Nevada adult-use cannabis sales reached almost a billion from July 1, 2021, to June 30, 2022, according to the Nevada Independent. In New Jersey, the State’s Regulatory Commission reports the sale of nearly $80 million worth of cannabis since the launch of its legal cannabis market in April. These figures indicate a healthy market with room for growth.
Check local guidelines for starting a cannabis business
A growing market provides great opportunities for entrepreneurs thinking of starting a cannabis business. It can also come with a number of challenges, including complying with federal laws and changing state regulations. Knowing the legal requirements of starting a cannabis business in a particular state could make a difference between failure and success.
States adopt a variety of approaches to cannabis, from full legalization to medical authorization. In some states, there is intense competition for licenses and high costs. For example, Connecticut charges a non-refundable $25,000 application fee. Prospective cannabis businesses have to make sure they comply with all the necessary application and regulatory requirements in the states where they operate.
Take advantage of changing attitudes
Possession, sale and distribution of cannabis are still federal crimes. Voters in November this year will decide whether cannabis can be sold legally in five more states – South and North Dakota, Arkansas, Missouri and Maryland. As four out of these five states are home to many conservatives, it shows how attitudes toward cannabis have changed.
Two-thirds of Americans would like cannabis to be legal both federally and in their own states. Changing attitudes toward cannabis means the user base is widening. This offers more opportunities for starting a cannabis business and making a success of it.
Types of cannabis businesses
The legal cannabis industry has grown significantly since California first legalized cannabis for medical use in 1996. When looking for cannabis business ideas, there are a number of opportunities for entrepreneurs willing to take on the challenge of the complex and ever-changing laws and regulations.
The cultivation of cannabis is heavily regulated and requires a significant initial investment and growing knowledge. Retail businesses like dispensaries are also expensive to start, but they can be very lucrative. Many medicinal users like to use edibles and other infused products, so this is another cannabis business idea for entrepreneurs. They could also look for a cannabis business for sale and buy it.
Starting a cannabis business
When looking at starting a cannabis business, entrepreneurs have to consider many different costs, such as the costs of licensing, rent, utilities, supplies, equipment, wages, marketing and security.
As with any other startup, it’s important to have the capital to get up and running. The fact that cannabis is still illegal under federal law can make banks and other investors wary about investing. Most funding comes from private investors.
The fundamentals of starting a cannabis business are not that different from starting any other business. A cannabis business plan should cover goals, startup costs, timelines, finances and other important information.
Local and/or county zoning regulations and real estate costs will determine where a cannabis business is located. Once a business structure is formed, and a license is obtained, entrepreneurs can get the operational infrastructure up and running.
Launching a cannabis brand
Launching a cannabis brand in a highly regulated market can be a challenge. It is important for entrepreneurs to have a good understanding of regulations and a clear brand concept.
When coming up with cannabis business ideas and brand marketing, new brands have to break free of the stoner narrative. The marketing part of the cannabis business plan must include dispelling any negative connotations associated with cannabis. If a brand operates in multiple states, it has to understand individual regulations around marketing.
Research: Brands have to understand the demographic they want to appeal to and this involves doing some research. As the market opens up to more people, including more females than before and more first-time users, marketing has to appeal to a different demographic than in the past. Once brands understand more about their target audience, they can start defining their voice and using creative elements like colors, fonts and designs to create an appealing brand image.
Brand differentiation: It’s impossible to draw up a cannabis business plan without understanding what differentiates a brand from its competitors. A unique selling point is needed to engage an audience. Is the brand a lifestyle brand that focuses on healthy living? Will it focus on the coolness factor and people who go to nightclubs? Will it be more for senior citizens who have difficulty with pain and mobility?
Cannabis packaging: Cannabis packaging has to comply with regulations and also tell a brand story. All the facts to include on labels often mean there is little room left to tell the story. Regulations can also change without warning. For instance, rules about what appeals to children change all the time. Brands must be wary of attempting to base their branding around popular cereal brands or nostalgic candy, which could obviously appeal to children. They also need to ensure that the packaging is childproof.
Retail launch: A retail launch consists of acquiring shelf space and creating displays. Budtenders need to know as much about cannabis products as possible to market them. What is it that makes one product superior to another in terms of potency? What type of effect does a particular product have? For example, if a product has a terpene mix that enhances creativity, budtenders should be aware of this and be able to discuss it with customers.
The cannabis industry can be risky due to the changing regulatory environment and the fact that it’s still in its initial stages. Entrepreneurs starting a cannabis business or buying a cannabis business for sale need to have a keen understanding of the complex regulations. They have to find ways to stand out from the competition if they want to be successful in this highly competitive market. If they can manage to do so, it’s a growing industry with potentially high rewards.