More states are legalizing cannabis, making it a lucrative business. It's crucial to overcome the extra difficulties of running a cannabis company as the sector enters the mainstream and becomes more regulated.
Positioning your cannabis company for success and avoiding rookie business blunders is simple with preparation and the correct tools. Here are the five fundamentals of the cannabis industry that you should know before opening your doors.
1. Choose A Cannabis Business Model
The type of cannabis business you want to start impacts every business decision you make, from licensing and location to taxes and who you want to sell to. Different business models have different needs, so before you do anything else, you should decide what kind of product or service you'll sell and who you'll sell it to. Examples of typical cannabis companies include:
● Dispensaries for medical and/or recreational use
● Cultivation (indoor and outdoor)
● Manufacturing (products, edibles, etc.)
● Shipping (transportation and distribution)
● Testing facilities
Cannabis has been legalized or decriminalized in 37 states, 3 territories, and DC as of 2023. However, federal law still classifies it as a Schedule I controlled substance. Consequently, licensing rules differ from state to state; thus, you must carefully research your state's regulations.
2. Identify Your Cannabis Market
Define your target market after deciding on your cannabis company model. A loyal customer base is crucial to long-term economic success in every sector. You can position your firm to grab the attention of your target market, address their demands, and distinguish yourself from local competition by determining it.
Identify your target market by selecting:
● Who does your local business serve?
● What products or services does your company provide?
● Does your business solve a particular problem?
● Where will you run your business?
● How does your business differ from those of your competitors?
● Why should customers pick your business?
You'll have a realistic picture of your firm's road to success by outlining your business strategy and target audience in advance.
3. Cannabis Licenses, Permits, and Tax Licensing
Applying for a license to sell cannabis can be a long, complicated, and expensive process that often requires the help of professionals. Because state and federal laws about cannabis aren't the same, each state has its own licensing and regulation laws. Check your state's licensing requirements as you build your cannabis business plan budget.
Furthermore, state and municipal governments may have different procedures for registration and permissions, so be sure your company complies with all regulations. For instance, growers might need permits that dispensaries don't and vice versa. Cannabis logistic businesses may need transportation permits, while edible makers may need food licenses. Aside from the typical company licenses, permits, and registrations, the cannabis industry also has specific documentation requirements, so ensure you have everything.
Just like tax registrations, state tax laws differ, so check your state's tax laws before you start to guarantee compliance and avoid any unpleasant surprises. You should apply for an employer identification number (EIN), commonly known as a company tax ID number, regardless of your state. This number will make it easier to get funding and banking options and make payroll and tax time easier.
4. Financial Support for Cannabis Businesses
Every business owner has to pay for startup costs, but the ones for a cannabis business tend to be higher than in other industries. Financial obstacles exist before a cannabis firm ever opens, including high rent from cautious landlords, high taxes, restricted write-offs for operating expenditures, and licensing and insurance fees. Many states charge thousands of dollars for cannabis license application fees, which are non-refundable even if your application is refused.
Several cannabis license applicants may not have the necessary startup money to assure seamless operations from the beginning. Many small and medium-sized businesses (SMBs) might need help from lenders or investors to do this. But because cannabis businesses haven't been able to get loans from banks in the past, they don't have many options. Federal banking laws apply to big banks, and even though cannabis may be legal in some states, it is illegal at the federal level. The FDIC can't back a bank that gives money to a business that breaks federal law, which technically all state-legal cannabis businesses do. It means that most big banks won't do business with cannabis entrepreneurs, which makes it hard for them to get traditional loans.
Funding your cannabis company is not impossible, despite the challenges. Some of the cannabis industry's financial needs are met by cannabis-specific funding companies, venture capitalists, and angel investors.
5. Choose the Right Cannabis Payment Processors
Cannabis Credit Card Processing Today offers a solution to the cash-only or ATM Solution payment methods for cannabis businesses, like manufacturers, cultivators, distributors, and more. You'll find everything you need to be successful. We understand the unique needs of the cannabis industry and have customized our services to meet them.
Our cannabis tools are excellent for businesses of any size and can grow with your business as it grows and changes. We provide all-in-one solutions for your complicated, always-changing industry with reliable services, open business practices, competitive prices, and a team of friendly experts who work with you. We not only know how things work, but we'll also help you learn them. Apply today!