Cannabis legalization continues to spread across the country. When another state passes reform, would-be cannabis business owners are often giddy to be part of a perceived green rush. However, as operators in mature markets like California or Colorado, being a license holder is often far more difficult than people realize.
In emerging markets like Minnesota and Maryland, licenses are beginning to be awarded. For folks new to the weird world of legal weed, here are some tips.
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Get your ducks in a row
So you were granted a license—congrats! Are you ready to execute? And do you have enough capital to make your business plan work? Setting up a cannabis company can be far more expensive than people may realize, and a handshake guarantee of funding may not mean much once it’s time for the investors to write checks. Don’t forget the cannabis industry has an epidemic of unpaid invoices—do you have enough cash in case payments start getting missed? If not, you could find yourself in trouble, fast.
Don’t count on getting rich
Speaking of cash flow, cannabis is hardly the space to get rich quick. Section 280E of the IRS tax code prevents pot companies from deducting basic business expenses. Regulation can also be costly, including track-and-trace requirements, testing, and other compliance-related costs. Factor all that in, and margins are pretty slim. At this point, most cannabis companies have yet to break even.
Prepare to pivot
The cannabis landscape is evolving rapidly. Laws are constantly changing, and marijuana operators have to stay on their toes. For example, what if legislators decide you need more information on your packaging? Can you afford to print new bags? And what about all of the inventory that could soon be non-compliant? Being part of a nascent (and still federally illegal) space means you must be nimble and able to face whatever is thrown at you.
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Be creative
Since cannabis is still a Schedule I substance, there are far more restrictions for operators. This is especially true on the marketing side. Social media platforms like Instagram and TikTok also love to censor cannabis content. So how are you supposed to reach your target audience? This is where thinking outside the box is key. If you don’t have creative (and persistent) minds tackling your marketing, you could be in trouble.
Look ahead
So many people in the weed space will tell you they’re building the plane as it’s flying. That may be true, given the nature of the industry, but companies must be forward-thinking and strategic to survive. What’s your one, five, and ten-year plans? Do you have contingencies built in should the federal government make any swift changes (or not)? Make a plan (or three) and work them to the best of your ability.
Cannabis is not a game for the faint of heart. However, it can also be incredibly rewarding, especially when you’re able to connect people with a plant that can do so much. As long as you have grit and a strong tolerance for BS, you’ll be just fine.
