Majority of Americans now live in states where marijuana is legal in some form. Recreational is legal in 11 states, while medical is allowed in 33. According to a report from ArcView/BDS, legal marijuana sales in the U.S. reached $12.2 billion in 2019 and expected to reach $31.1 billion by 2024.
No wonder why marijuana industry attracts a lot of entrepreneurs and investors. The industry is booming and growing exponentially which gives businessmen a huge opportunity to earn profits. If you are one of these people who wants to enter the field, this article may help you for it covers the basic steps in starting a marijuana business.
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Determine the Preferred Business Type(s)
First, you’ll need to decide what type of marijuana business you’d like to pursue. These businesses include dispensaries/retail stores, cultivation facilities, delivery service, processing or manufacturing facilities, distribution, transportation or transport-only, and testing laboratories.
Business Plan Creation
Once you have decided on the type of business, the next step is to have a business plan. It is the only way to have a better understanding of the costs and revenues to start and have a flourishing business. It also helps you to be organized, as well as, validate your company in the eyes of investors, realtors, and other business relations that will be the key to your success. It’s even more important if it is a requirement in your marijuana licensing application.
Determine if Licensing is Possible
You have to check your preferred areas to see what is currently possible or in the future. You need to do your research and know the different departments on the state, city, or county level that are responsible for marijuana licensing to find out what is legally possible.
After you have identified the state and city, you need to familiarize yourself with all their rules and regulations. This will guide you on what to do and look out for when setting up your business and completing your licensing application package.
Setup the Corporate Entity
Now it’s time to form a corporate entity (LLC, Partnership, S-Corp, C-Corp, etc) in accordance with what is required in the regulations so you can operate legally. On a side note, forming a corporation or LLC is important because it protects your personal assets from any potential debts and liabilities that arise from your business. It will also affect the taxes you pay and the level of risk you’re exposed to.
Identify a Business Location
After familiarizing yourself with the regulations of your preferred state and city, you are now aware of the location requirements. The next step is finding a compliant location that essentially makes or breaks your business. This process may be tedious and expensive so you need to have a lot of patience to find a good location.
Submit License Applications
By now, you should be ready to submit your licensing application. In order for your business to operate legally, you need to be licensed by the state, as well as the city or county. This process will take the longest out of all the steps of starting your marijuana business. Make sure you have all your ducks in a row before submission for any errors in your application will only delay the process or result in license denial.
Acquire the Necessary Licenses
After submitting the licensing application, all you have to do is wait for approval and issuance of your business license. The waiting time for applicable licenses to be approved may take several weeks or months depending on the state, city, and county. This may even be longer if you make mistakes in your application or business formation.
Install the Operations Infrastructure
After obtaining the necessary business permits and licenses, you need to install the operational infrastructure according to regulatory requirements. Now is the time to hire people, buy some equipment, and set up the internal policies and procedures that will ensure compliance. If you’re not operating according to regulations, your business will be shut down. The thing to watch out for is changing regulations on the city side, so you have to make sure that you’re always operating to the most current letter of the law.
Contract With Other Businesses
Depending on what part of the industry your business is in, you will have to build contractual relationships with other business establishments. Oftentimes, you’ll have to contract with cultivators, delivery services, dispensaries, and/or product manufacturers to acquire the necessary products needed for your business. You have to do some research, make some calls and emails, and attend as many trade shows you think is necessary for success.
Market & Publicize Company Products
Among the significant factors to consider when starting any business, is how to market it. The competition is high that most marijuana businesses live and die on how easy they are to find. You definitely need to have a website. Then you can submit your business to several advertising forums (such as weekly tabloid-style newspapers), online directories, other industry portals, and trade journals for visibility.
Pay Yearly Taxes & Renew Licenses
The state is only allowing medical or recreational marijuana businesses because of the revenue they will bring in. So it is important to keep your books in order and have a tax professional prepare your year-end taxes and financial statements. Also, be mindful of your licensing renewal details for the state, city, or county may not go out of their way to inform you about renewal deadlines.
That’s all for now. I hope by this time you have a better idea on how to start a business in the marijuana industry. Just follow this guide, combine it with hardwork and determination, and you should be on the road to success!