The legal sale of cannabis in the U. S. has opened up a world of opportunities for entrepreneurs interested in getting involved in the cannabis industry. But what are some of the biggest business opportunities available and what challenges must be faced? For many small business owners, the cannabis industry can represent an opportunity to become part of a high-growth international industry just as it starts to take off.
As cannabis legalization movements expand to new states and some members of Congress advocate for reform and even federal legalization, the cannabis industry seems ready to continue its breakneck growth as new markets open up. It's easy to think of the cannabis industry simply as the growers who grow the plant, the manufacturers who refine it into products, and the dispensaries that sell those products. However, while these elements are fundamental to the legal cannabis supply chain, the cannabis industry is much more complex and varied than those companies. Plant-related businesses include those that may come to mind when you think of the cannabis industry, such as breeders, growers, manufacturers and dispensaries. However, there are other plant-related businesses that may not be as obvious, such as transportation and delivery companies that bring harvested cannabis and finished products from point A to point B.
Companies that touch plants are the most regulated companies in an industry that is already characterized by immense oversight. To open a plant-related business, entrepreneurs often need to obtain licenses through an application process, which can be lengthy and expensive, with no guarantee of success. Licensing application processes vary from state to state, but there is usually a limit to the number of licenses available, similar to the way liquor licenses work. Some states require what is known as vertical integration, in which growing, processing and dispensary businesses are managed by a single company. Other states, on the other hand, employ a system of specialization, in which licenses for each type of operation are kept separate and are often granted to different companies. Cannabis ancillary companies comprise all other types of companies in the cannabis industry.
These companies are necessary to support companies that touch plants, but they are not necessarily involved in the process of reproducing, cultivating, refining or distributing cannabis products. They can include professionals, such as lawyers and marketing specialists, as well as companies that produce packaging or machinery that can improve the processes of companies that affect plants. While many people are excited about the prospects of starting a plant-related cannabis business, ancillary companies arguably offer a lower barrier to entry. Ancillary companies still face significant regulation compared to many companies not related to cannabis, but they don't have to compete for a license through a complex and expensive application process. In addition, many ancillary businesses can be started by focusing their existing business on the cannabis sector or by developing a new brand specifically associated with cannabis.
For example, with a little research and networking, a digital marketer with years of experience creating websites, running social media campaigns, and buying ads for customers could easily pursue a career in the cannabis industry. There are a number of challenges faced by cannabis companies beyond those faced by startups in other industries. Addressing these challenges in the early days of your business and building a foundation that allows you to grow and adapt as regulations inevitably change will be key to your success in the cannabis industry. It's difficult if not impossible to act alone in the cannabis industry; the partnerships you develop in the early stages can make or break your fledgling cannabis business. Scott Rudder, president emeritus and founder of the New Jersey Cannabis Business Association said that the way his company is established in the beginning is critical to its long-term success. The regulations that apply to your cannabis business are also likely to be subject to change as the industry is a new and evolving space and public officials work regularly to renew and review rules and regulations. Jessica Gonzalez, Cannabis and Intellectual Property Attorney at Bressler Amery & Ross P.
C., noted that banking is a particular weak point for cannabis companies. Since the federal government still considers cannabis to be an illegal Schedule I drug under the Controlled Substances Act, many banks hesitate to work with cannabis companies out of fear of losing their FDIC membership or receiving money laundering charges related to “drug trafficking” despite the legal status of cannabis in many states. State regulations and private company policies limit how cannabis companies can advertise. Not only is cannabis advertising usually banned on radio television or billboards but many local marketing channels including Facebook make it difficult to do so by prohibiting the purchase of sponsored content for cannabis companies. These types of limitations mean that many cannabis companies have to rely on a combination of content marketing and more organic content on social media email marketing campaigns and in-person marketing opportunities at trade shows and industry events.
Networking and word-of-mouth referrals are essential tools in a cannabis company's marketing toolbox. Cannabis still faces the stigma that it is only a “culture of stoner smokers” when in reality patients and users of cannabis come from a wide range of backgrounds. Avoid reinforcing stereotypes associated with cannabis, such as the environment of sellers or clandestine associations linked to almost a century of prohibition. Instead work closely with community stakeholders and elected officials to be a responsible member of your community; doing so will go a long way not only to obtaining necessary regulatory approvals but also expanding accessibility to your target customers who are likely more discouraged by stigmatized traps from past than you might think. Starting a new business in the cannabis industry isn't for everyone; it requires patience time money and often significant investment simply for obtaining business license. When it comes product growing cannabis requires real estate expert team botanists understand nuances climate soil type etc., while manufacturing requires understanding chemistry extraction techniques etc.
To succeed entrepreneurs must understand nuances regulations local state federal level while also being able build strong relationships with partners vendors customers alike. The cannabis industry offers unique opportunities for entrepreneurs willing take risks navigate complex regulations build strong relationships partners vendors customers alike while also being able create successful sustainable business model long term success.
