That means you will need to be uniquely savvy at negotiating lower product costs than any of your competitors. That’s how Walmart and Amazon deliver low prices. Cannabis is no exception.
First, you must ask the following: How do I add value, and where can I contribute my skills the best? From there, you can identify critical gaps and determine which roles you need to fill—hiring people to do what you can not.
You can’t have any type of business without customers. But acquiring customers isn’t as simple as it sounds.
3) taking out debt
8. How do I guarantee my cannabis business’s success?
Alternatively, business partners may contribute cash to cover expenses. In all cases, this cash is not expected to be repaid, per se. Instead, equity owners generate returns by building a business that eventually makes a profit. That profit is either reinvested in the business or divided among the owners.
Debt is cash borrowed that must be repaid. Unless you’re a hell of a negotiator who can get a lender to forgo repayment until your business generates enough money, debt is probably not the best route for early-stage companies. Preserving cash for operating expenses is the advisable approach.
Financing a business happens in one of three ways:
3. How do I get a cannabis license?
Equity is the cash that owners invest in the business. Entrepreneurs often turn to family, friends, and close associates to give them seed capital in exchange for a percentage ownership.
Licensing laws vary from state to state, and you need to understand them thoroughly if you want to be successful. For example, in Massachusetts, you must get local approval to do business in your selected municipality before you can be granted a state license.
Will: So we weigh it wet, we weigh it dry, and then we weigh the waste from each plant and enter that in. It’s making sure that every single part of the plant is accounted for. It’s a pound of that Gelato, baby.
Nancy: The competition for licenses becomes extremely fierce and very expensive.
Will: We applied for the NuLeaf grant, and we were able to get $10,000, which honestly, for cannabis companies, especially grows, is not that much. It gave us little more time to sell. We started making sales and gaining momentum.
Jeremy: They can’t take credit cards, because it’s federally illegal. They’re doing business mostly all in cash.
Narrator: There’s no such thing as a cannabis breathalyzer yet.
Krista Whitley, CEO of Altitude Products , a Las Vegas-based conglomerate of cannabis companies such as Social Media Unicorn, a canna-brand marketing and sales agency, and the Vegas Weekend Box, a monthly variety box of Las Vegas’ top cannabis products, agrees that a good relationship with your consumers is essential:
This is sure to change eventually, but for now, you will still need to fundraise enough capital without any loan assistance. How much? Many states require proof of at least $1 million in available cash to obtain a dispensary license. You should also keep in mind that you won’t be able to keep your profits safely stored in a bank account. All businesses that directly deal with cannabis are forced to keep their capital in cold hard cash, which is obviously highly inconvenient and dangerous—though some have been getting around this issue using cryptocurrencies like bitcoin to keep their funds more secure.
It’s a very exciting time to get involved in the cannabis industry. There are boundless opportunities to collaborate with a huge variety of businesses.
Know the rules (and follow them!)
If you’re technical and a savvy inventor, you could design a product that helps marijuana user process or ingest their medicine—think about all the fancy vape pens that have been coming out, or the rosin presses that easily extract solvent-free oil from bud or trim.
“The days of bootstrapping a start-up in the cannabis industry are quickly coming to an end, if not already over. My advice is to raise smart money with investors who can bring experience and expertise from other industries to the table. Raise enough capital to quickly be able to compete.”
Come up with a unique idea
With any startup, investment capital is crucial to getting your business plan off the ground. Some investors don’t want to put their money into cannabis businesses since it’s still illegal under federal law. And, as stated earlier, forget about asking the bank to fund your marijuana business. Focus on finding some great private investors. While some are still wary, there are many investors out there excited about how fast the marijuana industry is exploding with growth, and they want in on the action. Look here and here for starters.
So get out there and do research on how you can ensure your future customers are happy and satisfied with what you offer them. Really get to know and understand them. Build a relationship with them. Do this, and you will develop a loyal consumer base.