Starting a licensed cannabis business doesn't happen overnight - thousands of hours are invested into the planning, building, and launching of a cannabis business. If you're thinking of starting a cannabis businesses here are four steps to taking action today.
1. Do your research
Many cannabis business applicants don't do enough research on the requirements of the application, costing them additional consulting fees or even failing to move forward in the license process.
When you begin the cannabis license application process, you'll want to first look into the local cannabis ordinance, the the taxes that are associated with operating a cannabis business, and the requirements to apply.
During this phase it's time to break out google, attend as many industry events as you can, meet with your local city council and create your business plan. During the research phase you will need to determine what cannabis license you are applying for, the local licensing requirements and create your startup budget and 3 year financial projections. It is imperative that you run the numbers, assess the different scenarios that can impact your business. Although no one has a crystal ball, during this phase you will want to assess if the area that you are looking in will be friendly to cannabis businesses. What is friendly? Will there by ordinances that could block business growth? Constituents that do not want cannabis in their neighborhood? And most importantly, is the tax and fee structure favorable for commerce?
Often cannabis entrepreneurs forget about one very important thing - who will they be serving. During the research phase this is when you'll want to start flushing out the business plan. Spoiler alert - the business plan is required when you apply for a cannabis license.
Many cannabis owners have spent several years building relationships with the city, attending town hall meetings, and understanding the local rules before taking action into applying for a cannabis business. This can not be more important. The taking action phase is more than dipping your toe in the water, it's taking a plunge. Start building relationships with city and neighborhood councils, business providers in insurance, legal, accounting, land use, branding.
If the waters seem worth swimming in, it's now time to assess your timeline. Depending on the state, the timeline for applying for a cannabis business could be a few weeks or months (yes, very shocking!) or continually open. It's best to use a project management tools such as trello or asana to help manage this part of the process.
2. Invest your time in the Pre-application Period
The pre-licensing phase is a difficult phase that will take significant amounts of capital and resources. Like any business, starting up you will not see an immediate profit and positive cash flow.
The application process for a cannabis license requires keen attention to detail, a collaborative team, and is not done in a vacuum. Depending on the state, you may have to apply first for a local license to operate. Regardless of local or state licensing, you most likely need the following in your application:
- Business Plan including overview of business, operations, marketing plan, team, and growth plans
- Financial Plan including startup budget and 3 year financials
- Security Plan including security controls, training, and seed to sale tracking overview
- Premise Diagram that illustrates the premises, drawn to scale, showing the areas where cannabis is packaged, procured, shipped, delivered, and stored.
- Employee Training and Hiring Plan including recruiting, training methods
- Operations Plan including cultivation plan, quality assurance, SOPs for inventory, waste management, packaging, inventory management and sales
- Ownership Dossier and Financial Disclosures
- Corporate Documents and agreements
- Evidence of right to occupy the premises where you will be doing business
- A few other things that help the licensing body understand business model, funding, and team behind the cannabis business
Depending on the state, the cannabis application process is different. For example, in California and Michigan, a cannabis business applicant must apply for both a local and state cannabis license. In other states, cannabis applicants only need to apply for a state license.
Cannabis applications in certain states are highly coveted, making the cannabis application process even more competitive. I encourage all business owners and cannabis applicants to be highly involved in the process. Although there is no magic number of how long it takes to apply for a cannabis license, entrepreneurs should allocate a minimum of 60 hours of time on the application. The last two weeks prior to submitting the application should be spent on review and minimal revision.
3. Work with Professionals
Cannabis is not your time to be a jack of all trades. I promise you, this is a team industry. If you are applying for a cannabis license, I can guarantee you will need to hire at least one professionals for advice and input on the application. This may include an expert in law, cannabis regulation, a CPA an architect, security and risk management specialist, just to name a few.
A professional will be a great resource to review of your application as well. There are certain nuances that you may not catch if you've never worked with a cannabis business or within cannabis regulation - this can be anything from a compliance protocol or standard operating procedure to how the front room of an architecture rendering should look. Many lawyers, accountants, and expert consultants have been through the application process before, and can easily identify red flags or areas where key information is missing or not competitive.
4. Set realistic goals for time and cash flow
Be realistic with the constraints of time and money. The costs of applications also varies from type of application to the actual dollar amount. Some applications are less than $1,000 while others are more than $250,000.
Spoiler alert, YOU SHOULD NOT apply for a cannabis license in one day. Highly competitive cannabis applications deserve thoughtful time and energy, and should not look like a broiler template. Moreover, in some instances you will need to have found property before you can even apply for a license - meaning it takes time. Like any business starting up, you will not see an immediate profit and positive cash flow. Cannabis businesses often don't see a positive return on investment for several years.
5. Final Thoughts
Generally, you are required to have a business entity to apply for a state cannabis license. When you apply for a cannabis license you will need to have a legal entity and should consider working with a professional to form your corporate documents and operating agreements.
Project management as well as time management are key to applying for a cannabis license and launching your business successfully.