Last month’s elections saw the Legalization movement work its way around the edges of the country. Eight laws passed allowing recreational use in California, Nevada, Massachusetts, and Maine and medical use in Florida, Arkansas, North Dakota, and Montana. Now, many are trying to “get into the industry.”
In these early days of legalized cannabis, regulations are often strict and fines for ignoring them are steep. In other words, operating without a license is not a risk worth taking.
Becoming a licensed cultivator, processor, or shop owner is possible – and lucrative – for motivated entrepreneurs. But to get one of those valuable licenses, be prepared to do your homework. Download our infographic to learn more about the 11 steps involved in obtaining a cannabis business license.
11 Steps to Obtaining a Cannabis Business License
STEP 1. Find your niche. While plenty of business opportunities exist in a new market, most cannabis-related small businesses are cultivators, with 2,500 to 4,500 legal operations in the United States. Processors/manufacturers, who answer demand for cannabis products that meet users’ lifestyles, include chemists, inventors, bakers, even candy-makers. There are just 90-120 legal cannabis labs currently, but that number seems likely to grow. Other options include dispensary/retailers and distributors.
STEP 2: Understand the costs. New business owners need to pay for licensing, purchase insurance, buy or rent property, pay employees and themselves, and purchase product. Startup costs quickly hover around $500,000, half of which can be license and application fees.
Colorado, for example, charges application fees to new medical establishments based on the number of patients it plans to serve, from Center type 1 (up to 300 patients) at $6,000 to Center type 3 (501 or more patients) at $14,000. This is solely to process the application.
Business owners in this state also need to consider optional premises cultivation ($1,000), infused product manager ($1,000), vendor registration ($300), and initial license fees ($5,200 – $13,200). If your pockets are not that deep, you’ll need to find investors. Banks are averse to offering loans to a cannabis business.
STEP 3: Choose a location. If you want to work with medical marijuana, you can hang your shingle in 29 states and Washington, D.C. If you target the recreational market, you have 7 choices plus the nation’s capital.
Just because it’s legal to do business in a state, don’t assume your operation will be welcome everywhere. Some cities, such as San Jose, California, are vehemently opposed to legalization and ban cannabis sales within city limits.
STEP 4: Do some research. Start with your state’s government website. Find out how to obtain the proper licenses to run your business. Add important deadlines to your calendar and create a reasonable Project Plan to complete the all necessary paperwork on time. If you are seeking nonprofit status, build in extra time for approval.
STEP 5: Scope out the competition. Colorado’s cannabis business approached $1 billion last year, and the national market is trending upward. Your business will have plenty of competition. Visit their operations, check out their website and social media pages, and come up with ways to differentiate your company.
STEP 6: Pick a qualified principal. The person who serves as the official head of the company should have experience in business and cannabis if possible. He or she must be at least 21 years old and a resident of the state the business will operate in. The principal should also have a clean record with no felony convictions in the past 5 years.
STEP 7: Pinpoint a property. Whether you need a site to grow or sell cannabis, check local zoning laws and city ordinances. Many states prohibit cannabis businesses from operating within 1,000 feet of public parks, schools, and child care centers.
STEP 8: Hire consultants. With so many regulations to follow and details to consider, surround yourself with a knowledgeable team. Delegate work to industry experts, such as a cannabis consulting firm, security consultant, safety consultant, and architect.
STEP 9: Create a Business Plan. If you didn’t study business in school, look for community or online courses to learn how to create long-term strategies, manage employees, and invest profits. The Small Business Association can help you create a business plan that covers goals, sales projections, marketing, and many other aspects of your business. A buttoned-up business plan is critical if you are looking for investors.
In addition, you will need to create a few more plans to operate your cannabis business:
- Site plan
- Floor plan
- Community benefits plan
- Product safety plan
- Worker safety plan
- Environmental benefits plan
STEP 10: Develop operations manuals. This manual spells out the day-to-day activities of your operation. If you take time off, the operations manual will make sure your business can handle whatever happens. Post an internal version of the manual to your company’s shared intranet or server and have hard copies on hand for new hires. Remember, that is what three-ring binders were made for!
Your manual should include details about:
- Cultivation techniques
- Local and state compliance
- Software tracking procedures
- Record keeping procedures
- Staffing plan
STEP 11: Assemble your application. Then wait. Last month, Massachusetts voters approved recreational use, but the state’s Cannabis Control Commission isn’t taking dispensary applications until October 2017. Waiting is part of the process.
The average cannabis application requires many documents such as lease agreements, LLC documents, etc., so ensure you leave enough time to gather all of the neccessary supporting materials. Once it’s complete, reread the instructions. You wouldn’t want your license application rejected because you didn’t notice your state asks for multiple copies of your 500-page application, along with a digital version on a flash drive or CD.
Organize everything you need to turn in with your application. Triple-check the deadlines and make sure you have it to the right people in time.
SIVA Enterprises is a full-service business development firm that provides consulting, turnkey management, venture opportunities, and brand acquisitions and licensing to cannabis entrepreneurs across the country. Learn why we have the highest success rate of approved cannabis license applications in the United States. Contact SIVA at (818) 562-3362 or firstname.lastname@example.org.