The cannabis industry is growing every year. New businesses pop up all the time, employing more and more people in a range of roles. As the cannabis market matures and becomes more legitimate, entrepreneurs in the space are realizing the value of having the best cannabis business plan. Here’s how to get started with yours.
Why you need a business plan
Before we can launch into the details of what to include in your business plan, it’s helpful to understand the fundamental purpose and goal of a cannabis business plan. At its core, you can think of a business plan as your company’s resume. It clearly lays out your vision, the purpose of the business, and your planned means of operation.
A business plan has the added value of explaining your objectives to investors, partners, employees, and vendors. Expanding scope and feature creep can happen in any company but having a clear business plan can help you to stay on track with your cannabis business.
The components of a business plan
Whether you’re looking to start a grow house or distribution network, an online CBD store or dispensary, business plan example templates follow the same outline.
- Executive summary. This is a short overview that will give the reader an understanding of your overall business goals and rationale.
- Company description. When describing your business, you’ll want to include the company name, location, target customers, and the specific problems that your business will solve.
- Market analysis. This is where your competitive research goes, including any trends or themes you’ve found in the industry. The more local and specific you can be, the better. You’ll want to address any competitors in the field, highlighting what they’re doing well and what you will do better.
- Management and organization. You need to explain who will run your company, and the way it will be organized. Depending on the size of your business, you’ll want to include an organizational chart, as well as details about the legal structure of your business (sole proprietor, LLC, etc).
- Service or product line. While most cannabis business plans will address the kinds of CBD or THC products you plan to sell, Tier II or Tier III marijuana-related businesses (MRBs) can use this section to describe your specific service, software, or solution.
- Marketing and sales. How will you spread the word about your business? How many sales are you anticipating as your company grows?
- Funding request. As the section name implies, this is where you explain how much funding you’ll need over the next 5 years, and what that money will be used for. Specify if you’ll be offering equity and/or debt repayment rates.
- Financial projections. This is where you convince your reader that the business will be a financial success. If already established, including balance sheets and cash flow statements. If a startup, including forecasted income statements and projections.
- Appendix. This is where all the supporting documentation goes, like resumes, permits, and licensing.
Unique considerations in a cannabis business plan
In the same way that the cannabis industry is different from other industries, writing a business plan for cannabis companies is different. You’ll want to consider adding these components, weaving them into the existing structure outlined above.
Beyond what we list below, it’s vital to realize that state-legal cannabis is always changing. From one week to the next, new rules and regulations can come into force, changing what you can or cannot do. Depending on the people in power, federal legalization could happen quickly, or the federal government could decide to clamp down on cannabis. Where possible, it’s best to have a plan for a variety of contingencies.
Compliance is first and foremost. You will need to figure out how your company is going to comply with the range of laws, rules, and recommendations that are unique to your state, city, and county, as well as any additional requests your banking or payment processing partners may have. This compliance should be assessed initially, as well as continuously throughout the life of your business.
You will also need to adhere to any rules set out by your banking partner. You’ll need to make sure that you have a transparent bank account, which means that your bank or credit union knows that your business is accepting money for cannabis or CBD. It’s vital that you plan on being honest with your banking partner, as lying to a financial institution is a federal crime that carries massive penalties. Financial institutions will have their own compliance requirements as a result.
It is up to you whether compliance is a task that is assigned to someone in-house or contracted out to experts in the field. Either way, it’s a key part of running your cannabis business and should be mentioned throughout your cannabis business plan. Do you know how the rules will impact your marketing plans or who you list as your leadership in your organization?
Along those lines, you’ll need to give extra consideration to your plans for employee hiring and training. There are specific requirements in some states about who can or can’t work in the cannabis industry. Plus, your bank or credit union may add additional requirements including expecting a full background check on anyone you plan to hire. Once you hire your staff, there are licensing and training standards, often requiring ongoing training and development. This can slow down your hiring rate when starting the business, plus add to your regular costs.
You will also need to plan on rigorous testing of your products, as well as product replacement. Do you have a plan in place if your planned vendors don’t provide product of the required quality? What will you do if a local supplier of a product closes its doors? Is your business going to be built purely around one type of product, like a CBD ecommerce site, or are you planning to run a dispensary selling a range of products?
Often overlooked in a cannabis business plan is how you will handle payment processing. This isn’t an element that other industries typically need to consider. However, choosing the right payment processor for your CBD or cannabis business can make or break your business. Did you know that accepting debit or credit cards for cannabis could ruin your business? Do you have a plan for chasing B2B payments, something made more complicated in the cannabis industry?