Find Your Path To Starting A Cannabis Business

How to Find Where You Fit into The Cannabis Industry

So, you want to start a cannabis business? But where to start! There’s no shortage of options on what you can do in the cannabis industry, and we’re here to help with this helpful guide to show you which path to head down on your cannabis business journey.

1) Determine If You Want A Plant-Touching or Ancillary Businesses

First thing first is to determine, do you want to be a plant-touching business or what we call an ancillary business in the cannabis space?

Plant-Touching Cannabis Businesses

Plant touching businesses are typically those which require cannabis business licenses and have more stringent regulatory processes associated with them and their daily operations. These are typically:

Cultivators
Processors
Retailers
Vertically Integrated Businesses

Anyone or any entity which grows, packages, sells, or really touches cannabis and cannabis products would be a plant touching operation.

Ancillary Cannabis Businesses

There are plenty of other businesses in cannabis which are not plant touching, however. Some examples include:

Lighting operators for cultivators
Brand developers for producers
Security for retailers.

Even Canna Advisors is an ancillary business in cannabis, consulting individuals and businesses, often through the licensing or business planning process.

It will be up to you to determine if you want your business to be plant touching or ancillary, bearing in mind that plant touching operations may come with more stringent regulations and licensing requirements from the state. If you want to be an ancillary cannabis business, you’re path ends here. It’s a lot more straight forward! But for those who want to open a plant touching business, let’s continue on.

2) Sculpt Your Operation Around A Supply Chain Versus, Customers, or Both

Next, you’ll want to determine if you want your cannabis operation to focus on the supply chain of cannabis and cannabis products, or the customers and patients. Or, perhaps both! (But we’ll touch on both in a bit).

Cannabis supply chain is really focused on cultivation and processing cannabis and cannabis products, while the customer side is focused on getting those products into the hands of individual patients or customers. Cultivators and processors, for this reason, face different hurdles and requirements than retailers. They’re at the front lines of making sure good quality cannabis is grown and packaged. Retailers, meanwhile, keep up with individual demand and work to have their shelves stocked with exemplary options.

Consider Vertically Integrated Cannabis Businesses

But let’s say you want both. You’re passionate about growing, processing, and selling your cannabis. You want full control of operations from seed to sale. There are states where this is possible. Vertical integration can allow for more seamless processes and often afford individual businesses better quality control. However, this is not guaranteed with all states. Often, medical operators are vertically integrated or allow for vertical integration, while adult-use states have more segmented licenses. It’s important to identify what your state cannabis program allows. Can you grow and sell? Can you grow and process? Can you do all three? Be mindful to identify your strengths and interests, whether that’s on growing and packaging or creating a retail experience for patients or customers.

3) Understand Macro, Mezzo, & Micro Licenses

How Much Cannabis Can I Grow?

Let’s say you’ve decided to pursue cultivation. This still isn’t the end of the road! Next you need to think about size. There is no shortage of sizing options available for cultivators, depending on your state of operation. New York has multiple tiers for cultivators, ranging anywhere from 5,000-100,000 square feet of indoor canopy. Delaware likewise will be allowing for cultivation facilities to grow upwards of 12,500 square feet of indoor growing or 7.5 acres of outdoor grow.

Unique Cannabis Licensing Provides Unique Opportunities

And this is looking over some of the other specialty cultivation license types out there. Look to Minnesota, which is offering its own unique mezzo license. We have a full blog on mezzobusinesses in Minnesota, and this license would offer individuals the chance to operate upwards of three retail dispensaries in addition to a cultivation facility with a maximum indoor canopy of 15,000 square feet. And most states (such as New York, Delaware, and Minnesota) offer some kind of microbusiness license, which usually offers vertical integration of some kind and an overall smaller canopy size.

Current and Future Growth Is Critical To Understand

This is when it’s important as a prospective cultivator to think about scale and growth of the operations. There are often limitations when it comes to a micro business, but potentially the added benefit of having more control of operations at different stages of cannabis operations. Meanwhile a standard cultivator may be able to grow and change tiers as the business prospers.

4) Review Your Options for Becoming Cannabis Processors

Often working hand-in-hand with cultivation, processors often focus on packaging, labeling, and extracting cannabis. There are also some different types of processing licenses that you should consider; namely do you want to process and extract cannabis or are you more focused on white labeling. New York offers three types of processor licenses, depending on what forms of processing someone is interested in, including a specific license which is exclusive for white labeling and branding without any actual cannabis processing involved. Minnesota for instance is offering manufacturer licenses along with a lower-potency hemp edible manufacturer license, thanks in no small part to the state’s enormous hemp program. Kentucky, another state on the horizon for new licenses in its medical market, is offering both processor and producer licenses, with a producer being able to cultivate and process.

Pick Your Goals As A Processor or Partner To One

When considering processing or manufacturing, be sure to see what you want out of this license. Processing can be one of the most expensive license types, given the high costs of equipment, but one of the most lucrative as its often an overlooked license. Be sure to consider your own experience when it comes to different extraction methods and, if you want to focus exclusively on branding, making sure you’re in compliance with state packaging and labeling requirements to offer only allowable boxes and packages for products.

5) Truly Think About The Customer

And now we have the most customer facing license type (arguably) — the retailers. Across the board, this is the most in demand and therefore competitive license type. This is true for both medical and adult-use states. The barriers for entry are often lower for retailers than they are for cultivators and processors, as are the overall cost of operations. However, the competition is that much stiffer given the high demand and high volume of licenses (usually) offered by the state.

Environment Is Key To Return Sales

One of the areas we recommend people focus on when it comes to a retail license is creating an environment that will have people coming back. It’s easy to have someone come to a shop once, its another thing to make them returning customers. Here it’s vital to think about the customer, your target market, and how you will appeal to them time and time again.

And we say arguably at the onset of this, because yes, retailers have customers and interact with them on a daily basis. But there are other licenses out there still available to potentially enhance a customer experience and convenience.

6) Keep An Eye On New Cannabis License Options

The road may not end just yet for many! There are countless other licenses available. (Look at Minnesota where they will be offering an astonishing 15 licenses soon enough!) There’s also licenses for delivery; allowing retailers to go to the customer at their residence and offer improved flexibility and services for purchasing. Consumption lounge licenses have been growing in popularity in recent years which can enhance a cannabis consumers experience and offer a safe and relaxed environment to enjoy products. And there are distributor licenses which allow for those on the supply side of cannabis to legally transport cannabis between operations.

Explore Your Own Path with Cannabis Consultants

There’s plenty of options available to cannabis startups regardless of what state you want to open up shop in. It’s important to consider the legal allowances for a license and if you can have multiple. What works best for you is a decision you and your team can discuss and determine, but we at Canna Advisors are here to offer additional guidance including financial modeling and hourly consulting for all business types to help you make the most educated and knowledgeable decision about your future business.

Contact our consultants to begin navigating your road to cannabis business success.