The Guide To Expanding Cannabis Businesses Out of State
Become a Multi-state Cannabis Operator
Ready to expand and scale your cannabis operations to a new state? To some people, ‘MSO’ is a four-letter word, but being a multi-state operator doesn’t mean you’re inherently evil. In fact, I’d argue that new, small MSOs are a revitalizing lifeblood for the industry and will help lead us into a new chapter.
Cannabis Expansion in an Unpredictable Market
It’s a tough time for the cannabis industry as a whole, and the bubble of cannabis optimism and unbounded enthusiasm has dwindled. However, among the rows of cannabis business headstones, shining stars have emerged—those rare business that managed to break even or, unbelievably, turn a profit through the market downturn. And these rare gems aren’t running their mouths about their success, but instead are quietly hustling to keep their lights on, their employees paid, and their customers happy—and they’re also thinking about how to expand their fortunately profitable business.
Top 4 Considerations When Expanding Your Cannabis Business
If you’re trying to expand your cannabis business—whether a New Jersey, Massachusetts, or Connecticut operator broadening your reach over New England or a Michigan, Illinois, or Missouri operator looking to scope opportunities in the Midwest—there are many high-level tips and insights to keep in mind for those looking to expand out of state:
1) Consider Your Future Plans
First, determine your scope: are you gearing up for world domination or are you happy with local renown? Are you structuring your company to be the go-to cultivator or white labeler for the eastern seaboard, or do you want to be the retailer on the tip of every tongue across the country?
2) Monitor Federal Legalization
Building your business strategy around federal legalization is a fool’s errand, but that doesn’t mean you shouldn’t consider the long-term possibilities when planning out your geographical footprint. If that day of legalization should ever come, how will it affect your business?
2) Strategize Incremental Growth
If you’ve already seen success in this unpredictable industry, then you’re no stranger to taking two steps forward and one back, and though you are capable of tackling any challenge you should know that expanding to any one new state at a time is more than enough to put on any one entrepreneur’s plate. Be sure to have a strong team and support, especially if you’re taking on multiple new markets at once. Choose the markets that most interest you and dedicate the energy and effort necessary to securing your license.
3) Pick An Operational Specialization or Vertical Operation
Stick to what you’re doing well. If you cultivate in Michigan, then double-down on that skill in Kentucky or Minnesota or wherever you head next, unless vertical operations are in your sights. If you have aspirations of running a nationwide vertical operation, keep in mind that these businesses are less favored by regulators lately and even banned in many states, such as in New York where they follow the alcohol model by separating retail and production activities.
Our Guide to Evaluating New State Markets
Once you have a big picture goal for your expansion, you’ll want to evaluate each potential new market to determine whether your specific business model is a fit for the new market’s regulatory framework, license selection criteria and process, and operational opportunities. Conducting a thorough market analysis is essential for making informed decisions. Here’s a step-by-step guide on how to evaluate new state markets for cannabis expansion:
1) State Demographics and Tourism
Begin by gathering information about the state’s population and annual tourism numbers and be sure to utilize reliable sources to obtain accurate data. Understanding the potential customer base and tourist influx will provide insights into market demand.
2) Competition Analysis
Research the number of existing cannabis licenses in the target market and any licenses that are expected to be awarded in the future. This data can provide an overview of the competitive landscape and the level of saturation within the market.
3) Nationwide and State-Specific Sales Data
Use trusted industry sources to gather cannabis sales data. Nationwide data will serve as a baseline for comparing the potential market’s performance against the broader industry trends, and then explore state-specific data on cannabis sales and consumption rates. This information is often found on state webpages.
4) Market Revenue Potential
Refer to reports from reputable sources to estimate the market revenue possibilities. These reports often provide detailed projections and insights into market trends and growth potential.
5) Regulatory Overview
Gain a comprehensive understanding of the regulatory landscape in the target state. Identify the governing or regulating body responsible for overseeing cannabis operations. Note any important dates, deadlines, or milestones mentioned in the state’s cannabis laws. This is also where you’ll find specific information such as taxes and fees, ownership and transfer regulations, operational restrictions, and social equity components.
6) Licensing Process
Investigate the licensing structure and process in the target market. Understand the steps, requirements, and timelines for obtaining cannabis licenses. This knowledge will be crucial for planning your entry into the market.
7) Local Considerations
Investigate any opt-in or opt-out provisions related to cannabis sales at the local level. Some municipalities may have additional restrictions, such as additional licensing or zoning, that need to be considered.
8) Terminology and Unique Provisions
Pay attention to any unique terminology or provisions within the state’s cannabis laws that may differ from other markets. Regulatory cannabis consultants can help to identify and understand these nuances so you can navigate the regulatory landscape effectively.
Get Consulting Expertise Now To Become A Successful Multi-State Cannabis Operator
Evaluating new markets for cannabis expansion requires a meticulous approach encompassing demographic data, competition analysis, regulatory insights, financial considerations, and understanding of local nuances. By enlisting the help of cannabis industry professionals to conduct a thorough market analysis and to prepare initial financial pro formas and business plans, you’ll be better equipped to make informed decisions and develop a successful cannabis business strategy in your chosen market.
Reach out to Canna Advisors to consult on your expansion plans and discover licensing opportunities nationwide.