What is a Cannabusiness and How to Start One in 2021


  • Last modified: February 23, 2021

What is Cannabusiness? 

If you are thinking of starting a cannabusiness, now is the best time: the industry is booming and 2021 promises exponential growth. As of 2020, 15 states plus D.C. legalized recreational weed and medical cannabis is legal in 41 states. 

According to statistics, every fifth American can consume cannabis in a recreational way without visiting a doctor. It opens huge horizons for your cannabusiness but also arises such questions as high taxation, regulations, and other obstacles you will need to overcome before a successful launch. 

Cannabusiness is a relatively new term that combines two words: cannabis + business. It may stand for the hemp business itself or any ancillary business related to the industry. Let’s take a look at the most popular types of cannabusinesses you may get interested in. 

Types of Cannabusiness

Services in the Cannabis Industry 

To be ready for a good start every cannabusiness needs to cover all the bases. There is no need to hire in-house experts as it’s too expensive, so the company may ask ancillary (related to a cannabis industry but not “touching the plant”) businesses for help. 

The most popular services in the industry are:

  • Cannabis accounting and bookkeeping is tailored to particular needs of the business: it takes into consideration regular audits and federal and state regulations. 
  • Marketing includes SEO, design, PR and advertising. As cannabis is still illegal on a federal level, some of the methods (like paid advertising) don’t work and others should be used carefully. Cannabis marketing specialists know how to promote cannabusiness considering all the limitations imposed on the industry. 
  • Cannabis insurance is important for any business that needs to be compliant with requirements and maintain its license to operate. When it comes to canna business, it’s getting vital to protect yourself from risks if something goes wrong.
  • Cannabis lawyer is a must for every cannabusiness before entering the market as there are many complexities that may get in the way. The lawyer will answer the key questions: what are potential risks in the legal field, are there any loopholes in the licensing, how to optimize the expenses of the application fees and other. 

Cannabis Cultivation and Growing Companies

Cannabis cultivation and growing is the key type of the business as it’s the very beginning of the chain. To be able to operate, the company must have a marijuana producer’s license that permits storing, growing and selling the plant.  

Large-scale cannabis cultivation is impossible without automated processes: nutrients supplement, lighting, irrigation, climate control. Apart from this, compliance reporting and team management should be run smoothly as well, so to set it all up the company may think of a commercial software that will help to track, report and optimize the workflow.  

Another thing to consider is a cultivation plan which is the part of the business plan and the response to the state’s request for proposal (RFP) or request for application (RFA).

Training and Education  

Currently, the cannabis professionals are in high demand which exceeds supply. The labor market imbalance caused an educational boom in the industry and lead to various cannabis schools that offer:

  • Specialized training courses dedicated to a particular aspect. This kind of training is a good fit for professionals who want to fill gaps in their knowledge or enhance career opportunities. 
  • Full online or offline courses with further certification recognized at the state level. After passing the exams and graduating novices will have a basic understanding of their future job and necessary skills to get their foot in the door of the industry. 

Talking about cannabis certification, it covers six areas of expertise: growing, cooking edibles, how to open a dispensary, delivery services, law, and medical marijuana. Knowing which area of ​​the cannabis industry you are going to enter will be a key factor in picking up the right type of certification.

Gear and Accessories for Consumers

The accessories are the most lucrative in the cannabis industry. But unlike cultivators, manufacturers of growing accessories don’t fall under so strict banking regulations. With this in mind, the entire industry is spiking now. Let’s review the most popular products you can start selling with no fear of failure:

Vaporizers are at the highest demand as they are portable and can be used anywhere including travel. More than that, these devices are considered the safest way to consume cannabis and give a quick effect compared to traditional methods. But consuming marijuana is not limited to flowers: many people use CBD vaporizers for inhaling CBD vape juice, so you can start with a wide range of products.

Weed Containers are must-have accessories for all weed smokers as keeping the flowers in a closed space not only keeps them fresher and prevents it from drying out but also maintains their high THC level. Glass jars with dark tint, stainless steel or bamboo containers are the best option as they are airtight and protect the weed from UV rays.

Dab rigs are a good choice due to the growing popularity of hash, live resin, and shatter. Unlike the flower, concentrates give the consumer more taste and a stronger effect. Dab rigs are made of high-quality glass which is more expensive or silicone.

Grinders help to increase the burning of the weed and get the most out of plant consumption, so the market offers various types of models: acrylic, wooden, metal, and electronic. As an alternative, there are mini graters in the shape of a plastic card. 

Dispensaries 

Though opening a dispensary still faces regulatory difficulties and high barriers to entry, this is one of the most popular cannabusinesses in 2021. The industry is divided into medical and recreational facilities.

Medical dispensaries are licensed to provide patients medical advice as well as sell the cannabis intended to improve their condition. Each customer must be of 18+ age, have a medical cannabis certification, and a doctor’s prescription to buy weed. As the patient’s privacy is crucial when visiting the facility, every dispensary should meet a number of standards, such as a separating wall and a special waiting room.

A recreational dispensary is open to anyone above 21 years of age which makes it a promising start-up. Unlike medical marijuana that contains a higher level of CBD, recreational strains are designed to produce more THC. 

An online dispensary is another type of recreational facility that usually offers delivery service to all customers who will prove their age with proper documentation. This type of cannabusiness demands less effort and seed capital as you won’t have to pay for the location or hire a big team.

how to start cannabusiness

Resources that you Need to Start a New Cannabusiness in 2021

The booming industry opens many roads for aspiring entrepreneurs but the idea itself isn’t worth anything without a detailed plan and awareness of all the pitfalls your business better avoid. Once you’ve decided what cannabusiness you want to run, let’s talk about preparations for its establishment. 

Legal 

Any cannabusiness is subject to licensing and various requirements aimed at ensuring the transparency and accountability of the industry. Since it is highly regulated, the licensing of cannabusinesses is extremely difficult. Compliance requirements differ from state to state and depend on the category of your cannabusiness.

In order to operate within the state and federal laws, it is important that you meet all the necessary requirements and permits. Let’s review some licensing basics for each type of business you should be aware of before you plan the launch.

  • Cultivating cannabis is highly regulated. Apart from significant initial investment and a detailed site plan, growers are required to have proven horticultural knowledge.
  • Retail businesses may face limitations on the amount of product they can sell to a particular customer, as well as on the maximum price they can set for the product. Also, every state requires video surveillance systems that capture all the interior including entrances and exits of the dispensary.
  • Extraction companies must use the equipment certified by a Nationally Recognized Testing Laboratory (NRTL). This certification might be applied to separate components of the system but the final extraction assembly will need to get tested and approved by a third-party engineer registered in the program.
  • Packaging cannabusinesses are required to use packaging that is tamper-proof, childproof, and follows all state and local laws. Most states have their own regulations, but some have adopted guidelines from others.
  • Note that employees involved in the industry also must have a license to operate. For example, in Colorado, there are two types of licenses: Key Employee and Support Employee.

Funding

It could be difficult for cannabusinesses to find small business loans as it is still a Schedule I controlled substance at the federal level. However, there are financial institutions that are ready to review your application as a cannapreneur. Before contacting the lender, it makes sense to look for reviews and compare the conditions. Also, make sure you qualify for the loan on the following criteria:

  • Good personal credit. Usually, a cannabusiness must have a minimum credit score of 670.
  • Generally, you’ll need at least three years of credit history.
  • You shouldn’t have bankruptcies on your credit report.
  • The minimum time in cannabusiness must be at least six months.
  • To qualify all business owners need to be US citizens or permanent residents.

Real Estate 

Finding property at an affordable price is a real challenge due to high prices, so this is going to be your biggest expense. For example, a dispensary in California will pay up to $15,000 for a good location. When it comes to a cannabusiness that does not interact with a final customer, it may seem tempting to save money and find a cheaper but remote location. Don’t be too quick to decide: if you aim to attract talented employees to your team, many of your potential candidates for business operations will be frustrated they need to spend extra time driving to the location. To keep the team engaged, you can offer benefits or additional pay. 

Speaking of cultivation, consider the regulations your state has imposed such as a minimum distance of 10,000 feet from schools, libraries, parks, etc.

Useful resources to review the offers:

Team 

When it comes to choosing a team for your cannabusiness, there are a number of factors to consider as your staff should meet the experience requirements for a state application for your business license. If you start the team selection beforehand, it makes your application stand out from the rest and become competitive on the market. The more certified specialists you can demonstrate the better. It may seem challenging to start a search with your own effort, so the market offers a large number of staffing firms that have a huge base of applicants and know all the nuances of the hiring process.

Here are positions you need to cover first and foremost:

  • A lawyer will protect your business from legal issues by means of representing the company in the legal field, help with registration, licensing and compliance, and lobbying on your behalf. He must be aware of all the nuances of 280E of the IRS tax code that forbids businesses from deducting any expenses from their gross income when it involves “trafficking” schedule I and II controlled substances.
  • An accountant will prepare your business for frequent audits and keep all your records and books clean. Taxation in the industry is also complicated due to restrictions on bank operations specifically for cannabusinesses. Hiring a professional means you don’t need to keep an eye on legislative changes and can concentrate on strategic goals. 
  • Insurance providers will pick an optimal policy depending on the type of your cannabusiness: crop coverage for growers, auto and cargo insurance for delivery services, equipment coverage, and many more. 
  • Security providers will help you prevent the facility from theft and comply with the state laws. Among the requirements are 24-hour video surveillance recording, 90-day on-site security video storage, and cloud recording. There is more to expect from the regulatory authorities i.e. HD security cameras for face recognition, video streams with watermarks, and more, so it’s a good option to outsource this part of cannabusiness to a third-party provider. 
  • A budtenter for a dispensary is the face of your company and the first reason the customer will return and buy more. Not only will a certified and experienced professional give his expert advice but create a strong connection between the brand and the consumer. 

Marketing 

More than enough has been said about the importance of cannabis marketing as the industry is experiencing an unprecedented rise. Keeping in mind how many aspects of promotion you must consider, in order to save time and take the most effect from marketing you may turn your attention to non-staff cannabis marketing services. They are provided by companies who specialize in the cannabis industry in particular and know all implicit difficulties every company faces while advertising online and offline. 

You can learn the basic steps each cannabusiness needs to take in our Complete Guide on Cannabis Marketing >>>

Final Thoughts

The cannabis industry is a dynamic and promising area. As with any emerging market, early risers can get more if they create a good product and build the right business plan for all of the aspects. Though on the federal level it’s still illegal, changes are within reach so the sooner you start the better.

Hopefully, now you have the right idea of what type of business you are likely to start and what steps to make.

Viktoria Goshko

Viktoria is the Marketing Manager Assistant of Cannabis Stack. She has 10 years of experience in digital marketing, including content creation, community management, and lead generation.


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