10 ProTips Before You Start Your Legal CannaBiz Venture
Author: Joseph Chicas | Cannabis Expert | Cannabis Advising Partners
After several years consulting in the cannabis industry and now as the Executive Director of Cannabis Advising Partners, below are some gold nuggets, some ProTips, I offer for those of you looking to start your own CannaBiz venture.
1. Start with Your Why– Yes, I know its sounds cliché, but this point cant be understated. Do some intense soul searching, mediate on your goals, speak with your close friends and family, and dig deep to arrive at your WHY. Getting into the cannabis industry is no joke. Its highly competitive and capital intensive. It will require you to dig deep to be successful in the long-term. Being clear about your reason to be in the industry and having that reason (AKA Your Why) be sincere and authentic, is a great foundation for early success. Find your why and use it as your daily motivation.
2. Realize that Fortune Favors the Bold After drilling down on your WHY, realize there are inherent risks in launching your venture. Constantly changing regulations, high tax rates, inflated costs of business (i.e. real estate price hikes) all make cannabis a risky investment.
For this reason, many entrepreneurs and investors are on the sidelines. But this shouldn’t stop you. Early adopters who carve out a niche in the industry are seeing solid early returns. For instance, our clients are obtaining licenses to operate and choosing to put them on the market to be sold. We are consistently seeing 10 x returns within one year.
Obtaining your cannabis license is a low risk high reward proposition. But with cannabis prohibition slowing losing its grip, more and more licensing opportunities will occur and the space will get more saturated and competitive. Avoid the rush to the floodgates by being an early adopter, capture early market share and get ahead of the “green rush”
3. Avoid the Red Ocean– red oceans exist where sharks are feeding on their prey. This analogous to whats happening in the cannabis industry. Despite being at the early stages, cannabis is still a highly competitive industry. Some spaces are already extremely competitive and saturated. Evaluate the cannabis landscape and see what gaps, or blue ocean, exists out there. Catch up on cannabis news, sign up for cannabis blogs, and consult with experts as soon as possible.
4. Clarify Your Roadmap & Go – when you commit to starting your venture, go through a series of exercises to drill down on your vision and plan. Vision board, use design thinking, plan a strategic planning retreat, whatever it takes. Consulting with an industry expert is also highly suggested to get insider perspective and informed advice. Discuss your ideas with trusted and selected friends and colleagues that can give you their honest take. Narrow down your ideas and weigh the costs and benefits of each. Speak with prospective partners and co-founders. After you’ve exhausted these efforts, make a decision and GO!
5. Have Your End Goal In Mind – failing to plan is planning to miss the green rush. Is this a short or long-term investment? How do you define success? Are you interested in vertical integration? What is your exit strategy? Once you can answer these and answer other related questions, reverse engineer and map out all critical strategies and tasks needed to achieve your end goal.
6. Licensing is Key – Whatever avenue you choose, you will most likely need a commercial cannabis license to operate. Like any industry, cannabis licensing stretches across many verticals: retail, manufacturing, cultivation, distribution, testing, and delivery. Licensing in California is a two-fold process: obtain local authorization and then apply for a state license. Sounds straightforward, but the application itself is quite complex. Consult experts on this and don’t take short-cuts or take it all on your own.Cities are looking for applicants that know what they’re doing and the application is how you will get measured. Failed applications can result from incomplete documents, inaccurate materials, cookie cutter documents, technical oversights, language not aligned with local and state law etc. Missteps will lead to serious delays in getting your application approved. Avoid being penny wise and pound foolish.
7. Get Your Finances In Order - make no mistake, it takes a sizeable investment to get into the cannabis industry. Application and consulting fees will cost you around $100,000 and startup operational costs will cost a few hundred thousand, minimum.You will also need reserves while you strive toward positive cash flow. Additionally, city’s issue licenses for applicants that are fiscally strong and sustainable. They want to see roughly $500,000 + in your bank or in assets. If you don’t have that, find an investor or partner who does, and share your piece of the pie. There is plenty opportunity to go around.
8. Real Estate is an X Factor - to obtain a commercial cannabis license, you will need to secure properly zoned property. You can buy or lease real estate. The city and state will need to know you have permission to conduct cannabis activity at your site. Cannabis property rates are sky rocketing by the day while cannabis zoning laws can be unclear. Look out for deals that may drain your cash flow and hurt your bottom line. Contingency deals are advisable. Consult with experts to help you negotiate your terms and ensure your property fits the city’s zoning requirements.
9. Build Your Dream Team - anticipate your growth and prepare to build your dream team. Bootstrap as much as possible until growing your team is necessary.Attend trade shows, local cannabis meetups, and network on LinkedIn to find like-minded and like-spirited individuals in the space. Find technically sound people with values and mission alignment. And if you need more advanced help, seek out a cannabis hiring firm and pay them to do the heavy lifting of screening potential candidates that fit your dream team goals.
10. Course Correct, Pivot, Stay Agile and Stay Hungry - the road ahead is exciting, yet filled with highs and lows. Your plan will sometimes be met with resistance, doubt, may not be feasible or may be the wrong move. Be brave and course correct. Pivot when needed. Speed matters here so be agile. Celebrate small wins and stay humble, yet ferociously hungry.