The marijuana industry is booming, and there is no evidence to suggest that it will slow down any time soon. As of today, there are thirty-three states that have passed laws legalizing the plant – either medically or recreationally. With the industry driving over $52 billion in sales each year, it’s no surprise that more marijuana businesses are launching and more entrepreneurs are turning to commercial cultivation. Wherever there is a high potential for profit, investors are looking to get in the game with their capital. Before you can secure a partnership with them though, you will need to write a strong and convincing commercial cultivation business plan.
Marijuana as a legal industry is still relatively new and only a handful of investors understand the ins and outs of this sector. Before considering an investment, investors may ask questions that they wouldn’t ask startups in other industries. They also may be highly skeptical of any claims that aren’t validated with hard evidence.
At ThinkLions, we have worked with dozens of marijuana-related startups. We have learned exactly what investors in this industry look for when considering an investment. In this post, we will give you everything you need to know to write the most effective commercial cultivation business plan.
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3 Considerations Before Writing Your Business Plan
Writing a business plan for any industry is challenging, but cannabis entrepreneurs must make special considerations before putting their plan on paper. The overall perception of the industry is widely changing, but many investors are still hesitant to add a marijuana-based business to their portfolio.
In the following sections, we will explore several factors that cannabis businesses must contemplate to write a winning business plan.
Understanding Legalities
In most states, the cannabis industry is still in its infancy. As public perception shifts back and forth, laws continue to change. From growing operations and dispensaries to oil brands and beyond, governments are still figuring out how to properly regulate the industry.
This can present a major issue for investors. Unclear laws can turn cannabis businesses into extremely risky investments. To convince investors that they are making a sound investment, you’ll need to give them the assurance that all legalities have been considered and overcome.
Make sure you know your state’s laws down to the most minute detail. Find out which licenses you will need to legally operate your business and the steps that need to be taken to obtain those licenses. The more you understand how the cannabis industry is regulated in your region, the more effective you will be in developing your business strategy.
Finding The Right Facility
When operating a commercial cultivation operation, finding the right facility is critical. In most circumstances, regulations may only allow commercial-level cultivation within defined zones.
Even when operating in a legally defined zone, problems can still arise. Neighbors may complain or even conspire together with petitions in an attempt to force you away from their homes or businesses.
Then, there are considerations regarding the facility itself. The facility you choose must be large enough to house the operation, able to carry a large electrical load, equipped with the right ventilation, and more.
Visit different facilities, take photos, and ask for price estimates (whether buying or renting). Make sure you know the laws that define where your operation can be located. Working out these details ahead of time will allow you to present the most impactful cultivation business plan.
Building An Effective Team
Investors will only risk their capital if they believe your team is capable of creating a highly profitable venture. Operating a large-scale commercial operation requires many hands on deck. To succeed, the team needs to be experienced and strategic with organizational planning, finance, management, sales, legal, and more.
Build a team of professionals who have the background and experience needed to operate a successful cannabis cultivation operation. Seek out advisors in the industry who have specialized knowledge that can help you overcome obstacles.
What Plan Format Should You Use?
Cannabis startups typically follow the same format as other business plans. However, when writing your business plan, certain sections will require a more focused approach. Here are a few things we’ve learned after writing numerous winning business plans for startups in this industry.
Company Details
The company details section sets the stage for the rest of your business plan. It introduces the reader to your business and helps them understand what the business stands for.
Start this section by explaining what the business is and how the concept was developed. Detail any milestones and accomplishments that the team has made to date like applying and being accepted for applicable licenses, putting a down payment on a location, or inking a deal with a high-profile buyer.
Describe the products and services that you will offer. What are the specific factors that make your end product better than other competitors? Be descriptive and as detailed as possible. Since readers likely won’t be able to see or test your product, you must give enough detail so they can properly visualize what you are offering.
Market Analysis
Medical and recreational cannabis is a national topic and public research is widespread. Most investors have heard the arguments regarding cannabis and its usefulness, and many already know that there is enormous potential for those who can get in the market at the right time and with the right strategy. They also know that the competition in this market is extreme and only a few businesses succeed.
Your research should not only prove that there is a demand for your product, but also that there is a need for additional supply. In many markets, there are already too many producers and new cultivators find it difficult to earn their share of the market. An effective analysis will give an accurate snapshot of the market and provide evidence that a problem exists.
Describe your key target market – what are the specific markets that you will serve with your cannabis products? For some cultivators, this may describe different sets of end-users. Others may sell to dispensaries or other commercial outlets. Find data to showcase how many consumers exist and what share of the market your startup can realistically capture.
Sales & Marketing
To earn profits in this industry, companies must create a strong brand presence. For buyers to know what your competitive advantage is, you must reach them with a targeted marketing strategy.
There are many ways to market a business, but not all of them are meant for your specific business. Your cannabis business plan should show that you understand your customers, and their purchase process, and have developed a strategy for funneling them from awareness to purchase.
Describe your marketing goals in this section. What budget will you put towards marketing your product or service each year? How many clients will you reach as a result? On average, how much will it cost to acquire one client or customer?
Operational Strategy
In this section, you will describe exactly how you will operate your business daily. Use this portion of the plan to explain how you will approach the following factors:
1) Location: Where will your commercial operation be located? Have you already signed the lease for the facility? Explain the details regarding your business’ location and facility.
2) Quality Control: How will processes be managed to maintain a consistent and high-quality product? Describe your method of cultivation, how you will approach issues that may arise, and how you will ensure a top-quality product.
3) Customer Service: Like any business, cannabis startups must serve their customers with a defined process. How will you deal with complaints or product returns? What conditions will you have in place to ensure fair mediation when customer issues arise? Who should a potential customer contact when they have a question or concern?
Writing Your Commercial Cultivation Business Plan
Writing an effective business plan for a marijuana business can be challenging. Many considerations need to be made to showcase the full breadth of the business and industry.
Need help with your commercial cultivation business plan? We’d love to help. Our consultants have assisted in raising millions in seed money for marijuana and cannabis startups across the country. Contact us and speak with one of our expert consultants today!
