In a perfect world, a cannabis entrepreneur would obtain their license within days or weeks of a state legalizing cannabis. Businesses would open and entrepreneurs and states alike would start reaping the benefits of a regulated cannabis market. Unfortunately, that’s not the case—not even close.
Newly legalized states tend to follow a similar progression after legalizing: the decision to legalize is made via a vote or amendment, legislation is proposed, and public comment is taken heard. This process can go multiple rounds which often translates into a 6 to 12-month delay in businesses opening their doors, begging the question:
Here are 5 tips to consider while playing the cannabis waiting game:
PARTICIPATE IN PUBLIC COMMENT
Do not underestimate the importance of participating in public comment periods. For one reason or another, there is often a disconnect between the drafters of legislation and the operators who have to live with that legislation. Make sure your voice is heard.
EDUCATE LOCAL GOVERNMENT
Most states utilize a dual licensing structure wherein a cannabis applicant must obtain approval from both state and local regulators before operating. Moreover, most states empower local government to ban commercial cannabis in their jurisdiction altogether. Meeting with local officials in an applicant’s ideal jurisdiction, therefore, provides the opportunity to educate local decisionmakers about cannabis. Many municipalities have limited resources and little to no experience with cannabis to boot and end up banning commercial cannabis out of fear of the unknown. Explaining the business of cannabis in a thorough and informed manner decreases the likelihood that cannabis businesses will be banned in that jurisdiction and increases a future applicant’s likelihood of success.
IDENTIFY REAL ESTATE
Finding properly zoned cannabis real estate is a nightmare. However, it’s easier to identify real estate when a market hasn’t full matured quite yet. Identify commercial and industrial zones in your target jurisdiction and contact building owners A.S.A.P. Check in with local official to see if they’re able to give you an idea as to where the “green zone(s)” may be located in the jurisdiction.
WRITE A BUSINESS PLAN
Going through the drudgery of physically writing (as opposed to thinking through) a business plan out word by word may come across as overboard, but some semblance of a business plan will likely be required on a cannabis application. Beyond it being an application requirement, it’s important to physically write out a business plan and think through the future of a cannabis business.
Here are some general topics that should be considered when drafting a business plan and might show up on a future cannabis application:
- Ownership and Management Structure. Who will own and run the business? What are their backgrounds? Make sure that you’ve thought through the business and operational expertise required to run marijuana delivery service before making these decisions.
- Funding. How will start-up costs and ongoing operating expenses be funded? Will the business take on outside investment? Answering these questions requires a breakdown of the costs that will go into starting your business at a minimum. Be sure to consider the following: real estate costs associated with leasing or buying a property, insurance, payroll, operational costs (lease or purchase price of delivery vehicles, maintenance of vehicles, etc. etc.), professional services (lawyers, accountants, other consultants etc.), marketing/advertising costs, and so on.
- Marketing Plan. How does your business plan on distinguishing itself in an increasingly saturated market? Will you hire a consultant to design a website or implement asocial media campaign? Have you learned enough about online marketing on your own to not get ripped off?
- Operations and Compliance. Your license is only valuable if your business is run efficiently, and only if it’s kept it in good standing. Outline your plan to ensure operational efficiency and strict compliance with state and local regulations.
NETWORK, NETWORK, NETWORK
Forming and maintaining relationships throughout the supply chain will be critical to your business’s success. Consider joining state and local trade associations in an effort to network with future industry colleagues.
Waiting for regulations to be finalized can be frustrating, but entrepreneurs can and should make the most of the time. Take advantage of the tips laid out in this article to put your business in a position to succeed once the cannabis market opens up.
© RYAN T. KOCOT, ESQ. 2020
DISCLAIMER: THIS INFORMATION IS STRICTLY EDUCATIONAL AND DOES NOT CONSTITUTE LEGAL ADVICE.