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Updated Apr 04, 2024

How to Successfully Launch a Legal Cannabis Business

Legal cannabis is one of the fastest-growing industries in the U.S.

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Adam Uzialko, Senior Editor & Expert on Business Operations
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If you’re looking to cash in on the cannabis industry, you’re in luck, as the field is still young and growing. The U.S. cannabis market generated about $10.8 billion in 2021, according to Grand View Research, and the U.S. market is predicted to grow 14.9% annually from 2022 to 2030. 

Stuart Titus, president and CEO of industrial hemp company Medical Marijuana Inc., said startups of all stripes still have ample opportunity to launch, grow and succeed in the cannabis space.

“The whole industry itself is at the very ground-floor level,” Titus said in an interview at the Cannabis World Congress & Business Exposition. “We’re certainly nowhere near maximizing what we could do. Look at alcohol prohibition. Suddenly, legalization spurred industries and businesses. … We think the same is true for this industry.”

FYIDid you know
As you consider opening a cannabis business, see where you fall on this debate: Should businesses still drug test for marijuana?

This startup guide will give you an overview of what you should know about the marijuana business before you launch a company of your own. Whether you plan to open a dispensary, obtain a cultivation license or run an ancillary business, knowing the basics of the industry is essential to building a successful legal marijuana business. 

Frequently asked questions about starting a cannabis business

These FAQs can help you get started on the path to opening your own cannabis business.

What is an ancillary cannabis business?

The term “ancillary cannabis business” refers to a company that provides needed services in the cannabis industry without actually touching the plant. These can be marketing agencies, professional advisors, payment processors, security companies and more. Ancillary businesses tend to provide B2B services to other cannabis companies.

Ancillary businesses often avoid the onerous licensing and permitting requirements of plant-touching businesses. Many entrepreneurs entering the cannabis industry are pivoting their existing skill set or business and adapting it to the industry to provide necessary services.

How much does it cost to open a dispensary?

The cost of opening a cannabis dispensary depends on many factors, including your location, the size of your dispensary, and your state’s application and licensing process. In some cases, opening a cannabis dispensary could be a multimillion-dollar process, while in others, it could cost a few hundred thousand. The bottom line is that opening a cannabis dispensary isn’t cheap. Moreover, it is a detailed and complicated process that requires meticulous planning.

If you’re considering opening a dispensary, it is important to line up the right partners, obtain funding and familiarize yourself with your state’s application process. Every state will look for slightly different things, so it’s important to optimize your plan based on what the state is looking for in an applicant.

How much does it cost to start a cannabis grow house?

Similar to opening a dispensary, launching a cannabis cultivation operation is no cheap endeavor. The total initial investment required for a 7,700-square-foot facility with 1,000 plants is estimated at more than $830,000, according to Cannabis Business Plan, and certainly, many cultivation operations become multimillion-dollar investments. Also similar to opening a dispensary is navigating the licensing process; it’s important to understand what your state is looking for in an applicant and then build your team and business plan to suit those needs.

Where do you obtain a cannabis cultivation license?

To obtain a cannabis cultivation license, you will have to go through the regulatory body in your state. Typically, this is some kind of marijuana control board, but the exact process varies from state to state. For example, some states require your operation be vertically integrated, meaning you cultivate and sell your cannabis products from start to finish. Other states separate cultivation and dispensary licenses, meaning your company can do only one or the other.

What other permits does your marijuana business need?

Depending on where your business falls in the cannabis supply chain, you could require some other permits or licenses as well. In addition to cultivation and retail licenses for grow houses and dispensaries, there are processor licenses for companies such as extractors or edibles businesses, research licenses and transportation licenses. Before you launch your business, be sure to familiarize yourself with all the requirements of your state’s law and to obtain all necessary licenses and permits before beginning operations.

How can I guarantee my cannabis business will be licensed?

There is no guarantee your cannabis business will be licensed, but following your state’s guidelines to the best of your ability will increase your chances. A strong team and a good business plan are essential, and they should be backed up by realistic financials and a source of funding that makes your project credible. Some states prioritize social justice and diversity, giving a boost to teams led by minorities and veterans. Identifying the specific priorities of your state’s regulators and tailoring your company and plan to suit them greatly increase your chance of getting a license, but it’s never a guarantee.

How can entrepreneurs learn the cannabis laws?

Besides conducting your own research, it is critical to engage an experienced attorney when you’re starting a cannabis business. Ideally, you will want to develop a relationship with an attorney who helps educate you on the applicable laws. Entering the cannabis industry without legal counsel is especially risky given the ever-changing laws from state to state and the uncertain future of federal policy.

How do you start a cannabis transport or logistics business?

To launch a transport or logistics business for the distribution of cannabis and cannabis products, you will likely require a transportation license. In some states, direct-to-consumer cannabis delivery is legal, while in other states, it is not. Regardless, every legal cannabis company will need transportation for moving harvested product to processing facilities and dispensaries. Again, every state has its own specific rules and regulations regarding cannabis transport, so do your homework and follow all available guidelines.

What types of financing are available for cannabis businesses?

Traditional loans are rare in the cannabis industry, because the FDIC will not back any bank that lends money to a business that breaks federal law, which all state-compliant legal cannabis companies currently do. While conventional loans can be nearly impossible for cannabis businesses to obtain, funding sources are available. In addition to angel investors and venture capitalists, cannabis-specific funding companies have launched to fill the gap left by banks that are too hesitant to provide loans to young cannabis companies. Many ancillary cannabis companies are also bootstrapped, started from the owners’ own savings or personal financing options.

Kimberlee Leonard contributed to the reporting and writing in this article. Some source interviews were conducted for a previous version of this article. 

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Adam Uzialko, Senior Editor & Expert on Business Operations
Adam Uzialko, the accomplished senior editor at Business News Daily, brings a wealth of experience that extends beyond traditional writing and editing roles. With a robust background as co-founder and managing editor of a digital marketing venture, his insights are steeped in the practicalities of small business management. Since 2015, Adam has meticulously evaluated a myriad of small business solutions, from contact center platforms to email and text message marketing software. His approach is hands-on; he not only tests the products firsthand but also engages in user interviews and direct dialogues with the companies behind them. Specializing in digital marketing, Adam's expertise spans content strategy, editorial direction and adept team management, ensuring that his work resonates with entrepreneurs navigating the dynamic landscape of online commerce.
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