As states continue to legalize marijuana, there is an increase in demand with a shortage of supply. This makes for a great environment to start a cannabis business. Millions are attracted to these startups to buy cannabis. Since the business model is highly profitable, many startups are entering the space. To help entrepreneurs who are starting out in the cannabis space, we got some tips from MJ Freeway on what startups in cannabis should be doing to build a successful business. Read on below to find out these tips on starting a cannabis business.
Understand The Local State Laws
The laws that affect cannabis startups vary from state to state. In order to operate a legal marijuana business, you will have to start the LLC in certain states. Familiarize yourself with your local state laws about dispensary, cultivation and delivery. In some states, it could be legal to sell medical marijuana. Meanwhile, other states may allow recreational use as well. In the event that your state does not accept any of these cannabis programs, you may not be able to open the business in your ideal location. Or, you can wait until your state like New Jersey starts to take applications to open a cannabis business.
Apply For A State Operating License
Once you understand the laws of your state and plan to proceed, you can work on applying for a license to operate in the state. Just to start a marijuana business, you need to file an application with state that can cost up to $20,000. However, the average cost of an application is about $5,000. During the application process, entrepreneurs need to meet several requirements in order to gain approval. This fee is non-refundable. You should prepare for the application process to ensure that you get approved the first time around. Although this is difficult for some people, it is a necessary step to starting a cannabis business.
Secure Business Funding For Startup Costs
Next, you will need the funding beyond the application costs. Depending on your business model, startup costs can become very expensive. If you plan on cultivating marijuana, it will require a significant investment in space and equipment to grow cannabis. Secondly, you could buy and sell marijuana as a dispensary. However, this will have higher inventory costs to sell to others. On top of that, you have to account for other expenses like labor, marketing and transportation. Certainly, you should budget the startup costs required to break even and start making a profit on a new cannabis business.
Invest In Cannabis Business Technology
After securing funding, a cannabis startup needs to have the proper technology in place. The cannabis industry leader MJ Freeway recommends having a fully scalable software solution to manage everything from seed to sale. The right software will allow you to track all marijuana down to the gram and stay compliant with state regulations. As a result, you can carefully manage your products and ROI for better returns. Having the right technology in place, startups will be in a better position to accelerate growth and increase their revenues consistently. This is a direct result of investing in scalable technology for a cannabis startup.
Scale Your Cannabis Business Model
With the right infrastructure in place, startups must focus on scaling the business model. You will need to build out your network to partner with other growers, producers and suppliers. Especially, if you plan on having a dispensary, the partnership with growers can be especially critical to buy inventory at lower costs while maintaining a high quality standard. Once you have a business model at the growing, distributing, retail or delivery levels, work on scaling the business. You can do this by attracting more partners as well as increasing your number of customers. If this is done successfully, you might end up selling the startup altogether.
The cannabis business has plenty opportunities for startups. In order to be successful, you have to follow the laws at the state and federal level. This way, you can obtain a license to start a cannabis business in the state, if allowed. Then, prepare the startup’s costs associated with the new venture. This will give the business the financial backing needed to get up and running. As early as possible, invest in technology and software to run the business. It will save you and your partners plenty of time, streamlining the business from seed to sale. Lastly, scale your business model by increasing capacity with partners and attracting customers for sales.