How to Write a Marijuana or Cannabis Business Plan

If there is one tool that can help a new business owner succeed, it’s a solid business plan. However, a cannabis business plan needs a little bit more. An ordinary business plan outlines your vision for the business and the steps you’ll take to get there. A cannabis business plan must also include the legal, financial, and regulatory hurdles you must clear to make your business safe for investors.

An average business needs city and state business license applications and a good market analysis. Your cannabis business requires several layers of state licenses and an outline for security and transportation. Like any other business plan, it’s important to understand your market and demographics well.

Business plan templates are available online, but your cannabis business plan needs a few extra details. Potential investors want to see that cannabis entrepreneurs have all the legal angles covered before they contribute to what is still an illegal enterprise under federal law.

Writing a Cannabis Business Plan

Whether you write your own plan or use a cannabis business plan template, your plan should contain the usual business plan sections. To start, your business plan should contain the following:

#1: Executive Summary

A stand-alone description of the business, market research, and financial information. The executive summary is a brief bio of yourself and other “founders,” the business itself, and your business history. It should include your funding needs.

#2: Company Description

A more detailed description of the company, operational costs, and the “value proposition” or the purpose of your business.

#3: Industry Analysis

An industry analysis includes regulatory and licensing requirements. It should also describe how your business differs from others in the area. Investors want to know how your business will stand out from similar businesses on the same street and in the same area.

#4: Operations Plan

This section outlines your legal structure, such as whether you will be a partnership, LLC, C-corp, or S-corp. It should contain an org chart showing your management structure if you have one.

#5: Product Line

If your operation is a cannabis retail business, describe the products your shop will sell. For instance, in a cannabis dispensary, you may sell CBD products, edibles, and vape products. A medical dispensary may need to comply with medical marijuana dosing laws.

#6: Marketing and Sales Plan

Pricing and sales strategies, advertising, and sales plans are important to any business. You should know your target audience. With a cannabis business, there may be some audiences you cannot target. As with liquor and cigarettes, the marijuana business cannot advertise to minors or place advertising near schools or playgrounds.

Cannabis Business Plan Specifics

A cannabis-specific business plan needs more than just the basics about what you will sell and what it will cost. Your cannabis business plan must contain details specific to the industry. Because cannabis laws are different in each state, your business plan must refer to your state’s licensing requirements.

For instance, California has seven types of cannabis business licenses, with many subtypes for each license. Your business plan should contain the licenses you’ll need for your proposed business and how to acquire them.

In addition to the basics above, cannabis business plans should include:

#1: Security and Inventory Tracking

The cannabis market uses “seed-to-sale” tracking. In layperson’s terms, you must account for your product from the grower to the end user. Depending on where you are in the chain, your inventory control has to account for all steps before yours.

Shipping regulations vary widely between states, but they all have this in common: businesses cannot send marijuana in any form through the mail. Cannabis companies cannot use the U.S. Postal Service, and both UPS and FedEx have restrictions on shipping unlawful substances.

Further, shipping across state lines is considered trafficking in illegal drugs. You must source and ship all marijuana and legal cannabis products within your state.

#2: Regulatory Compliance

Even where cannabis is legal, the cannabis industry is an industry in flux. Laws change every year, so your business model must include a method for staying ahead of changes in the laws.

Marijuana remains a Schedule I illegal narcotic at the federal level. Although the Drug Enforcement Administration (DEA) suspended enforcement of federal narcotics laws because so many states have legalized medical and recreational marijuana, there is no guarantee that this will remain the case. Your business plan must include a contingency plan to protect stakeholders if policy changes require you to close your business.

#3: Financial Planning

A cannabis business plan must include provisions for the industry’s banking challenges. State and federal laws restrict access to how a cannabis business can deposit funds and pay bills. Formerly, marijuana businesses had to operate as cash-only businesses, a risky method that left them open to robbery and charges of tax evasion.

In 2014, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued formal guidance for banks wishing to do business with marijuana dispensaries and other cannabis companies. Companies also must account for the special tax requirements of operating their business, designed to ensure the business is not engaged in illegal trafficking.

#4: Market Analysis

A key part of any business plan is the market analysis. You must know your target market, your competitors, and the area’s demographics. A cannabis or marijuana plan needs to include other factors since your business still carries a social and legal stigma, including:

• Local zoning and permits: Many states allow cities to opt out of dispensary laws. A city or neighborhood can restrict the types of businesses allowed in their area. Make sure your chosen city allows cannabis-related businesses before you develop your plan.

• Local needs and customers: All business plans target their “ideal customer,” but a cannabis plan should ensure that their ideal customer exists in their target area. Some regions do not want or need a cannabis dispensary. Cannabis delivery services may meet the needs of others without a brick-and-mortar shop.

Your marketing plan must follow the requirements for any other highly regulated product. Marijuana, like liquor, cigarettes, and prescription medications, cannot be advertised to minors or near schools. Your marketing plan should show you’re aware of these constraints.

Funding and Financing

The purpose of a business plan is to find potential investors for your cannabis business. The main difficulty is not the legality of a cannabis dispensary but the uncertainty of the market. Investors want to know that their investment will pay off over the long term. In other words, they want their money back.

Your plan must include clear business goals and financial plans. Potential investors expect to learn the startup costs and how much you expect to make in the first year. Once you pay off the first year’s expenses, you need a cash flow statement showing your anticipated revenue for the next three to five years.

A sales forecast can be speculative based on other companies’ sales and market trends. You should have some idea of what your business will bear. You can work with an accountant to develop financial projections for your business plan.

Contact a Cannabis Dispensary Attorney in Your Area

Cannabis entrepreneurs have a lot more details to consider when starting their businesses. Before beginning your cannabis operation, it is essential to know the current status of state and federal laws.

To ensure your business plan covers all of these details, discuss your cannabis dispensary business plan with an experienced cannabis attorney in your area. They can give you detailed advice about the legal requirements for marijuana businesses in your state. They can also be a valuable resource moving forward, helping your business stay in compliance as you grow.