What You Need to Include in Your Cannabis Business Plan
The cannabis industry has been compared to the Wild West ad nauseum. But you need to believe the cliché. The Wild West parallel remains because it’s so accurate. It’s a federally unregulated industry with enormous stakes that can bring out the best and worst in people. The community can be supportive, just as the competition can be vicious. And just like the days of the unincorporated West, you need to know your stuff to survive. Only the best could make it in the West. You’re setting off on an adventure through a pioneering industry; a new frontier that can be just as bountiful as it is unforgiving. There are usually a lot of steps between where you’re standing today and the point where you can consider yourself a successful leader in the cannabis industry; just how many steps depends on you and the route you take. One of the best ways to start your journey through the Green Rush on steady footing is to write a solid business plan.
What is a Business Plan?
If this is your first business, you may be unfamiliar with the concept of a business plan, but it’s exactly what it sounds like: the course of action you’re choosing to take to improve your business’s chance of success. You won’t just be clearly spelling out your goals. You’ll be deciding which strategies to use to achieve them. The cannabis industry may be wild and unregulated, but it strives for legitimacy and seems to be on a steady course toward federal legalization. Therefore, you can count on professionalism going a long way in this industry, just as with any respectable business. Drafting your business plan is already a great signal to your professionalism. Are you looking for investors? A business plan will be what you use to give them an overview of your concept as well as enough details to boost their confidence.
Understanding Your Cannabis Business Beforehand
You should have a clear idea of your cannabis business and product prior to researching and writing your business plan. For example, you should already know whether you plan on servicing medical patients, recreational customers, or both. This information is necessary for mapping out the licenses that you’ll need to obtain at the levels of state, county and city. Putting together a summary of your basic information will help aspects of your cannabis business plan move along as smoothly as possible.
Set Clear and Specific Goals
Setting achievable goals gives your business plan real structure. What do you ultimately want out of your business? Make sure to be specific. Don’t say “a lot of money.” Name a specific dollar amount; one that you feel you can realistically attain by following the pathway you’ve mapped out in your business plan. Where do you see your business in 6 months? One year? 5 years? 10 years? These are all milestones that can help give you direction and focus. When you have clearly defined goals, it can be easier to make sure all your efforts are pointed in the right direction. You also need to live a day in the life of your cannabis business to understand the short-term expectations. Walk through a full day of operation, step by step. Map out every detail and put it in the business plan. The short-term details are just as integral as the long-term goals.
Researching Your Cannabis Business Plan
With so much to consider, you’re not going to be winging a business plan; especially in the relatively new playing field of the cannabis industry where regulations are still changing frequently. Research is the foundation of a great cannabis business plan. But where do you start? One technique is to determine your competitors and then closely study them. There are plenty of industry research resources online, but nothing can beat that hands-on approach of visiting an active cannabis business to watch it in motion.
Show Investors Where Their Money Will Be Going
One of the goals of your business plan should be to give you an idea of how much money you need to not only start your cannabis business but to maintain it. Attention to detail is key when mapping out your financial needs. Let’s take a cannabis dispensary as an example. Your comprehensive list of expenses needs to include rent for the space, estimated electricity costs and other utilities, worker’s wages, license fees, inventory, inventory software, insurance costs… even scissors. You need to consider every detail as if you’ve already lived a year in this business. This sort of comprehensiveness is rewarded by investors who see people taking their business seriously. It also lets them know specifically where their investments will be spent.
Who is Your Ideal Customer?
Who is the ideal customer of your cannabis business? Plenty of research has already been done into the cannabis consumer, but your specific business will likely appeal to an even more specific customer type based on your vision. For example, a medical-only dispensary will see a different average customer type than a dispensary that caters to a recreational crowd. But that’s just one factor. Spend some time getting into the mind of your customer and detail your target demographic in your cannabis business plan.
How Are You Different Than the Competition?
We already mentioned studying your competition to get an understanding of what you can expect when operating a fully functional cannabis business. But you should also include a written section of your business plan devoted to discussing your primary competition and how your business brings something new to the table, providing the market with something that your competitors can’t or haven’t. Investors will want to know what sets your company apart from the pack.
How Long Should It Be?
Unfortunately, there is no standard, agreed upon optimal length for a business plan. We’d suggest shooting for 10 pages minimum, but some plans may exceed 50 pages depending on the scope of the concept. Your cannabis business plan should be thorough, but not flowery. This basically means you’re going to need to temper your details with directness. You’ll need to account for a lot of cogs and gears when developing pretty much any type of business in the cannabis industry and all of this will need thorough coverage in your business plan.
Drafting your cannabis business plan will likely take a bit of time and effort, but it’s not the time for short cuts. This is a situation in which you’ll want to dot every i and cross every t before sharing your concepts and strategies with potential investors. The more thoroughly you prepare, the more likely you’ll be to hit the ground running without stumbling.