Should You Start a Cannabis Business?

With more and more states in the United States legalizing the consumption of cannabis, the cannabis market is experiencing a boom. For cannabis lovers, starting a cannabis business can be an exciting and lucrative endeavor. This article will walk you through the basic types of cannabis businesses and the benefits and challenges that you will face.

Types of cannabis businesses

Grow operation

A common option for those who are starting out, grow operations are relatively inexpensive and can be done on a small scale. In fact, many individuals start growing their plants for personal use and expand into commercial operations down the line.

A grow operation provides the opportunity to own a stake in the industry and potentially earn a large return. You also get to experiment with creating your proprietary strains and establishing your own brand. If you develop a popular and unique strain, you can reap huge financial rewards.

However, it can be difficult to get started unless you have a background in horticulture. It can also be challenging to find quality seeds and supplies. Hence, many growers hire professional consultants to assist them with everything from cultivating the correct strains to harvesting the plants.

Legal dispensary

Starting a recreational or medical cannabis dispensary is an attractive option for those that live in a state where cannabis is legal. Running a dispensary can be very profitable, especially if you are located in an area with a high number of recreational users and active foot traffic.

As a dispensary owner, you have the freedom to choose which supplies and brands to stock in your store. If you are a grower, you can also sell your product directly to consumers, eliminating third-party retailers from the supply chain and allowing you more stock control and profit.

However, a dispensary can have significant expenses, including regulatory costs, start-up costs, security costs, and inventory costs. Furthermore, state regulations vary based on location so a Mississippi cannabis license will have different requirements compared to a New Jersey cannabis license.

Cannabis delivery service

Consumers get everything from groceries to electronics delivered to their homes, so why not cannabis? A delivery service can be less expensive than opening a dispensary and can allow you to operate your business across several states that have legalized cannabis.

A cannabis delivery business will save you costly brick-and-mortar rental costs and you will be able to stock a greater range of products and be more flexible in where you move your stock. Customers can take their time to read up on the strains that you offer and choose the ones that they prefer.

That said, state regulations may vary on delivery licensing. You must be careful not to breach the terms of your business license. Additionally, you may have to face a larger expenditure in terms of marketing to reach customers without the presence of a physical location.

Benefits of a cannabis business

Earn hefty profit

The legal cannabis market in the United States is projected to be worth $43 billion by 2025. The rapidly-evolving cannabis market provides opportunities for entrepreneurs to get grab their share of the profit. The cannabis market is poised to continue strong growth so brands that get established now will be in a better position to gain more market share later.

Contribute tax revenue

Cannabis products have retail tax and cannabis businesses pay federal, state, and local taxes. Hence, a cannabis business can generate significant tax revenue. For example, legalized cannabis sales in California earned $275.2 million in tax revenue for the state in the second quarter of 2022. This revenue can be used to fund vital community services in the area.

Create social change

By hiring locally and promoting the local area, a cannabis business can help revitalize the local economy. As the cannabis industry is generally more equitable and geared towards social justice, a cannabis business can also employ traditionally marginalized individuals such as people of color, persons with disabilities, women, veterans, and members of the LGBTQ+ community.

Challenges of a cannabis business

Complicated regulations

A major challenge of running a cannabis business is the complex and ever-changing regulatory environment. Businesses must be aware of new laws that could impact their business and stay up to date on regulatory developments. Having an experienced and knowledgeable cannabis business consulting firm can help entrepreneurs to navigate these issues.

Lack of financial support

Establishing a cannabis business requires significant capital. In addition, cannabis businesses typically face barriers to accessing traditional banking services as many financial institutions are reluctant to work with the cannabis industry. As a result, many cannabis businesses rely on cash-only transactions—which pose security risks and make accounting difficult.

Social stigma

Finally, cannabis businesses and their employees may face stigma, discrimination, and even harassment. Hence, a cannabis business needs to be prepared to deal with unsavory incidents. Business owners should provide social and mental health support for their employees and ensure that they are inclusive and beneficial to the local community.

Operating a successful cannabis business can be fulfilling and financially rewarding. But there are several factors to consider before starting your career in cannabis. Take time to understand the options for starting a cannabis business and their respective benefits and drawbacks.