As the cannabis industry enters the legal sphere and business opportunities flourish ambitious entrepreneurs all over the country -- and especially in the Golden State -- are eager to get a piece of the pie. Do you have what it takes to break into the world's largest legal cannabis market?
However, starting a cannabis business requires considering unique social, regulatory, financial and managerial issues that make this sector different from others.
Here are five questions every cannabis business founder should ask themselves before jumping into the green rush.
How Do I Feel About Running a Federally Illegal Business?
Although the cultivation, breading, distribution and sale of cannabis products has been legalized in many U.S. states -- including California -- the plant remains a Schedule 1 narcotic under federal law. This means that to federal agencies, cannabis is a “drug with no currently accepted medical use and a high potential for abuse,” and falls in the same category as heroin.
This doesn’t mean that running a licensed cannabis business in a legal state will bring the feds knocking on your door. However, it does come with consequences that will create extra hurdles to operations, like not being able to conduct interstate commerce and having to come up with alternatives to traditional banking services.
Am I Willing To Deal with a Complicated Regulatory Landscape?
In states like California, legal cannabis is heavily regulated. This means that in order to operate a cannabis business, producers, manufacturers, distributors and retailers need to obtain special state-issued licenses.
As lawmakers struggle to bring order to a new, previously-illegal industry, regulation changes often and business owners need to keep up with the multiple transformations of complex laws.
Additional outlays in compliance experts, lawyers and regulatory consultants are routine expenses for cannabis businesses. This is where Headquarters comes in. We are a one-stop shop for getting your cannabis product in the lucrative California market. We have experts in all facets of the industry that know how to navigate everything from compliance to marketing to distribution.
How Soon Am I Looking To Turn A Profit?
In some cases, cannabis startups are only profitable in the long-term.
Starting a cannabis business in California is betting on an industry with almost unlimited growth potential. Still, as the industry grows and adapts, businesses are bound to experience growing pains.
The latter half of 2019 was marked by a wave of big cannabis players having to reduce its taskforce and limit operations in order to stay afloat. Although future earnings are inevitable, there is no consensus as to when the industry will become profitable and run smoothly.
Am I Ready to Get Creative with My Brand’s Marketing?
Cannabis’ gray legal status brings many restrictions to advertising, which vary state to state. In California, TV, radio, print, digital and billboard ads have special restrictions that other industries don’t have.
But state-imposed regulation is just the tip of the iceberg. Digital advertising giants like Facebook, Google and Apple choose not to show cannabis ads to stay on the safe side. That will change, but for now you need to build a brand using a limited array of channels.
Cannabis businesses have to come up with creative ways to reach their audiences. As an example, while you may not be able to market in Google Adwords, tradtional Google search is still a highly effective way to reach a targeted audience that is less affected by the whims of social media algorithms. Additionally, developing an engaging newsletter is a great way to own your own audience.
Can My Business Idea Raise Enough Capital?
For all the reasons we’ve mentioned above, starting a cannabis business requires extra outlays that sit on top of the regular costs of founding a traditional company. And just like in any sector, founding needs funding. So unless you and your team are self funded, your future company will need to raise capital from an external source.
While there are many investing firms dedicated to the cannabis industry, not all investors are as enthusiastic about cannabis. For this reason, raising capital can be a turbulent process that will require an exceptional idea or business plan to attract the attention of investors. (Luckily, we're here to help you every step of the way when you're ready to enter the California cannabis market.)
If you have what it takes to launch a cannabis business in the largest cannabis market in the world, reach out to us. Headquarters is a one-stop-shop that helps cannabis companies enter the Californian market. We have expertise in everything from compliance, policy, legislation, marketing and distribution.
Get in touch to find out how we could help you navigate the minefield that is California cannabis law.