With the massive growth of the cannabis industry over the past several years, entrepreneurs across the country are eager to learn how they can break into this highly sought-after space. Whether you’re interested in opening a dispensary, extraction facility, or even hemp and CBD store, having an effective business plan will get your venture off the ground quickly with minimal risks involved. Keep reading to learn our top 3 tips for writing a successful cannabis business plan!
Research your Competition
It’s no secret that there’s abundant competition in many sectors of the cannabis industry. Including a competitive analysis in your business plan is crucial because it shows that you’ve invested time into researching other companies operating within your space. The more specific you can be, the better. Keep in mind that it’s also a good idea to include potential competitors who might not have entered the market yet, but will be soon.
The primary purpose of including a competitive analysis is to understand the strengths and weaknesses of your future competition. While this step can be extremely tedious and time-consuming, skipping it will hurt you and your business in the long run. The amount of research you do is at your discretion, but there are a few main points that you should make sure to touch on.
First, you want to recognize specific things your competition is doing well. Take a look at their website, marketing materials, and advertisements if possible. Ask yourself who they’re marketing to, what mediums they’re using, and what their basic objectives are. It’s also a good idea to search them on Google and see how much press coverage or media features they may have.
After that, you can identify any areas they might be lacking in and think about how you can use this to your advantage. Perhaps you’re opening a dispensary in an area that already has a few fan favorites. Is there a service that customers want that your competitor does not supply? Is there a specific target market that’s not having their needs met? Think about how you can position yourself to stand out and fill these gaps.
Know your Rules and Regulations
Before you share your business plan with potential investors or partners, you must become a pro at knowing your state’s cannabis legislation. Since compliance for cannabis businesses is such an essential factor, this step will make or break your success. Your business plan should include a dedicated section to exactly how you’ll comply with all relevant laws and regulations.
The first step is doing heavy research on your particular area of operation. It’s important to note that there is no one-size-fits-all approach to compliance as each state has its own unique set of rules. If you plan on operating in Virginia, New York, Or New Jersey, check out our state guides to give you a headstart.
Unlike businesses in more traditional industries, you need to consider things like security, employee hiring, handling cash, and more. Once you understand what’s needed to remain compliant in your state, outline how you plan on meeting these requirements.
Something else to keep in mind is that state, county, and city ordinances regulate where you may locate certain cannabis businesses, like dispensaries. These operations are forbidden from operating within a certain distance of schools or playgrounds. To avoid legal issues, ensure that your location is carefully chosen.
Develop your Financial Plan
As mentioned in our article on raising capital for your cannabis business, having a solid financial plan is integral for your success. The more detailed and transparent your plan is, the better your business will appeal to investors. It’s important to keep in mind that while you don’t want your financial plan to be too vague, you should also avoid overpromising on things you might not be able to deliver.
This part of your business plan should include three key items: forecasts, financing, and future projections. An excellent place to start is determining your startup costs. This would include things like licensing fees, lab testing fees, and other administrative items. Additional expenses can vary greatly depending on the type of business you plan on operating.
A good financial plan includes:
- A profit and loss statement
- Projected cash flow
- Balance sheets
- Financial projections
- A breakeven analysis
The Bottom Line: Cannabis Business Plan Writing
Working with a financial advisor or accounting professional is a great way to ensure you’re in a good place both before and after you start operating. If handling the financial side of your business seems too complicated for you to handle on your own, click below to schedule a free 30-minute consultation with Green Space Accounting. We will work with your team to identify and implement solutions to improve performance and put effective financial systems in place.