Although cannabis legalization is spreading across the United States, the industry is still in its infancy. This means that entrepreneurs who are eager to get involved in cannabis may find themselves facing many roadblocks. From regulatory concerns to financing issues, there are a number of potential pitfalls that could trip up your business. This blog post will explore the top three challenges entrepreneurs face when entering the cannabis industry. Follow along to be better prepared in navigating the complexities of the cannabis space.
Compliance
Because cannabis is still illegal under federal law, business owners in this space have to be extra careful when it comes to following their state’s rules and regulations. Very few industries deal with regulatory restrictions as strict as the cannabis industry.
Compliance is important in nearly every aspect of the cannabis supply chain, from growers to processors, to dispensaries. There are specific standards when it comes to acquiring permits and licenses, facility security, environmental impact, and so much more. Not only do you need a deep understanding of compliance when starting your business, but you’ll also need to develop standard operating procedures to maintain compliance after you’re up and running.
The biggest issue when it comes to compliance is that there’s not a one-size-fits-all solution. To grasp how compliance works, it’s important that you first understand the infrastructure of individual state markets. Each state has its own unique compliance protocols, so you need to be clear on what laws apply to which aspects of your operation.
Whether intentional or not, failure to comply with cannabis regulations puts you and your business at risk. Non-compliant operations may be hit with devastating fines or even closure of their business. To learn more about the consequences of non-compliance, read our article on Tax Code 280e in Green Entrepreneur.
Creating Strategic Partnerships
As an entrepreneur, you might find yourself wearing many different hats when it comes to running your business. While this is admirable, you should not overlook the importance of creating strategic partnerships with other industry professionals. This is especially true for those who are not well-versed in the cannabis space.
Creating a name for yourself in the highly competitive cannabis space is hard to do all on your own. Whether your goal is to create a cohesive brand image, boost your marketing strategies, or get your finances in order, partnering with the right people can bring your vision to reality.
As you’re crafting your business plan, consider doing your due diligence in researching industry experts for potential partnerships. Having a team member with comprehensive knowledge of the ins and outs of the cannabis space will be vital for your success.
The type of partnership you choose to pursue depends on a few things, for example, whether you’re in a medical or adult-use market. Potential partners could include a marketing agency, graphic designer, accounting firm, or general business consultant.
Building a Sound Financial Foundation
As discussed in our blog, “The Basics of Starting a Cannabis Business: Funding & Financials,” managing the financial side of your business on your own is no easy task.
When writing your business plan, one of the most critical segments will be your financial plan. Investors and partners want to know that you have a clear understanding of how to plan to bring your ideas to life. This part of your plan should include three key items: forecasts, financing, and future projections.
Having a detailed financial plan will get your venture off the ground quickly with minimal risks involved. For more information on writing a successful business plan, check out our blog post dedicated to our top tips.
Bottom Line
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 improve performance and put effective financial systems in place.
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