How to Start a Cannabis Business: The Basics

Drafting a Business Plan

• To begin, what kind of cannabis operation are you hoping to create? If you’re here on the Montel blog, shopping around for indoor vertical farming systems, you’re likely looking at one of three possible industries, perhaps more than one:

• • Cultivation: growing and harvesting plants
  • Production: turning the plants into packaged goods
  • Dispensary: selling goods to happy consumers

• (There are smaller but still important opportunities besides these core three, such as cannabis testing labs.)

• From there, you’ll need a business plan, an outline of how you’ll find reliable suppliers, turn opex and capex into profit, and make a name for your brand apart from the competition. This is the blueprint for how your business will come together, and your approach on paper could be your golden ticket to opening a unique business venture and attracting a bounty of business partners and customers.

• Every good business plan answers the following six questions:

• • What is the purpose of your company?
  • What is the nature of the market you plan to enter?
  • How do you plan to market your goods?
  • What are your operational targets, and how do you plan to meet them?
  • What are the ownership and organizational structures for your business?
  • What are the ownership and organizational structures for your business?
  • How do you plan to fund your venture, and what is your projected cash flow?

Registering, Licensing, and Permitting

As you develop your business plan, a lot of the specifics will revolve around where you want to sell and the local laws around cannabis sale.

In the US, cannabis is still a Schedule I narcotic at the federal level, but states can decriminalize or legalize as their politicians and voters see fit, though that alone won’t preclude the federal government from prosecution. That’s why it’s so important to know the ins and outs of state and local laws around cannabis and adhere to them tightly, as well understand the regulatory bodies you’ll encounter and with whom you’ll file your necessary paperwork.

Take a look at this recent state-by-state ranking based on governmental favorability toward cannabis. Below is just a sampling of just how different state cannabis regulations can be (as of July 2023):

Banking and Financing

• The relationship between state and local governments versus the federal government is mirrored in the banking process.

• Because cannabis is illegal at the federal level, banking institutions and investors will approach cannabis clients on a case-by-case basis, as there’s no denying that exposure to cannabis businesses can introduce those parties to risk. Many organizations, such as the American Bankers Association, have called on Congress to address the widening gulf between federal cannabis classification and the regulations enacted by the Californias and the New Yorks of the world.

• This fissure has complicated large-scale cannabis production, especially as cannabis businesses jockey for pole position. Recently, a $2 billion merger between cannabis giants Cresco Labs and Columbia Care evaporated amid speculation that the ongoing lack of federal regulation in the US has spooked lenders and investors into the belief that even the biggest names in US cannabis can’t scale without serious reform.

• But what does all that mean for your business, for your boots on the ground? It means you’ll have to devote extra time and energy when selecting a banking partner:

• • Ask around: Reach out to your competition and ask where they bank. Many 420-friendly banks are simply not going to advertise it.
  • Exercise caution: When you have a list of potential banking partners, vet them according to operational legacy. Fledgling banks with little sense of the local regulatory environment might one day decide to shutter, leaving your business in a lurch.
  • Consider their services: What are their deposit and holding limits, if any? What sorts of fees can you expect, and do they fit in your operating budget?

• Until Congress passes the Secure and Fair Enforcement Banking Act, which has repeatedly stalled in the Senate, though there is some hope that it will pass this year, expect bankers, lenders, and investors to prioritize their safety when exchanging money with cannabis businesses. Always interface with them courteously. Honesty goes a long way to finding a perfect banking or investment partner.

• Speaking of good investment, when your cannabis business does take flight, consider reaching out to your local Authorized Montel Distributor for a free no-obligation consultation. Montel is the no. 1 name in mobile racking, and our mobile vertical farming systems for cannabis are peerless in how they optimize space and maximize crop potential.

• See our systems in action, or talk to your local AMD about free 2D and 3D renderings of your layout with state-of-the-art grow racks, dispensary storage, and storage accessories from the most trusted name in vertical farming.