(Newswire.net — December 29, 2017) —
The legal framework that regulates the use of marijuana is constantly evolving. As of 2017, 29 states plus the District of Columbia have put in place some form of legislation that allows the use of marijuana. In the majority of these states, only medicinal use is allowed. Seven of the states, plus DC, are allowing it for recreational use as well. Under federal law, however, marijuana is still a controlled substance and illegal.
But the strange and sometimes challenging legal landscape didn’t quite stop the legal cannabis industry from being called America’s newest gold rush. In 2016, the legal cannabis market was worth more than $6.5 billion. Some projections show that, with the compound annual growth rate of 16%, the market will grow to be worth more than $24 billion by 2025.
The Booming Market
The numbers that show just how much potential there is in the legal marijuana industry are staggering. In 2015, more than 74 tons of marijuana were sold in Colorado, a state that allows recreational marijuana. By 2016, there were close to 115,000 medical marijuana cards issued by the state’s physicians. In the first eight months of 2017, total sales of marijuana in the state topped $1 billion.
The size of the boom, of course, varies from one state to another. It’s reasonable to expect that the states that allow the broadest legalization experience the biggest growth in the market. And with the entrepreneurial spirit characteristic to Americans, many people might want to join in on the fun.
However, many are faced that the hard fact that legal marijuana is not exactly a gold rush. It takes much more than a simple set of tools and determination. Not that determination doesn’t count — cannabis entrepreneurs will need a lot of it. As for the tools, they might as well be replaced by the services of specialized cannabis business consultants. The market might be too difficult to navigate without them.
Starting a Cannabis Business
Just like any other serious businesses, a cannabis business requires a business plan. To create a business plan, entrepreneurs need to determine which area of the industry to focus on. Depending on the state they’re in, entrepreneurs can pick one of several options — growing, selling, product manufacturing, testing, or distribution. And that’s where the first hurdles pop up.
Cultivating marijuana is a completely different business from selling it in a store. One is agriculture, the other is retail. A person who doesn’t have the necessary experience with agriculture shouldn’t try to be a cultivator. The same goes for retail, transport, laboratory analysis, and processing and manufacturing. Although it might seem that cannabis business is open to hobbyist and enthusiasts, in reality, things are different. It’s big business that requires expertise. Especially because of the tight regulations.
Regulations, Licensing, and Costs
When deciding how to enter the legal cannabis industry, entrepreneurs need to study the regulations carefully. Even the states that are the most lenient with the use of marijuana are pretty strict when it comes to giving licenses to cannabis businesses. Colorado, for example, offers eight different types of licenses — five for recreational, and three for medical marijuana businesses. Each type of license has standards that entrepreneurs need to meet. The standards will include when, how, and where a future business can operate, and they will directly influence the costs of starting a business.
The state of the market will also have a direct input on the size of the investment into the business. It’s pretty simple. The more permissive the laws, the more businesses will be operating under them. More businesses mean more competition, which inevitably leads to lower prices and margins. In that case, it might make sense to open the business in a different state, one with stricter laws but a bigger market. Stricter laws mean fewer competitors. Often enough, however, they also mean that the process of gaining a license is more difficult and expensive.
Ancillary Marijuana Businesses
Another way to join in the growing industry if by offering ancillary services and products for the marijuana industry. In that case, entrepreneurs can avoid the regulations meant for the businesses that “touch the plant.” A major ancillary industry is manufacturing the equipment needed for cultivating marijuana. Equipment for product packaging is also in demand. As is equipment for consummation.
Specializing in supporting services might be a good choice for existing businesses. Offering legal or accounting services especially for marijuana businesses is a possibility. Other types of services, such as marketing and branding, might also be in demand by cannabis businesses. With the industry growing and raking in more money, security services are becoming increasingly sought after in the cannabis industry.
The rapid growth of the cannabis industry is not expected to end soon. Some form of legalization is the trend, and as it progresses, the market will become bigger. And while that gives an opportunity for entrepreneurs to join the industry, they should be cautious. Licensing can be a difficult and expensive process. For entrepreneurs who are new to the types of businesses that are legal under the regulations, it might be better to start an ancillary business first.