Preparing for a Cannabis Business Plan
With so many states creating paths to establish legal marijuana businesses, there is quite a “gold rush” feeling about starting a Cannabusiness. However, the start-up expenses can be steep for an industry with substantial regulations and compliance needs, so you want to do all you can to establish a solid business strategy from the very beginning. For instance, you need to:
- Start with a unique idea. What will be the “calling card” of your business? Do you plan to specialize in just a few specific, popular products, or will you diversify your business with a wide variety of strains and forms of cannabis?
- Consider what type of business you want to be. Are you working toward being a cultivator, a distributor, or a dispensary operator? You should understand that how you structure your business, be it a corporation, a limited liability company, or another entity, will affect your financial responsibility and the investment capital available to you.
- Research your consumer base. Know what is popular in your area using cannabis mapping and menu integration resources to understand what kinds of products are already available and how you can differentiate your dispensary or cultivation choices based on the individuals you want to sell to.
- Understand the regulations, laws, and licenses. Just because you are familiar with Cannabis legislation in one state does not automatically translate to any other state, so learn about any current laws on the books and start to get a picture of how much money you’ll need just to be in compliance legally from the beginning.
Creating Your Business Plan
Once you’ve done these pieces of research, you’ll create the formal business plan; it will include a variety of the items above, but also will make it clear what your value proposition is, i.e. why your business needs to exist.
While you’ll want to have extensive information to back it up, your executive summary is a quick way to showcase why your business exists. It should mention:
- Who you are and what expertise you bring to the business: why are you the right person to run this business?
- The problem your business solves: this goes beyond a general demand for legal Cannabis; what helpful or useful strategies will make your business stand out? Will you be known for your extensive knowledge of strains, helpful customer service, wonderful loyalty program, or something else?
- The target market of customers: The more you know about what your customers like and their buying habits, the more confidence people will place in your future success.
- The competition: Be honest about who might be potential threats to your business, but also include how you will edge them out and win customers in a competitive market.
- Management team: In many states, it is required that people involved in your business have no past drug-related convictions; understand what you need in a management team, what might disqualify people, and convey your confidence in your team in this summary.
- Financial Summary: Demonstrate, through explanations of your budget, why you believe you can create the business you’ve described for the amount of capital you are asking for. Discuss your anticipated sales goals, price points, and any other cold hard numbers that you can offer.
- Timeline: When do you want to launch and how will you ramp up over time?
- Milestones: What are your goals for the business, such as multiple locations, certain sales levels, or the ability to expand your offerings?
Position Your Company and Differentiate From Competitors
You want to create a clear statement of what you bring to the table that your competition simply cannot achieve. This will influence what business model you choose; after all, many of the regulations on the advertisements for Cannabis products make are no longer the best option as a business model, but a well-organized affiliate program where your loyal customers can receive store credit for bringing new customers in could be very effective.
Showcasing your knowledge about the competition and where they are missing opportunities is very important for this part of the business plan: the more you get to know your competition, the more places you’ll find to offer a different, better “value-added” in the Cannabis purchase process.
Quantify Your Target Market and Create Buyer Personas for Key Customers
In marketing, you’ll want to know some important industry figures: TAM, or total available market, are those who are interested in the products and services you want to offer, while the important number for you will likely be SAM, or serviceable available market, meaning those that you can legally and feasibly sell to. In your business plan, you want to discuss what you think your SOM or serviceable obtainable market is, meaning those who can actually be convinced to purchase from you: using your above information about the current market, you can offer a potential figure of how much of the market you believe you can capture.
Once you do this, create in-depth personas for the key buyers that you want to be interested in your store: get to know the “backstory” of the people who are already going to be drawn to your product, so that you can tailor everything about your buyer’s experience to suit their tastes. Others will also be drawn in, but this strategy helps you to cast a very specific, targeted net to attract key customers.
Include a Preliminary Marketing Plan
A great marketing plan from the beginning is key to the long-term success of your Cannabis related business. This may mean understanding regulations and rules about what you can and cannot do to market your business, or it may involve partnering with great point-of-sale software to create an easy-to-implement loyalty program or email newsletter. Get creative with your planning, but also learn from what other dispensaries are already doing.
A final element of your business plan should project out into the future, showing what you’ll do first, second, and onward when you secure the funding you need and begin your business.
- Responding to Opportunities: How will you take advantage of partnerships throughout the supply chain as well as community involvement to make your business a success?
- Future Products and Services: Many businesses begin small in order to learn more and more about the target market; what will you do to ramp up once your customer base helps you to understand what they want to purchase?
- Operations and Financial Benchmarks: In as much detail as possible, talk about the responsibilities and duties of each member of your team, and where you want to be financially at different points in the process of launching the business. Give yourself flexibility but make sure you are aiming for success!