Legalized cannabis is a relatively new industry in America. To date, there are 11 states, plus D.C. that have laws regarding the legal use of smoking, distributing, and growing marijuana recreationally, while 33 states have made it legal for medical purposes. There are many entrepreneurs who want to jump on board this period of growth before the market becomes too saturated. Just like with any business venture, however, there are reasons why some people fail and others succeed. Every niche has its own unique way of doing things, which is why it’s so important to listen to the experts when it comes to any type of start-up venture.
The cannabis industry has created hundreds of thousands of jobs and shows no signs of slowing down. Many have compared it to industry growth after the end of prohibition. It is still very early in the marijuana game. However, despite all of these changes, it’s important to remember that the federal government still considers cannabis to be a Schedule 1 controlled substance. By definition, that means cannabis is still viewed as an illegal substance with a high potential for abuse and no accepted medical purpose.
This is also a difficult industry for expansion since every state comes with its own regulations and laws when it comes to each phase of this product. Having no federal regulations means that rules can vary widely across state borders. In addition, since this is still an illegal product at the federal level, cannabis companies cannot deduct ordinary business expenses like mainstream businesses and they must pay taxes based on their gross income, rather than net. In addition, some states charge an excise tax on top of the federal tax.
The cannabis market also has many players – from cultivators to distributors, so the first decision is to know your link in the chain. Ask yourself whether you have the availability and the experience to be on the agricultural side. Licensing and permitting are going to be areas you will need knowledge of. The cost of getting licensed isn’t cheap. Cultivators and dispensaries should be prepared to spend hundreds of thousands of dollars throughout the process.
Money continues to be a problem in other ways, such as financing. Cannabis industries face a much harder time getting a traditional line of credit or even a business account, which not only makes it harder to get first-round funding, but it also means most businesses operate at a cash-only level. This makes it a target for theft and relies heavily on manual bookkeeping for salaries and bills.