Not that long ago, if you wanted to partake, you had to know a guy that knew a guy.
You really could only smoke marijuana and if you did, people didn't look very favorably upon you. The comparisons to Sean Penn's Spicoli (Fast Times at Ridgemont High) and Matthew McMatthew McConaughey's Wooderson (Dazed and Confused) were the norm.
We've evolved a great deal over the last two decades. Recreational marijuana is now legal in nine states and Washington D.C. Twenty-one more states have medical marijuana laws on the books. And, as such, the industry is booming. Wall Street's even getting in on the cannabis craze. What most people don't realize is that it's not all about smoking marijuana. The sale of concentrate is on the rise, holding about 50% of the legal market in some states. It's only expected to get bigger.
So, if you've decided that starting your own cannabis extraction company is a good idea, you're right! But, you need a cannabis business plan to get it off the ground.
Not sure how to write one? We've got you covered. Check out our guide on how to write a cannabis business plan below.
Why You Need a Cannabis Business Plan
You may not think you need a cannabis business plan. After all, you're just buying some pumps and setting them up, right? What else do you need?
Well, it turns out you need a lot more than that. Have you considered the differences between Co2 extraction vs. butane? Where are you setting up shop? How will you fund your business?
A business plan will get you moving in the right direction. If you do it right, it will keep you headed in the right direction after you've gotten off the ground. Here's what you need it to include.
1. Executive Summary
Every business plan, regardless of industry, starts out with an executive summary. This says who you are and what you do. This should be the easy part. You have a cannabis extraction business which means you use CO2 or another form to extract CBD oil from cannabis plants.
You should also include what makes you and your company special. If you're trying to secure funding, you should include that in the executive summary as well. If you do, make sure you know the specific amount you need and where you'll spend it.
Keep this in mind: If you're applying for any kind of loan in the US, it won't be an SBA loan. The Small Business Association added a revision in April 2018 stating they won't back loans given to marijuana businesses. Remember, the US federal government still says marijuana is illegal.
The executive summary is very important to lenders or investors. This gives them the best idea of who you are and what you're about. If they're not impressed, they likely won't keep reading your business plan. This doesn't mean to write your entire plan in this section. Keep it to one page and be as clear and concise as possible, while still being intriguing at the same time.
2. Target Market
It's very important that you know your market. This means that you've thought about being local vs. national and have the market analysis to back you up. We have a great infographic on knowing your market that you can see here. It breaks down all the confusing numbers and what they mean. You can use ours as a guide of the info you should have in yours.
You should also include the size of your market and any specific factors that affect it. For example, if you live in a medical marijuana state, you can include any regulations in the industry. You can even explain how weather affects harvesting in certain seasons.
3. Organization and Management
This is one of the easier sections to complete. In organizational and management, you're going to describe your business's structure. This will list you as the owner/proprietor. You'll also list the type of business you are like LLC, S-Corp, sole-proprietorship, partnership, etc.
List all members of management and why they're qualified to be in those positions. If you have anyone on your team specifically qualified to work in this business, like a chemist or master grower with a PhD you want to list them as well. This gives the investors or lenders an idea that your company is structurally sound and run by the right people.
4. Products and/or Services
This is the easiest part of your business plan. What are you selling? You can also add if you'll grow your own plants or buy it from a wholesaler.
Describe your marketing strategy using industry examples. In other words, if you're starting a website and will have a blog, are you hiring a local SEO company to help you? Will you be using social media or pop-ups to spread the word? Are you planning on attending trade shows?
Anything you can think of that you'd like to use to market your business, you should include in this section. Make sure you include both offline and online strategies. While you may be tech-savvy, your investor may not be.
In this area, you're going to lay out your growth plan. This could include branches or satellites in other states or other markets you eventually want to move into. Think of the growth section as a combination of your business's potential and your own goals.
If you don't plan on moving into another market, that's fine too. But you should at least have some aspirations of expansion or growth.
7. Budget and Financial Projections
This isn't always the fun part, but it's vital to your plan. The final section needs to describe your pricing structure.
If you're a startup, you won't have enough to show any profitability yet. But you will be able to refer back to your market analysis. This section should also explain in detail your expenses. This is everything from salary to shipping costs. If you have any equipment loans or other loans that get repaid, you must include them. You need to include your monthly rent or lease payments as well as utility costs. Insurance, certifications, licensing -- anything that's an expense must get included.
It's not an absolute must to include your operating budget, but it's a really good idea to do it. The investor or lender will see how you plan on spending their money. It will also help you stay on track, too.
Now that you know exactly how to write a cannabis business plan, you need to get off the ground the right way!
We can help.
If you haven't considered the equipment or system you'll use, you need to see what Vitalis Extraction Technology offers.
We're an award-winning company that specializes in extraction equipment. Our friendly staff is waiting to answer your questions and get you started in the right direction. So, contact us today!