The cannabis industry is a budding billion dollar industry that is continuously growing thanks to the legalization in Canada in October 2018. Although it’s legal, starting a cannabis business isn’t a cut-and-dried process. Laws and regulations are always changing, and you’ll need to keep up with them to stay out of trouble. But if you’re willing to start a venture in the industry, you could be rewarded handsomely.
You have many paths to pursue in the cannabis industry. Here are three main categories to start with:
Ready to start your cannabis business? Follow these five steps to get up and running.
Before going all in with your business, see whether it’s a venture you really want to pursue. Although its a budding industry, not every cannabis business is successful, and even if the company is successful, not every business is going to make big profits.
The legal arena is a good place to start your research:
You should also look into your financing options and consider how your business will manage its finances. Many banks (with the possible exception of BMO) won’t fund loans to cannabis businesses, however some online lenders, credit unions and alternative banks will.
It’s restrictions like these that make it difficult to start a cannabis business. Before pouring resources into your venture, understand what you’re getting into. You could save a lot of time and energy you’d otherwise lose by diving in headfirst.
Writing a business plan will help you gauge the feasibility of your venture. Its contents might include:
If you’re writing a business plan to seek funding, include a funding request section. Here, you’ll describe how much funding you’ll need, what you need it for and how you’ll deploy the capital.
Location is especially important if you’re opening a dispensary, as you want a place that’s easily accessible by your target market and abides by all local laws.
Even if foot traffic isn’t your primary concern, pay attention to your city and province’s zoning laws. They can greatly affect where you can locate your business.
Rent may be a factor as well, as it’ll eat into your revenue. Picking the right location may help you keep expenses low.
In Canada, you’ll need to be licensed at the federal and provincial level to run a cannabis business. Given the tight regulations surrounding this industry, it would be wise work with a lawyer to make sure you’re filing the right paperwork, including all the right information and paying all the necessary fees.
Each province and territory has its own cannabis licensing requirements and fees. Application fees can be several thousand dollars. You must also pay an annual fee to renew your license — the cost typically ranges from just under $1,000 to $3,000.
Bear in mind that you’ll have to comply with whatever organizational structure your province or territory has in place to regulate the sale of cannabis. In many regions, there is one organization with exclusive wholesaler or retailer rights. This means that, as a cannabis business owner or a cannabis consumer, you may only be able to buy from one source. For example, in Ontario authorized retailers can only buy cannabis wholesale from the Ontario Cannabis Retail Corporation (OCRC). In New Brunswick, Cannabis NB is the only retailer that’s legally allowed to sell cannabis to consumers for recreational use.
After completing the four previous steps, you’ll have created a legal business. Now, it’s time to start making money.
Decide where to focus your efforts to build out your business. This could include:
It can be challenging to start a business from the ground up. Stay patient and keep up with federal, provincial/territorial and local laws. In time, you could have a thriving cannabis business to be proud of.
Although cannabis is now legal across Canada, many of the big banks are not yet comfortable with providing funding to cannabis business owners – although BMO is said to be the exception, offering loans and lines of credit to cannabis businesses. Online lenders, some credit unions and smaller banks, such as Alterna Bank, could provide the much needed financing your cannabis business needs. Some online lenders will approve loans to cannabis businesses on a case-by-case basis, but you’ll typically need to have been in business for a few months at least.
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Getting a business loan to start a cannabis business
Although operating a legal cannabis company is now possible, it’s still a very new and developing industry – and you should prepare for the risk before you begin any operation in this market.
Prepare for some uncertainty, but also be eager to invest significant resources to get your operation off the ground.
Each province and territory has unique laws that determine:
Learn more about provincial and territorial regulations in our guide here.
Costs vary by the type of business you want to start, where you intend to start it, your provincial and local laws, as well as other factors. Do your research to learn how much funding you’ll need lined up before starting your business.
Here are a few costs you may need to budget for:
Consider your ability to raise funds, if necessary. Some potential investors won’t want to contribute to a cannabis business. And as mentioned above, it’s typically difficult to obtain funding from most banks for a cannabis operation.
Starting a cannabis business is no easy feat. You may need significant capital, and you’ll likely jump through many regulatory hoops. On top of it all, the industry is very new and hasn’t been growing as fast as analysts thought it would.
But if done right, a cannabis operation can be a highly lucrative endeavour, as the legal cannabis industry is growing. You can carve out your own slice of a market already worth billions — and one that’s likely to be worth more in the years to come.
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