With the exception of New Hampshire, all states in the Northeast have officially legalized recreational cannabis. This has presented an opportunity for entrepreneurs seeking to break into the business. However, according to the Bureau of Labor Statistics, around 70 percent of small businesses fail in the first 10 years, with the chances of failure even higher for small businesses in the cannabis sector.
Before establishing or investing in a cannabis business, taking the time to understand and follow these seven key steps will improve your chances of success:
1: Choose your state wisely. Nineteen states plus D.C. have legalized recreational cannabis use. More are in the process of formalizing detailed regulations. But that does not mean that each of these states is the right place for your business.
2: Understand the geographical nitty-gritty. Regulations are not just a state-level issue. Cannabis businesses are subject to local zoning and environmental impact plans, and the requirements of individual municipalities.
3: Weigh risks and rewards. Operating within a highly regulated industry like this comes with above-average cost burdens. Just because the opportunity is there doesn’t mean that sustainable profits and long-term success will inevitably follow.
4: Identify success factors. Why are some businesses more successful than others? The evidence is out there, but it may not be on your doorstep and so you will need to leverage the knowledge and experience that exists elsewhere.
5: Get connected. States that are currently rolling out recreational licenses are learning from states with a longer history of legalized cannabis who have experienced the challenges of an evolving, maturing market.
6: Get structured. Are you going into cultivation or retail? These are important considerations as there will be hard assets involved – and those business assets, including property, will need to be separate from your personal assets.
7: Get the right professional support. All of the above means you will need the support of professionals in the field. Despite the myriad inter and intra-state differences, many banks and professionals still view the cannabis business through a federal lens.
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