As of now, there are 21 states in which recreational use of marijuana is legal: Alaska, Arizona, California, Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington. At the same time, Marijuana is classified as a Schedule I controlled substance under the federal Controlled Substances Act, which means that it is illegal to manufacture, distribute, or possess marijuana under federal law. However, many states have passed laws that legalize marijuana for medical or recreational use, or both.
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This discrepancy between federal and state laws has created a complex legal landscape for the cannabis industry. While it is legal to grow, sell, and consume marijuana in states where it has been legalized, cannabis businesses in those states are not able to access certain benefits and protections that are available to businesses in other industries, such as the ability to deduct business expenses from their taxes.
The federal government has generally chosen not to interfere with state marijuana laws, but it reserves the right to do so at any time. As a result, the future of marijuana legalization at the federal level remains uncertain. As always, check the local, up-to-date recommendations in your state because the legislation changes quite often.
A bright future for the cannabis industry
Despite the complex and ever-shifting legal landscape, the future of the cannabis industry looks bright and there is plenty of money to be made for ambitious entrepreneurs.
According to a report from Grand View Research, the global legal cannabis market is projected to reach a value of $73.6 billion by 2027. As more states move toward legalization, more markets will open for all sorts of marijuana businesses.
Main cannabis business types
Like other industries, there are many different ways to make money at various stages of the process from seed to final sale. Some businesses will only perform one of these functions while others will perform several.
These businesses grow and harvest cannabis plants. After obtaining a growing license from a regulatory body, you’ll need to set up a growing facility, plant seeds and harvest the buds. They make money by selling raw marijuana to other businesses.
These businesses sell cannabis and cannabis-infused products to customers in a physical storefront. These are the businesses you’ll see billboards for in many urban areas. Marijuana dispensaries are heavily regulated and taxed, much like vendors of alcohol and tobacco products.
These businesses process raw cannabis into products such as edibles, concentrates, topicals, and tinctures. This may involve mixing and cooking ingredients, filling and sealing containers, and labeling and packaging the finished products.
Sometimes referred to as transportation, many businesses create value by acquiring cannabis products from producers and wholesalers, and then selling them to retailers or directly to consumers.
The profit a distributor makes will depend on a number of factors, including the demand for cannabis in the area, the competition, and the margins you’re able to negotiate with your suppliers and customers.
How to run a cannabis business
How to get funds
Starting a cannabis business can be a capital-intensive endeavor, as it often requires significant investment in facilities, equipment, and supplies, no matter your business niche. If you don’t have the money in the bank to get your cannabis business started, there are several ways to go about acquiring funding, including:
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Business loans: Some banks and credit unions offer business loans to cannabis entrepreneurs. However, because cannabis is still illegal at the federal level, many traditional lenders are hesitant to lend to cannabis businesses.
Private investment: You can seek out private investors, such as friends, family, or accredited investors, to fund your cannabis business.
Crowdfunding: There are crowdfunding platforms like Fundanna that allow you to raise funds for your cannabis business from a large number of investors, often in exchange for a small portion of the ownership. If you live in an area with a high demand that hasn’t been met yet or have access to a large social network, this could be a great method.
Grants: Some states and localities offer grants to help fund cannabis businesses, especially those that are owned by women, minorities, or veterans.
It’s important to carefully consider the pros and cons of each funding option, as well as the legal and regulatory requirements that apply to cannabis businesses in your state.
How to market to your audience
Marketing a cannabis business can be challenging due to the complex and ever-changing legal landscape surrounding the industry. That being said, there are still a number of ways you can effectively market your cannabis business:
Develop a strong brand identity: Establishing a strong brand identity is crucial for any business, but it is especially important in the cannabis industry where competition is fierce and there are strict regulations on advertising. Make sure your branding is consistent across all of your marketing materials, including your logo, website, and packaging.
Utilize social media: Social media is a great way to connect with your target audience and build a loyal customer base. Create profiles on platforms like Instagram, Facebook, and Twitter, and use them to post regular updates about your business, including new products and promotions.
Build partnerships: Partnering with other businesses or organizations in the cannabis industry can help you reach a wider audience and establish credibility for your brand. Consider partnering with companies that provide complementary products or services, or with organizations that advocate for cannabis reform.
Attend industry events: Participating in industry events, such as trade shows and conferences, can help you network with potential customers and partners, and learn about the latest trends and developments in the cannabis industry.
Optimize your website: Your website is often the first point of contact that potential customers have with your business, so it is important to make a good impression. Make sure your website is well-designed, easy to navigate, and provides detailed information about your products and services.
How to build trust
Building trust for your cannabis business is crucial for attracting and retaining customers, as well as for establishing credibility in the industry. Fortunately, the same tried and true methods of building trust with your clientele in standard enterprises are applicable in the cannabis industry.
Be transparent: Be open and transparent about your business practices, including your sources of supply, production processes, and quality control measures. This will help build trust with your customers and give them confidence in your products.
Consistent branding: A consistent brand identity can help establish trust by conveying a sense of professionalism and reliability. Make sure your branding is consistent across all of your marketing materials and product packaging.
Provide excellent customer service: Providing excellent customer service is a key way to build trust with your customers. Make sure you are responsive to customer inquiries and complaints, and go above and beyond to meet their needs.
Clearly, there are a lot of ways into the cannabis industry and there is a great deal of money to be made given the national trend towards legalization. It is important to remember that the cannabis industry is heavily regulated, and the laws governing cannabis businesses vary by state and country. Make sure to research the current laws and regulations in your area before starting any cannabis venture.
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