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Top Challenges to Starting a Cannabis Business (And How to Overcome Them)

Top Challenges to Starting a Cannabis Business (And How to Overcome Them)

The Cannabis industry is seeing a ton of growth and is expected to reach $65 billion in the next five years. This space is finally seeing a place within mainstream business as more tolerant attitudes are helping to find change in this crop’s legal status.

This started out as purely medicinal, moving to recreational, and finally adding in a ton of derivative products that are helping create this hockey stick growth.

For common users, as well as patients hoping to benefit, this is a major historical moment. The reality of this industry is extremely complicated, and if the legal part of the industry is to succeed in drawing business from the illegal side, then it will need to rise to the challenge of meeting this major demand.

Starting a business in the cannabis space can be complicated, and the challenges don’t end even after you open your doors.

Here are the three main challenges you will face:

Navigating Cannabis Laws & Regulation

One of the most important things to consider when getting into this industry is whether you are prepared to navigate all the complicated ever-growing regulation. Spend the time consulting with outside parties to ensure you are fully compliant. If there’s even one deviation from regulation, there could be a reason for these regulators to come close your doors for good.

Green Light Law Group’s Bradley Bloomer adds his own input to cannabis regulation by saying in a joking manner “just don’t sell weed to kids, only trade with licensed and authorized businesses, those kinds of basic things.” Similar to Alcohol, any order you get, check their credentials. You could lose your whole business if you aren’t diligent in the areas that the law expects.

Below is a checklist of questions you should be thinking about when deciding who to sell to.

How old are my customers? Do they have ID to prove their age?

Are my suppliers licensed? Are their products properly tested?

Do my vendors have compliant packaging? Do they have the paperwork proof?

Growing the Business in the right way

Most political experts in the cannabis industry acknowledge that at one point or another cannabis will be federally legal.

Therefore, it is a matter of when rather than if the legal industry will see rapid expansive growth. It is easy to assume that as cannabis becomes federally legal it’ll be easier to navigate compliance, although this isn’t necessarily the case.

Legalizing cannabis country wide will require EPA requirements, OSHA rules, workers compensation, consumer protection etc..

As regulators continue to get a better grasp on this ever-changing industry, new regulations will continue to be introduced. It is not safe to assume that if you’re in compliance with regulations today, you will be tomorrow. Industry professionals recommend trying to anticipate regulations rather than being reactive in trying to change your business as the regulations come into effect.

It is also extremely important to plan for the expansion of recreational markets. This could potentially disrupt the growth of the medical marijuana business, because as the recreational market grows, it will combine into one market as it’s not practical to have both. If you currently have a medical license to sell cannabis, it’s important to keep in mind that your business will be grandfathered into the recreational one day.

Taxes for Cannabis

Doing taxes as a Cannabis business isn’t easy – and there’s no way around this. All businesses have to pay taxes and in the cannabis space it can be especially confusing. Less than 1 percent of businesses in the US are audited, but 16% of cannabis businesses are audited.

Because it’s extremely important to pay your taxes in full, including personal income taxes, payroll taxes, property taxes etc. Often times it can be hard to pay with cash, but it’s something you should do consistently to stay afloat.

Overall Cannabis professionals will have an abundance of business opportunities, questions, and challenges in 2019. Nobody knows exactly how the legalization process will play out and to what effect it will have on industry growth and adoption.

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Marshan B.


Marshan B.

Marshan Beals is a co-partner at Client Verge Inc. With 8 years of experience in digital marketing, his expertise extends beyond digital marketing for cannabis brands. He is also a sponsor of the High Profits ebook, available for download when you sign up for our email list.