Ultimate Guide to Writing a Cannabis Business Plan
When first starting a company, writing a business plan is highly recommended. Whether you’re a rookie in the business world, or a serial entrepreneur, developing a business plan is no easy undertaking. The process requires a dedicated amount of time spent researching your industry, scouting your competition, identifying your market, and setting realistic milestones. It also involves structuring your company management, forming financial projections, and more.
Either way, a business plan is absolutely essential for any company. Not only does the business plan improve your company’s internal operations by setting realistic goals for your team, it also validates your company from the perspective of investors, real estate companies, and other business relationships that are key to your company’s success.
These parties don’t just enter into long-term business relationships with just anyone. They want business relationships with individuals who aren’t going to act on gut feelings and ones who simply plan on winging it. More specifically, these parties seek a venture that takes itself seriously and knows its objectives and goals, and the strategies they will take to get there. The easiest way to determine one’s professionalism is by asking for a well-written and organized business plan.
Even with the legalization of recreational cannabis in 11 states as well as the growing positive stigma around the medicinal benefits of cannabis, the stoner stereotype still remain for many people — and some of these people could be key to the success of your cannabusiness. This is why writing a business plan for your cannabis business can help demonstrate your professionalism and overcome stereotypes that work against you. This is your chance to prove them wrong, and it all starts with a business plan.
Executive Summary
Today, the legalization of recreational marijuana in a handful of states has created a large market and a great investment opportunity for many. Once wider use of cannabis is liberalized by federal law, which is the current direction developments have been leaning towards, this is going to be an ever-growing industry with huge growth potentials. The executive summary section will primarily describe the overview of your company, and what you’re trying to accomplish. It is also recommended for those investors who aren’t too familiar with the growing cannabis industry, to include research and polls acknowledging the growing demand for legalization of cannabis.Objectives
These types of business plans need to reflect a desire to mine the wider legalization of recreational marijuana for the launch and growth of cannabis-based businesses across the nation. The main goal is to participate in and profit from activities in the various sectors of the overall cannabis industry such as biotechnology, cultivation, retail and consulting services. Cannabis business plans will need be carried out in two phases.- Phase I focuses on the number of states that have legalized marijuana for both medical and recreational purposes.
- Under Phase II, the venture will be spread nationwide as legally applicable.
The Team
In your cannabis business plan, it helps when investors can see positive resumes of the proposed partners as this helps make their investment decision easier. In this section, they will want to know that the partners have good work ethic, skill sets and are prepared to dedicate the necessary time length in the early growth phase of a company. Basically, partners should have a healthy diversity of backgrounds to ensure that each individual brings specialized skills and experience to the table. In summary, this section will be used to showcase why your team has the capacity to win in your respective business venture. So, you’ll need to clearly articulate how your backgrounds will allow your company to thrive.Market Size and Development
This section of the cannabis business plan should include research about the general marijuana market size against your company’s proposed market sector so that readers can gain a better idea of your company’s potential growth. This research will also specifically focus on which market segments your company plans to invest most of its energy, whether it be cultivation, extraction, manufacturing, etc. Other examples of market segments would be marijuana retailers, growers, infused products, testing labs, ancillary goods, and ancillary services. Additionally, the market section helps you clearly define the kinds of customers you will be serving. This includes age, gender, median income, location, etc. Unless you have a comprehensive team and a business plan already created, it is not recommended to try to capture the entire market in the beginning phases of your company. If you do, you’ll be spread too thin and lack direction for your company. Below are recent insights into the marijuana industry as a whole: With the legalization of cannabis use for both medical and recreational usage across a majority of states, the sale of cannabis products has shown significantly strong performance in the previous years. By the end of 2018, the recreational segment alone registered an explosive growth of 45.0% as it reached $5.1 billion in total revenues. On the other hand, the medical cannabis segment was forecasted to grow by 17.8% as it reached $4.5 billion. By 2019, the industry grew even more exponentially as revenue increased at an annualized rate of 25.7% to $8.1 billion. These developments are expected to continue in the forecast period to 2024 as the entire industry’s revenue reaches $14.7 billion.Competition
Even if your business has an amazing value proposition and factors that make it stand out within the industry, there will always be other similar businesses competing in your chosen market. It doesn’t matter who does it first; what matters is who does it the best. You will always find competitors. If you can’t identify any, then your search hasn’t been thorough enough. It all depends on the type of cannabis company you are operating. This will drive the type of competitive analysis that you build. The competition section is also a great place to showcase the research that you’ve done on other companies operating in the industry. Additionally, it helps convey why your company is different and worth investing in. For example, if you are building an extraction-related cannabis company, you will want to show all the features of your competitors and how your company’s features are different and better. This specific section will also tie into your financial section since the additional features that you want to build will correlate to how much funding you are seeking to raise. Any investor will know instantly if you’ve invested a dedicated amount of time on your company in addition to how well you researched your competition and why your company can do better than them. In summary, you need to know that competitors exist; don’t ignore them. You have to acknowledge them, as one day, you can potentially build strategic relationships with them that could provide enormous value to both parties.Brand Differentiation and Value Proposition
In the Value Proposition and Brand Differentiation section, which may directly tie to your competition, you can include the following:- Longer Lasting
- Rarer
- Easier to Use
- Safer to Use
- More Efficient
- Designed by a Well-known Figure or Endorsed by a Celebrity
- Greener/More Ethical
- Approved by a Respected Organization