According to the Colorado Department of Revenue, legal marijuana sales during 2018 were $1.55 billion and have consistently increased each year since registering $683.5 million during their inaugural year of 2014. These numbers are unprecedented for such a young regulated industry, and there are countless opportunities for Coloradan investors and entrepreneurs to get in while the marijuana industry is still on the ground floor. However, some of the logistics can be complicated, so read below to learn more about starting a successful marijuana business in Colorado!
Pick a Type of Marijuana Business
The first step to starting a successful marijuana business is brainstorming to find your specific business idea. The regulated marijuana industry is still in its early phases, so there are countless niches and areas for one to break into. Finding a successful area and coming up with a creative idea that you are passionate about will help lead to success.
The marijuana industry is segmented into two main fields of plant touching and ancillary businesses. Plant touching businesses consist of dispensaries, grow houses, and any other business that deals with the marijuana plant itself. Dispensaries are where marijuana is sold for recreational or medical use, while grow houses are where the seeds are grown, maintained, and harvested. They are two of the most common marijuana business ventures, but they are subject to harsher legislations and regulations and require more logistic planning than ancillary business.
For example, grow houses require very specific heating and cooling conditions for the ideal growth of marijuana plants. The ideal temperatures range from 65 °F to 75 °F, depending on the plant’s growth stage, so ductless mini splits are an excellent option for their versatility and efficiency that allows marijuana plants to thrive. Grow houses also require very specific lighting and irrigation systems.
Ancillary businesses are all other businesses that do not involve the direct “touching” of the marijuana plant. This ambiguous description means that there are countless ideas and opportunities available in the ancillary market. Examples of ancillary business include, but are not limited to, consulting, marketing, security, and cultivation products. Regardless of your business type, most marijuana ventures are considered profitable, and there are lots of opportunities and room for growth in this new industry.
Business Plan
After deciding what business you want to start, you should then formulate a business plan. Business plans are written outlines that explicitly say what your business is and how you will accomplish certain goals and plans. There are no concrete guidelines for writing a business plan, but it is highly recommended to at least write and plan out major logistics, goals, and guidelines. Running a business can be complicated, especially during the initial phases, so it helps to have these items written down to serve as a guide and motivator and have everything ready on the countertop before you go in.
Legislations and Licenses
The marijuana industry is very heavily regulated, and businesses are subject to much legal scrutiny. Starting a marijuana business requires permits, registration, documentation, and licensing. In Colorado, medical or retail marijuana business licenses are available via application. When starting a marijuana business, make sure all proper paperwork is filed and applications are submitted with enough notice to allow for approval.
For information pertaining to your specific business, research online or speak with an attorney. They can provide guidance and ensure you are following all guidelines to avoid legal repercussions down the line.
Funding
Any successful business requires funding to be successful, and the marijuana industry is no different. However, raising capital and funding a business in this specific industry presents certain challenges.
Obtaining a loan for a marijuana business through a bank is nearly impossible because marijuana is still illegal under federal law. The Federal Deposit Insurance Corporation (FDIC) does not insure banks that take on “existential” risks by violating federal law, even if it is legal in that specific state. A bank that finances a business that violates federal law could be guilty of money laundering, and they generally avoid this at all costs.
Colorado has seen significant progress in this regard, but there is still a long way to go. Some banks may provide financing for ancillary marijuana businesses, but this is not guaranteed. Private investors and funding the business yourself are the best options. There are certain ancillary companies that specialize in financing marijuana business ventures and, with an excellent business pitch, you’ll have the money you need in no time. You can also speak to an attorney for more information concerning the financial element of your marijuana startup.
Marketing
Marketing your marijuana business is crucial to its immediate and long-term success. A great business idea is nothing without a properly implemented marketing campaign, which allows you to grow your brand, find a specific target demographic, and reach new customers.
The federal illegality, coupled with a potentially negative stigma surrounding the “drug use” factor, presents many challenges for marketing marijuana businesses to take it beyond your cabinets. However, the stigma surrounding marijuana in Colorado is generally more positive or at least neutral, so there may not be as much of an issue.
Many have found success marketing the lifestyle and promoting education rather than pushing any specific product, but there are no concrete guidelines for marketing campaigns. They allow you to be creative and think outside the box, so have fun with it! If you struggle finding a place to start, print advertisements and social media/digital marketing are excellent jumping-off points.
Many prefer outsourcing their company’s marketing to an ancillary firm, as this allows business owners to devote more time to their specific business or craft. There are companies that specialize in marketing marijuana, so do your research and talk to other entrepreneurs. You should check local legislations before moving forward with a marketing plan, as there are sometimes restrictions.
Keep an Open Mind and Have a Positive Attitude
Finally, keep an open mind and positive attitude when starting a marijuana business in Colorado. The industry is still young but fairly lucrative, and there is a lot of room for creativity and success. As with any business, there will be trials and tribulations and obstacles to overcome. However, a positive attitude and an open mind will keep you on the path to success!
