Cannabis is a multi-billion dollar industry promising exceptional growth rates and profit margins.
However, establishing a solid foothold in the cannabis industry is no easy task. Firstly, the legal compliances and secondly the costs of setting up a business- you will have a lot to figure out when starting your cannabis business.
A well-planned strategic business plan removes the how, when, where, and what from the equation and gives you a concrete answer to business growth and succession.
You need to create this custom bible for your business before you undertake its responsibility.
Let’s uncover the step-by-step procedure to write a cannabis dispensary business plan in detail.
Let’s get started.
Key Takeaways
- Identify the state requirements and regulations through official state websites before finalizing anything for your cannabis business.
- Analyze the competitive landscape of your cannabis business using SWOT analysis and identify your competitive edge in the local market.
- Consider contingencies and casualties, and prepare the key financial reports for your cannabis business.
- Create an in-detailed operations plan for your cannabis business highlighting the processes and procedures for sales, purchase, inventory, technologies, and other key aspects.
- Conduct a thorough market analysis and outline your target market, industry trends, and growth potential in the market.
Why is a cannabis business plan important?
If you are wondering why a business plan is just another trend that holds no concrete value, reconsider. It is more important than ever and here’s why:
- A business plan offers strategic direction to your business goals and helps you realize them.
- A marijuana business plan helps evaluate the financial aspects of owning a cannabis business. This will enable you to grab the best opportunities by remodifying the plans and adjusting the ideas.
- A marijuana business operates in a high-risk environment. With a business plan, you can mitigate the risks and challenges and address them strategically.
- The cost of setting up a cannabis business can extend up to millions. Only a forward-thinking detailed plan can help you acquire the required funds.
- A business plan offers a solid framework for your business operations. Having your operations in place will keep the expenses and costs under control.
I guess you now have plenty of reasons convincing enough to have a business plan. So let’s move forward.
How to write a cannabis business plan: Step-by-Step Guide
A lot goes into writing a comprehensive business plan- from company analysis to customer analysis, marketing strategies, funding strategies, and much more. Here is your step-by-step guide to writing an effective plan for the cannabis business.
1. Understand your target market & business model
What type of cannabis business are you planning to start? Get an answer to this before you start working on your cannabis business plan.
Now, dispensary is not the only way to get into the cannabis market. Here are a few prevalent cannabis business models:
- Cannabis producers
- Cannabis dispensaries
- Cannabis product manufacturers
- Cannabis retailers
- Vertically integrated operation
The business plan for each of these models will be different. Explore a business plan example here and find the one relevant to your business model.
After identifying the cannabis business you want to start, determine an ideal customer for your business.
Incorporate different market analysis methods to create a buyer persona for your products. Consider factors like age, gender, location, spending patterns, values, needs, and expectations of your target audience in this process.
The study of the target market will help you identify the ideal customer who will be willing to pay for your products.
2. Create an executive summary
An executive summary offers a concise summary of your cannabis dispensary business plan. It is recommended to write this section at last after you are done writing for other aspects.
Potential investors gauge the viability of your business model after reading your executive summary. If it’s intriguing enough, they will move forward and use it as a reference point.
Consider adding all the important information in this section using a storytelling approach.
This includes business details like its name and location, contact information, market overview, products and services, team members, operations, goals, objectives, and everything that makes your company unique.
An ideal executive summary must offer a snapshot of your business plan. It should attract investors with a hook and persuade them to read further.
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3. Prepare a company overview section
This section offers a brief description of your company and an insight into its important details.
Remember, the different types of business models we discussed earlier? It’s now time to highlight the type of cannabis company you are planning to open.
Mention if it is a startup or an already established company. Also, specify the legal structure of your business, i.e. sole proprietorship, S Corp, LLC, partnership firm.
Include other details such as:
- Why do you want to start a company?
- What is the value proposition of your business?
- If it’s an established business, when did it start?
- What are the future business goals, aspirations, and objectives of your business?
It’s okay to brag a little but offer your readers a realistic picture of your company.
4. Conduct an industry analysis of your cannabis market
The industry analysis section offers a brief overview of the cannabis industry. Although it may seem unnecessary, this market research will play an extremely important role in determining your business strategies.
The market analysis will enhance your knowledge of the cannabis market and make you aware of the emerging trends that are worth considering. Not only that, it will establish your expertise as a professional amongst readers.
Now, what should an industry analysis section include?
- The relevant market size of the cannabis industry
- The growth rate in the marijuana market
- The industry’s growth forecast for the next 5-10 years
- The key suppliers for your cannabis dispensary
- The competitive analysis of your business
- Current industry trends and emerging trends
- Potential market share and growth opportunities for your dispensary
While writing this section narrow down the focus from the broad to the specific marijuana market you would be covering. This will help establish the logical flow of information.
For instance,
The US marijuana market is projected to reach 71 billion dollars by 2030, of which legal sales in Arizona alone are projected to reach $1740.2 million. This shows a favorable growth opportunity for cannabis dispensaries in Arizona.
5. Competitors analysis
The Cannabis industry has a competitive market landscape in the US especially since it was legalized. The question is do you stand a competitive edge in this market?
In this section of a business plan, focus on evaluating your competitors and identifying your key strengths through competitive analysis.
To begin with, identify your direct and indirect competitors. Direct competitors are other cannabis businesses offering the same products and services as you, i.e. cannabis dispensaries in your location.
Indirect competitors are businesses that offer replacement products for marijuana.
Study industry reports and publications and use methods like SWOT analysis, competitor profiling, etc. to analyze your competitors. The market research will help you identify their product offerings, strengths, weaknesses, pricing, and distribution channels.
Now, identify your competitive advantage over these cannabis businesses and outline them strategically. Highlight the details like prices, products, or services that make you stand apart.
6. Describe your cannabis product line
In this section of a cannabis dispensary business plan, you offer a line down of all the products and services offered by you.
A variety of marijuana products can be found in a dispensary. From flower buds to edibles, oils, pre-rolls, vaporizers, and cartridges- determine what you will sell or intend to sell as the business scales.
Mention if you would be offering any luxury or branded options in medical and recreational cannabis. And also highlights additional services like consultation, delivery, white labeling, etc. that are relevant to your business.
7. Detail out a cannabis sales and marketing plan
All the analysis and market research in the previous stages will now come together to form a plan of action. This action plan will bring you sales and make your dispensary profitable eventually.
Firstly, detail your sales strategy and highlight different methods that will help you achieve your sales plan.
For instance, a medical dispensary can partner with medical professionals to sell their high-THC cannabis products.
Now, line down your cannabis marketing plan that will help you achieve desired sales and popularity in the market.
Cannabis marketing is tricky and you need a proper understanding of the product, price, and place to market your products.
Here are a few things to consider while strategizing your marketing plan:
- Where will you sell cannabis products- online or physical store
- What customer segments or age groups will you cater to Youths, medical patients, seniors, etc..
- What is the placement of your product- luxury, mid-range, low-price
- What marketing channels will work for your audience- online marketing, print media, social media marketing, Emails or SMS
Find a correlation between each of these factors and form varying marketing strategies.
8. Introduce your management team
In this section of your business plan, outline the organizational structure of your business and introduce the founding members of your dispensary. Also, introduce your key management team and important personnel.
Outline their relevant experiences and skill sets and show how they are an asset to your business.
9. Outline an operational plan
The operations plan streamlines the backend processes and details the everyday operations of running a dispensary.
In this section, mention standard operating procedures (SOPs) that will contribute towards the smooth functioning of a business. There must be a clear SOP for inventory management, ordering, delivery methods, employee training, vendors and suppliers, etc.
Mention all the technologies you will use at a dispensary. For instance, a seed-to-sale compliant POS system.
Detail all the security measures for a dispensary. Clarify how you will store cash and what tools you will have to combat situations like robbery, emergency, etc.
All in all, think of every small detail and lay down a clear guideline for different business activities.
10. Prepare a financial plan
This section of a cannabis dispensary business plan offers a brief financial summary of your business. Prepare this part with utmost scrutiny, especially if the purpose of a business plan is to acquire funds.
Let’s have a glance at everything your financial plan should include.
- Estimate the cost of starting a cannabis business. Account for every expense starting with lease rental to licensing fees, inventory, payroll, development costs, technology setup, etc.
- Identify your funding requirements and sources. Government banks and financial institutions are averse to high-risk industries like cannabis. So, it is better to plan your funding sources well in advance.
- Prepare financial projections for operating costs, sales forecast, and pricing using your study on market analysis. Create monthly, quarterly, and yearly projections taking into consideration price hikes and seasonal fluctuations.
- Generate the key financial reports like income statements, balance sheets, cash flow statements, and break-even analyses using the financial projections made earlier.
- Test and validate the assumptions.
- Present the information strategically through charts, graphs, and diagrams by highlighting key data points.
Now, it gets relatively difficult to create a robust financial plan from scratch without any aid. Upmetrics financial forecasting tool comes to your rescue by helping you generate accurate estimates and reports in minutes. Simply add your assumptions to the tab and it shall do the rest.
That’s pretty much everything a cannabis business plan must have.
Cannabis Industry Highlights 2023
Let’s have a look at the latest market trends and statistics ruling the cannabis industry in 2023:
- Market Value: The US cannabis market was valued at $13.2 billion dollars in 2022. North America is the largest market for legal cannabis in the world and all the sales are generated from here.
- Cannabis users: More than 55 million American adults have consumed cannabis products at least once in their lives.
- Legalization in states: According to NCSL, 23 states have legalized the use of recreational cannabis by 2023. Apart from that, districts in Columbia, Guam, and the Northern Mariana Islands have also legalized cannabis.
- Expected spending: The global spending on Cannabis products is expected to cross $57 billion by 2027.
- Contribution to the US economy: The cannabis market is expected to contribute $130 billion to the US economy by 2024.
- Highest market share: The share of the single largest marijuana market in the world is held by California. Colorado, Michigan, Florida, and Washington follow this.
- CBD Oils: According to Grand View Research, the CBD oil market is expected to generate a revenue of $1 billion by the end of 2022.
Impressive, right? Now consider these stats while forming your market research.
Download a sample cannabis business plan
Need help writing the content for your cannabis business plan? Look no further. We have a perfect resource for you.
Our cannabis business plan sample pdf offers step-by-step instructions with relevant examples and tutorials. It’s an intuitive template with perfect reference points and is available for free download.
Resources related to cannabis businesses
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