Last Updated: 10/8/2019
If there is one tool that can help a new business succeed, it's a solid business plan. A business plan not only outlines your vision for the business and what it will take to get there, it also serves as a guide you can refer back to in the future. Think of your business plan as your road map to success.
A business plan is crucial no matter what type of industry you are going into, but this is especially true if you are starting a medical marijuana dispensary business.
Yes, the marijuana industry is booming, but that also means there are fierce competition and big investors. You need to be able to clearly articulate your client base, financials, and what sets your business apart, especially if you are seeking outside funding.
Going into the marijuana business is riskier and more complex than going into just about any other type of business. Cannabis law lacks uniformity between the states and the federal government, and it is constantly evolving.
Currently, 33 states permit the use of medical marijuana and 11 states permit the recreational use of cannabis. However, marijuana is still considered an illicit drug under federal law in the United States. It's crucial to know the laws that apply to your business and make sure that you are in compliance.
A business plan can help you feel in control, even when the cannabis industry can be chaotic.
The business plan that follows is based on an outline provided by the U.S. Small Business Administration (a great resource for small-business entrepreneurs), but it is specifically tailored to meet the needs of someone starting a cannabis dispensary.
As far as business plans go, this one is more detailed than you might need, so feel free to leave out any sections that don't apply. But keep in mind that potential investors will be expecting a thorough, traditional business plan like the one that follows. Get stuck? A cannabis business attorney in your area can provide personalized advice.
This is your chance to explain what your business is and why it will be successful. This section should be between one and two pages in length, and it should be a summary of your business plan that could stand alone if needed.
Include your business's mission statement, a description of your dispensary business, and where your business will be located. You should also include basic information about yourself and any other founders or employees. Be sure to have a paragraph or two on the budding cannabis industry, in case you present it to potential investors who are not familiar with it. Disclose financial information, including the business model you will be using, estimated startup costs, revenues, and liabilities. Finally, include a brief statement of your funding needs.
Here you will provide more detailed information about your business, including your value proposition. This is the problem that your business will solve.
For example, let's say your city has several dispensaries, but none of them offer a high-end cannabis retail experience. Your dispensary could solve this problem by opening the city's first upscale dispensary with higher-end cannabis products.
Think about answering questions like:
Finally, your business will need to comply with local and state law. You will detail the laws that apply to your business here, as well as how your business complies with the laws. It is a good idea to meet with a cannabis attorney in your state who can assist with regulatory compliance.
In this section, you will go into more detail about the research you have done on the industry, competition, and target market.
By now you have probably done plenty of research on the cannabis industry. Detail your findings here. Go well beyond just saying that the cannabis industry is on fire right now. Note the market trends and themes in your area as well as more broadly.
You will also need to differentiate your business from those that are similar to make sure you can offer a unique and high-quality service. Detail the strengths and weaknesses of competing dispensaries in your area, and analyze how your business will be better or different.
Identify your ideal customer. Who can your business serve and why? Detail as much as you can about your target market. You can also create a "persona" for your ideal customer that you can target with your marketing.
Using the example of the high-end dispensary above, you could determine that your ideal customers are professional men and women ages 30 and above who might be using cannabis products for the first time. They are higher income and looking for a "boutique" dispensary experience in an inviting, yet sophisticated environment.
This section explains the nuts and bolts of your business.
First, explain how your business will be legally structured. The most common legal structures are: sole proprietorship, partnership, limited liability company (LLC), C corp, or S corp. Your cannabis business attorney can help you determine which structure to choose for your business.
Next, create an organizational chart that shows who is in charge of what aspects of the business, and how much they will be paid. Feel free to note each person's experience and education, relative to their respective roles. Also include a general hiring plan for personnel and filling management gaps.
Describe what types of cannabis products you will sell at your dispensary in this section. Explain how each product is used and how it benefits your customers.
Also explain who grows your cannabis and where you will source other products that your business will sell. Detail what the product life-cycle looks like for each product. Share a pricing structure for each of your products.
Next, discuss all relevant intellectual property rights issues.
Finally, if you are researching and developing products, detail that work here.
Describe how you will use marketing efforts to attract and retain customers. You may be working with a marketing company or handling the marketing efforts on your own. Have a budget for how much you plan to spend on marketing and the types of marketing you plan to do (social media ads, billboards, mailers, commercials, etc.).
Explain how sales will be conducted at the dispensary. Here is where you may need to go into detail about operating with cash and whether or not you can accept credit cards. As you may already know, there are currently banking restrictions in place for cannabis businesses because marijuana is still illegal under federal law.
Finally, discuss your marketing and sales plans on a timeline with target milestones, deadlines, and management responsibilities for the next three-to-five years.
This is where you will outline your funding needs, if you have any. Clearly explain how much funding your business will require over the next three-to-five years and how you will use the funding. Also clarify:
Finally, make sure to include your strategic financial plans for the future. Keep in mind that banks typically will not fund a cannabusiness. Marijuana is still illegal under federal law, and banks are regulated by the federal government, so they risk facing federal charges by working with cannabusinesses. There are exceptions, however. This is another topic on which your cannabis business attorney can advise you.
If you are requesting funding, use this section to outline how your business will be a success, financially speaking. This includes detailing your projected startup costs, sales forecast, expenses, profits and losses, and cash flow. This is a good place to use charts and graphs to tell your financial story.
If potential investors or lenders requested specific items such as licenses, permits, credit histories, or letters of reference, input them here.
Think of your business plan as being a living, breathing document. It can and should change as you continue to develop your ideas and opportunities. Revisiting your business plan over time can help you stay focused on your goals and strategies.
If you haven't already, it would be helpful to meet with an experienced cannabis attorney in your area to learn more about the laws that govern cannabis in your state, as well as the licensing and permitting processes for marijuana dispensaries. Your attorney can also help with deciding which legal business structure to use, and answer any questions you have about protecting intellectual property.