Questions To Ask Before You Get Into a Marijuana Business
I’m often asked if I would advise anyone to get into the marijuana business. The question is hard to answer because it’s not an easy decision for anyone contemplating it. The risks are high. The rewards, IF SUCCESSFUL, can be very high.
The main issue that initially challenges us all in the legal cannabis world, is HOW, and then inevitably, WHY.
So before you go down that path, ask yourself some basic questions and jot down the answers as you go. What you want to end up with is a convincing argument when you tell your significant other, or friends and family what you're thinking of doing.
Answering the WHY is the hardest part.
In no particular order, here are some basic questions and critical thinking you want to do around your decision-making. We’ll be posing more in the coming months so sign up for our newsletters.
- What problem or challenge will your business solve?
This is pretty basic. A better question is, why would you need to know this answer?
Because this answer is so fundamental to the start of your business, you definitely shouldn’t get into the weed biz if you cannot say all the reasons, but also, it will help you define your actual opportunity.
For instance, in my case, I could definitively say:
- I will be one of a handful of legal licenses in a county that stretches 70 miles long.
- I will be legally allowed to operate a legal marijuana business at a time when the vast majority of marijuana businesses are operating illegally, (which means they face a serious threat of being shut down)
- I will be 1 of 4 other licenses in a municipal district that is large, and I will have the best location of all of them, which means even more value to the license
- I will be one of the closest locations next to a municipality that does not allow marijuana businesses, so I will be able to capture that market also
- I will be first to market, which we all know means certain advantages over those who come later
By answering these fundamentals, I was able to hone into the fact that the market opportunity was not just going to provide me an income, it was about the cost to waiting, and the value I would be creating by simply accomplishing the acquisition of the permit. So in addition:
- Because the licenses are rare and hard to get, I will have created a value to the license simply by getting it
- The business I start will likely earn a lot of money in the next few years while competition is scarce
- So the opportunity is big. BIG!
What do you really know about your opportunity? How many people are applying? How many permits are there? How many candidates are really going to get through the process? How can you get the best location? Will one location have a stronger value over another? What does it mean if you are first in your market? What does it mean if you are the last? Will you still have the same value?
- How does your company generate income?
Again, it comes down to why you need to know this. In the cannabis world, up until recently, products were barely defined, names were made up on the fly, branding didn’t exist, and there were certainly very few metrics.
The thing is though, now that legalization is here, we’ve got a whole new level of scrutiny, a new opportunity for marketing and consumption, and we have new ways to generate income.
In my case, I could very easily picture the retail process, but what other add-ons could I offer? Would delivery be a big part of it? How would that ordering system work? In a large, car-centric region like Southern California would I perhaps need delivery driving limits?
By asking and answering these questions, I was able to focus my resources on where they were really needed, and prioritize some store launch features over others.
What do you know about the income it’s going to generate? Will you offer terms to your customers? What if they don’t pay? How exactly will your billing work?
- Which parts of your business will not be profitable?
This is hard to know when you’re still developing your business plan, but if you take time to apply this thinking to all aspects of your business, you may see some benefit.
For instance, a friend who’s a farmer in Nor Cal had started out thinking he wanted to specialize in boutique strains. He envisioned a cultivation opportunity that would set him apart from the others, and thus begin to define a brand. He even had his logo and his slogan all picked out.
But, when he really thought about what he was currently selling (illegally) he realized that a boutique brand was perhaps incredibly risky. For sure it would be cool to have a strain named after him….
BUT, what his customers really wanted was a great outdoor grown indica at a rock-bottom price.
To make that happen, he needed volume, not fancy strains. He needed a production attitude, and to think about efficiencies, rather than venturing down some risky, new path.
Think it through. What do you know to be true? What do wish was different? Can you marry the answers together? If not, why not? If you don’t know these answers, where can you find them? Who knows them?
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