A green, leafy plant that once clung to a taboo reputation for being a purported “gateway drug” – a myth that has since been dispelled – has emerged as one of the most lucrative crops on the planet. So much so that it’s now possible to embark on a career in this developing mainstream avenue, which will be worth $73.6 billion on a global scale by 2027.
Among the many things that legal cannabis has done for the United States economy is tackling unemployment. Numerous roles, such as budtenders, lab testers, cultivators, and producers, must be filled to keep everything running smoothly. A report confirmed that the US cannabis industry’s employment had grown 15% in 2020 from the previous year to 243,700 full-time employees.
It is important to remember that cannabis industry employment wouldn’t be possible without the entrepreneurs who take a leap and launch their business venture, whether it’s a company that sells Sativa strains or a THC vape kit manufacturer. Companies use various Cannabis SEO techniques to rank their sites so that their overall sales and profit will increase.
Knowing how to be a proactive cannabis entrepreneur will determine your success level in the ever-evolving cannabis space, not to mention your appeal to investors.
Maximizing the Chances of Entrepreneurial Success with Cannabis
Venture capital investments in the cannabis space almost doubled in 2019 from the year prior; 309 deals were struck across 277 cannabis companies, totaling around $2.62 billion. This is based on data published by a financial, tax, and advisory services provider known as the MGO | ELLO National Cannabis Practice.
So are you the kind of entrepreneur that an investor would choose to grow their money with? By taking the following things into account, you can stand out to prospective investors, ensure your business functions within the boundaries of the law, and avoid potential pitfalls on your journey to success with cannabis:
1. Obtain the Necessary License(s), Permit(s), and/or Certification(s)
As an industry subject to strict regulations, cannabis entrepreneurs must prove that they can be compliant with state-specific rules and regulations. How? Adhering to license, registration, permit, and other requirements, that will vary based on your business location and category, e.g., retail, cultivation, testing facilities, and edibles/extract manufacturers. Some things you should know include basic legal requirements, business formation (forming an LLC), tax ID number, general business license information, DBA filing, sales tax permit, and permits for types of products, signage, or land use.
2. Make Sure You Are Tax Compliant
All cannabis businesses will need to fill out the IRS Tax Section 280E [5] (the federal tax code that prevents business owners from taking tax deductions for business expenses due to their involvement with the federally illegal plant or any other Schedule I or II controlled substance) on their tax return form. When making sure your cannabis business is tax compliant, you may need to get your hands on at least two years worth of tax returns. Additionally, you should be able to obtain copies of sales, excise, and local tax returns, IRS-issued Employee ID Number (EIN), and a list of owners/business partners.
3. Focus On Your Finances
Cannabis businesses across North America raked in $10.8 billion in 2018. With the growing market, the need to establish a revenue-focused business plan will ensure you earn a high return on investment (ROI), which could convince investors to fund your business. Once cannabis gets legalized at the federal level, banks and financial institutions will be more likely to support the industry. Until that time, the cannabis business’s funding options remain limited, so do your calculations and get your finances in check beforehand.
4. Learn How To Stand Out
With an ocean of cannabis entrepreneurs to stand out against, you must understand how to differentiate your company and brand from others. According to Forbes, presenting a brand consistently across all social media platforms can increase sales revenue by 23%. Although Facebook, Instagram, and Twitter have banned cannabis advertising, it is still possible to share relative content and media to your social media following. Remember to include a memorable logo representing your brand image, and express your cannabis company’s authenticity, loyalty, and integrity by sharing engaging vídeos and photos.
You also ought to think about marketing since numerous social sharing platforms like Facebook, Google, YouTube, and Instagram do not allow the promotion of cannabis products. Even when you find a viable avenue for advertising, you mustn’t make unsubstantiated health claims. Consider spending brand ambassadors to significant events for extra publicity and dabble in influencer marketing to stay relevant in the online world amid the social distancing measures caused by COVID-19.
5. Abide by the FDA’s Regulation Requirements
Currently, the Food and Drug Administration (FDA) has only approved one CBD product; Epidiolex is a prescription drug developed by British drug company GW Pharmaceuticals to treat two rare and severe forms of epilepsy. Nonetheless, at the current time, labeling CBD as a dietary supplement or adding it to food is illegal. Avoid falling under fire from the FDA by ensuring your entrepreneurial efforts comply with the Federal Food, Drug, and Cosmetic Act (FD&C Act), and always back up any claims made for your cannabis products by citing the scientific evidence; such as studies, clinical trials, and research.
Crucial Things to Consider When Starting a Cannabis Business
The sale, possession, cultivation, and consumption of cannabis hás been tightly restricted by federal law in the US for many years and government laws in various other countries worldwide. Why? Because the cannabis Sativa plant contains a psychoactive compound called tetrahydrocannabinol (THC). Even If you sell products containing the non-psychoactive compound cannabidiol (CBD), there is a chance that it may contain traces of THC.
Thankfully, the 2018 Farm Bill’s passing meant that hemp-derived CBD products became legal across the United States. Nonetheless, cannabis-derived hemp may contain more than the legal THC threshold — 0.3%. On that note, you must label your cannabis business products correctly.
