The following questions will not only allow you to figure out if you can and should participate in the cannabis industry, but also shape your business going forward. Answering these questions will be essential to creating your business plan and financial model, to determining your capital needs, and to applying for a license if you need one. So, take a seat, ask yourself these questions, and think about them—hard. The answers you end up with should be unequivocal and unambiguous. Are you ready?
1. Is this business the right one for you? Support for cannabis legalization in the U.S stands at a record high. In April 2016, CBS News released a poll showing that 61 percent of Americans believe marijuana should be legal. This number rose to 64 percent by October 2017, according to a Gallup survey.
“Regulations around cannabis are changing rapidly around the world, along with social acceptance,” says Derek Riedle, founder and CEO of the cannabis and lifestyle media company Civilized. “Think about this in the fullness of time: In a few years, opposition to cannabis will become marginalized as cannabis becomes more mainstream and people continue to realize that it is not the ‘boogie man’ that we have been told it is for generations.” Having said that, Viridian Capital Advisors’ Scott Greiper warns that a percentage of the U.S. population still frowns on marijuana.
There are legal implications as well: Anyone who wants to get involved in this industry has to take on the reputational risk and the legal risk, because even though numerous states have legalized it, cannabis is still a Schedule I, federally illegal drug under the Controlled Substances Act.
2. Are you prepared for the unique business model? On top of the risk of federal prosecution, IRS targeting, and asset seizure, cannabis entrepreneurs have to cope with the hazards of conducting a business that deals mostly in cash, since a majority of traditional financial institutions—banks, credit card issuers, and payment transaction companies—won’t provide services to the industry. That’s why hiring a security service will be essential.
Canna Advisors’ Tyler Stratford adds that this is an industry for people with thick skin. “You need to withstand and fight against adversity in this space, and be willing to help change the course forward,” he says. “Be ready to be an industry operator and advocate.”
No matter how progressive our society has become, we’re still not completely familiar with cannabis; we’re not used to having it around, as we are with alcohol. So, anybody who opens one of the first operations in any given jurisdiction has to be an advocate.
As an entrepreneur, you’ll have to “be able to explain why this isn’t something to be feared. Cannabis has actually been a part of our culture for thousands of years; only for a short period of time was it put into prohibition,” Canna Advisors’ cofounder Diane Czarkowski adds. “If you can’t talk about this with people, I don’t see how you’re going to be successful, as you’re going to keep perpetuating the same belief system.”
So, prepare to challenge the stigma, educate, advocate, and fight, both for people’s right to use cannabis and your right to run a cannabis business. The road will run uphill.
3. Are you comfortable with uncertainty and frequent change? If not, then this nascent industry isn’t for you. “None of this has ever been done before,” Czarkowski asserts. “Sometimes change happens so frequently that you don’t have time to implement the last change before you have to make a change again.”
Of course, there’s one chance you’ll have to take as an entrepreneur starting a business in any industry: Are you ready to put all your faith in your problem-solving abilities, risking your financial safety in the pursuit of a larger reward?
“You need to be able to get to the edge of the cliff and decide that you’re going to jump,” Civilized’s Riedle concludes. “Since you don’t always know where the landing spot is, your challenge is to build a hang glider, and eventually turn that hang glider into a plane and, ultimately, a jet.”