Business

Cannabis Legalization Stokes Entrepreneurial Opportunity

How Can You Position Yourself in This Growing Industry?

The legalization of recreational cannabis use is on the rise throughout the United States. In fact, five states will be voting on legalizing recreational use of cannabis in the 2022 midterm elections. If these states approve of legalization, almost half of the country will have approved of recreational cannabis use.


A “Budding” Industry with Unique Challenges


Sweeping change brings opportunity. Entrepreneurs have been ecstatic about the potential that exists in the cannabis industry, and for good reason. In the United States alone, cannabis sales are projected to grow from $25 billion in 2021 to $40 billion in 2026. The question is, how can you position yourself in an industry that presents the challenges that the cannabis industry poses?

The short answer is this: knowledge and planning. Without an understanding of what is going on in terms of cannabis legalization and the risks that come with the industry, entrepreneurs are putting themselves at risk for failure.

“Many ‘budding’ entrepreneurs come to us with stars in their eyes, unaware of the requirements to plan, open and operate a successful business, much less a cannabis business which is far more complicated,” Nick Scalera, the founder of NJ Cannabis Consulting, a New Jersey-based cannabis consulting firm, told Advisors Magazine.


Education is Key for Cannabis Entrepreneurs


When it comes to educating yourself about the cannabis industry, there are two governing bodies to focus on that dictate the regulations for a cannabis business: the federal government and local state governments.

While history has shown that changes to federal cannabis regulations have been slow, there are some things to keep an eye out for. For instance, SAFE Banking Plus (an updated version of the Secure and Fair Enforcement Banking Act) has a good chance of being passed by Congress. This bipartisan bill would enable cannabis businesses to more easily access banking services and loans.

“I think this thing’s going to get passed this cycle, so I’ve got my fingers crossed,” said Rep. Ed Perlmutter of Colorado, who first introduced the bill in 2019, in an interview with The Hill in mid-October 2022.

The passing of this bill would certainly be exciting for the cannabis industry. However, until the change happens, entrepreneurs should tread slowly. Cannabis is still technically “federally illegal.” However, the federal government is, and has been, taking a hands-off approach when it comes to cannabis regulations, leaving things up to the states.

As the CEO and founder of a cannabis consulting firm, Scalera said his clients often underestimate the power that the state and municipalities hold when it comes to cannabis regulation. However, keeping on top of your state’s policies and requirements is crucial to succeeding within the industry.

“First, they [states] can ban the possession and/or operation of a cannabis business – medical and/or adult-use programs. If they do choose to allow cannabis businesses, they control exactly how the program will be run – licensing, operation and compliance. Therefore, we must be aware of (and strictly comply with) their requirements,” Scalera explained. “In some states, such as New Jersey, there is an additional level of control - the local municipalities. Towns can decide if they will allow cannabis businesses to operate at all, and if so, the type of businesses, the number of businesses and where they can be located. Applicants are required to demonstrate the municipality’s approval by including a letter of support with their application. Some towns have even implemented their own application process, granting support only to those applicants they deem acceptable. Further complicating the situation is that towns can opt-in, opt-out or change their requirements at any time.”


Plan Before You Jump In

There’s no denying the excitement and potential for success the cannabis industry presents to entrepreneurs. It perhaps is a once in a lifetime opportunity, but planning is key for those looking to have success in this growing market. Understanding the different sectors of the cannabis industry and planning your operation accordingly is the way to go.

For instance, there’s the cultivation of cannabis, retail operations, and even delivery businesses for cannabis. Each of these different sectors present unique challenges that can’t be overcome without an in-depth understanding of the sector. If you’re trying to get involved in cultivation, you’ll have to learn about different soils, nutrients, and other related areas. Retail operations focus more on the experience of the buyer, from layouts to decor. Delivery businesses involve managing drivers and vehicles.

This is where that knowledge and planning as an aspiring cannabis entrepreneur shines. If you come into the market with a plan and the necessary knowledge to succeed, the opportunities are plentiful.

 

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