How to Start a Commercial Cultivation Business
Hemp and legalized cannabis is a booming consumer industry that is creating wholesale plant demand beyond what can currently be produced. Learn what it takes to cash in on this new green boom.
How to Start a Cannabis Cultivation Business
Over 30 US states have now legalized or decriminalized marijuana, sparking a thriving cannabis industry across America.
Time is now ripe to get a slice of the action by diving into our cannabis dispensary guide to business planning. You will find here everything you require to get a growing operation off the ground.
To craft a successful plan for a growing operation, you will need three vital ingredients: time, motivation, and resources. To get your cannabis business started, you first of all, need to apply for a cannabis growing license. The conditions surrounding these licenses vary from state to state. Before proceeding, please carefully read the relevant information on your state’s official government website. Once you understand all the requirements, you are ready to take the next step.
Acquire & Consult with a Legal Professional
If you don’t have one, get a lawyer. You will require a lawyer if you are to successfully navigate the law governing the opening of a cannabis business, which is an absolute labyrinth.
Since both federal and state law comes into play, it’s vital that you find a reputable lawyer to keep you on the right side of the law. Bear in mind that under federal law, marijuana remains illegal. Don’t get caught out by taking shortcuts at the state level which could put you on the wrong side of federal law.
If you are having difficulty finding a lawyer suitably versed in marijuana law, you should take a look at the National Organization for Reforming Marijuana Laws (NORML) lawyer database.
Applying & Submitting for a State License
To obtain a cannabis license, you must submit an application to a state-run program that’s overseen by the state public health department. For example, in Florida, your application is submitted to the Office of Medical Marijuana Use (OMMU). This organization is supervised by Florida’s Department of Health.
After submission, your application form is scored against the state’s criteria for granting licenses. Competition for permits is fierce, so you will wish to ensure your presentation is polished. Ideally, hire an experienced content editor and business consultant. They will go through your submission to ensure it is correct, coherent, and thoroughly addresses all the questions.
Build a Development Team
With little separating applications, a carefully hand-picked team could be the deciding factor that tips the balance in your favor. States are keen to see your team consisting of high-quality people.
Don’t rush the team building process as these people will be critical to your success or failure during the more fragile early years of your new business.
Among the people you may wish to hire are:
Doctors or Chemists – This is especially true if you are growing medicinal marijuana, doctors for prescription, chemists to lab test THC/CBD quantities which are legally required for resale.
Agricultural Engineers – You will need engineers to design the growing operation.
Cultivars & Horticulturists – You will need horticulturists to plant, grow, and clone your cannabis.
Legal Experts & Administrators – Your team needs administrators with marijuana business experience.
Operational Managers – People with managerial experience are required to take care of security, operations, zoning, and finances — all preferably with a track record in the medicinal marijuana sector.
Organizing your Finances
Finances are another deal-breaker in your license application. Both the health department and the state government will wish to be assured of your financial position. You will have to demonstrate that your business has sufficient capital to weather the first few years of operation, typically when profits are not so lucrative.
Depending on where you are located in the US, you may be required to provide proof of at least 250,000 bucks. The figure varies from state to state, however.
In practice, you should strive to obtain more liquid capital than the minimum specified. This will help your application stand out as serious, and increase the chances of your business being able to succeed.
When searching for a facility, keep four things in mind, namely, the following:
The real estate’s physical layout: Is it extensive enough to scale up your operation? Are the ceilings lofty enough to accommodate your plants, growing lights, and the all-important ventilation system? If you wish to grow outdoors, will the land have to be cleared before you start planting? Will the building be able to be secured easily?
Zoning and related issues: Is the building compliant with all the state’s zoning requirements. These requirements can include distances from schools, libraries, and other venues where minors typically congregate. Are there neighbors who will be less than thrilled to see a cannabis growing operation on their doorstep?
Legal and financial issues: Can your fledgling business live with the buying price or the rent? Is the landlord etc. fully aware of your intention to grow cannabis? Would it be possible to buy the facility after you have paid the landlord’s rent for several years?
Owning versus leasing: Which option is the most cost-effective? Does the rent over time amount to more than the purchase price? Which of these two options, owning or leasing, makes more commercial sense?
You will be asked to prove that you comply with state and local zoning regulations along with your license application. Proof for this will typically consist of a lease, proof of ownership, or a letter of intent.
You will also need to turn your mind to your security system and how to implement it. Ideally, your facility should be simple to secure and not overly large for your needs. Otherwise, you may not be able to afford a sufficiently large security team.
An alternative to a large security guard team is an access control system such as Kisi. These restrict access to you and key employees to certain parts of the facility. Entry is via a smartphone and avoids swipe cards being lost. For example, Kisi integrates with Doorbird to unlock access points directly from your smartphone and tracks access via logs.
Access control systems like Kisi go a long way in helping to prove your facility and cannabis products will be secure 24×7.
Write your Cultivation Business Plan
The next step is to write your business plan for commercial cultivation. Start with a mission statement. Do research rather than merely jotting down ideas. Each state has slightly different priorities for their marijuana industry oversight.
Some states focus on the health and safety of medicinal marijuana users. Other states focus on the purity and security of the product. To ensure the pitch in your license application hits the correct chords with legislators, carefully scrutinize the state’s website to get a steer. Including their priorities in your mission statement will demonstrate you are on the same page.
The following should be addressed in your growing operation system:
Breeding (if applicable)
- Harvesting and drying
Explain in your business plan each stage of plant production and the supply chain process. Numerous application forms will require descriptions of your facility and its planned technology, as well as the procedures you will use for quality control and testing.
Other information that may be requested include the following:
- Organizational plan
- Financial projections
- Patient confidentiality training
- Tracking methods for the seed to sale inventory
- Security plan
- Product safety testing
By now, you have done the real sweat with paperwork and research, and should be ready to obtain your license. All that remains are a few additional items for consideration, including:
Will you grow indoors or outdoors? Every state has varying regulations on this, depending on the scenario. Some states only allow indoor growing. Outdoors or indoors is a crucial question as costs will vary significantly.
Outdoor plots will cost $10 to $17 per square foot while a greenhouse will charge about $50 per square foot. Buildings, meanwhile, typically demand $75 per square foot.
If you opt for indoors, here are five pointers::
- Draw up a plan of the floor space and figure out how many plants you can grow in that space.
- Prepare the space by clearing anything unnecessary and check the electricity and plumbing.
- Set up the lighting and water systems, and then test thoroughly to ensure everything works as it should.
- Prep your pots and arrange them in the space. Start planting.
Final Tips & Advice
We get very excited when we dream, when we imagine a business that conforms to our ideologies of what a business should be and how happy we’d be working in an industry we’re passionate about.
Don’t let the legal, financial and business hurdles dull that excitement. Everyone will eventually hit a roadblock, one way or another, because of how new and highly regulated the cannabis & hemp industries are.
But if you can keep focus, work consistently toward your goal, and overcome these obstacles you’re joining an elite club of early industry movers, who will have an enormous advantage when the plant is legalized at the federal level and investment pours in from all direction.
Be patient. Be thorough. Treat your partners and employees with respect. Keep a rainy day fund twice the size of other less regulated businesses. Keep your dream alive. Achieve your goals.
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