Marijuana Industry Business Opportunities
The weed industry is booming, there is no question about it. The so-called “Green Rush” is in the making. This industry is expected to grow to astronomical levels and will certainly mint millionaires in every state. According to the Washington Post, over 55 million Americans have used marijuana in the past year, and 35 million are considered regular users. This means there are almost as many pot smokers as cigarette smokers ($59 million). Keep in mind, this poll was from 2015 and we all know weed has become way more mainstream since 2015.
If you live in a state that allows medical or recreational marijuana, we came across an opportunity that is worth checking out.
This article will discuss the risks related specifically to the cannabis industry and we will review the many different business models for people that are interested in getting into the weed business.
As it is in every new industry, the first-mover advantage is huge. The people that are willing to take a little more risk and jump into the industry earlier are the people that are going to walk away millionaires.
Cannabis Franchises are starting to pop up around the country. Here we take a closer look at the marijuana industry, including risk factors and opportunities in the market place.
Starting any new business requires some capital, and in this industry, most business models require $250,000, and in some cases, even $1,000,000 and up, to legally start a cannabis business. This makes a huge barrier to entry.
We have found one business model that can be started with a much smaller budget. We will be discussing several business opportunities within the cannabis space in depth later on in this article.
If you are interested in getting capital to start or grow a small business, Fundwise offers creative funding.
Risk Factors of Cannabis-Based Businesses
There are two major categories for risk factors that are specifically related to this industry.
Political/Legal Risk Factors – The legal status of marijuana is changing constantly. The laws related to the industry can dramatically affect any company in this space. The best way to mitigate this risk is to build a business that doesn’t involve touching the cannabis plant.
Supply & Demand – The demand for weed is expected to grow consistently as it becomes widely accepted and accessible to the public. Let’s focus on the supply side of things. There are only a couple of ways that legal weed can enter the marketplace, in other words, there are only a few ways to increase the supply to the market. The first is when a company follows all state and federal regulations to grow, harvest, process and eventually retail the plant. In other words, these businesses touch the cannabis plant.
The other way that legal weed can enter the market, is when regular consumers grow their own weed at home. Growing weed at home is shaping up to be the future of weed culture. Check out this cannabis franchise business model that is focused on the homegrown market.
Cost of a Cannabis Business License
The cost of a cannabis business license varies depending on a variety of factors. The prices of marijuana business licenses are different for every State. Each state has slightly different regulations for growers, processors and retail companies that deal directly with the weed plant.
Dispensary and grow operations license fees range from $5,000-$500,000 annually. For the legal rights to grow or sell the cannabis plant. This does not include any other start-up costs involved in starting a new business.
After you receive approval from your state to legally grow or sell weed, you will need & pay for real estate to operate your business, employees, marketing/advertising, legal representation, plus any other general business expenses. All of this will need to be paid before you see a dime of revenue.
Cannabis businesses can be a costly and risky venture.
To avoid these high legal operating fees, we recommend focusing on business models that do not touch the plant itself. Here is an example of a cannabis franchise that does not touch the plant.
“Touch” Vs “No Touch” Business Models
Does the business touch the plant? Or does the business deal with other aspects surrounding the plant?
Businesses that touch the plant includes companies that grow, process, product manufactures, distribute or retail any part of the plant.
Risks of Touching the Plant
There is a significantly higher risk for businesses that deal directly with the plant. This is due to the complicated, constantly changing, regulations in every State. As of 2020, Federal Law has this plant classified as a Schedule 1 narcotic.
This makes for some confusing regulations and can be a complicated and expensive mess for any business owner that must abide by these newly formed laws. Starting a grow facility, or retail dispensary is more than just the growing and selling weed. The owner must understand the legal landscape which can become expensive quickly. This is one of the biggest barriers to entry into the industry.
Business Models that Do Not Touch the Plant
There are only a few business models that we have found that do not touch the plant. Most of them require large capital investments and a strong knowledge of the industry. No-touch business models include: Grow Supply (ie light manufacturers, soil & nutrient companies, etc), technology businesses that support the industry, Legal & Political companies (lawyers, consultants, etc). All of these businesses are designed to avoid handling the plant itself due to the inherent risk. No Touch business models also are able to grow internationally because they have fewer legal restrictions.
Homegrown Weed is a Growing Market
With the high retail prices, the next step for many consumers is to grow their own weed. You can grow your own weed for 1/10th of the cost of retail marijuana.
The logical decision for any regular consumer is to grow their own. Even a small 4 plant grow tent will pay for itself in one grow cycle. Not only can regular users grow there own weed for cheap, but they can also profit by selling it to their friends and family. Which ultimately means less revenue for the retail market.
With new indoor grow technology, growing at home has never been easier which makes it a logical choice for the consumer.
The opportunity to capitalize on this market segment is with supplying these new home growers with the knowledge, and tools they need to grow their own.
Selling Shovels in a Gold Rush
“The Gold Rush is a good time to be in the pick and shovel business” – Mark Twain.
Mark Twain was an American writer and entrepreneur. This brilliant quote can be directly applied to the current “Green Rush” of today’s economic landscape. He is telling us to focus on selling accessories and to focus on businesses that do not physically deal with the “gold” (cannabis). During the gold rush, the people who prospered the most were the people that were selling picks and shovels to the people that we’re searching for the elusive gold mines.
Searching and digging for gold mines during the Gold Rush is the equivalent to starting a marijuana grow operation or retail business modern day. There are a few businesses that will hit the jackpot and get rich, but the majority of the businesses will end up bankrupt. Just like the majority of gold diggers that lost their fortune searching for a gold mine.
New Industry Opportunity
First-movers advantage plays a huge roll in this industry. The businesses that have been around for decades have earned a large share of the market. We hear of these retail pot shops and grow operations on the news when they report their earnings in millions of dollars. What we don’t hear about is the thousands of failed cannabis businesses.
In conclusion, our opinion is that the opportunity lies in the home grow niche. As the stigma surrounding growing weed diminishes, more and more people are going to realize the potential benefits of growing weed at home. Between the people that want to grow and sell weed to their friends and family, and the people that will just grow for personal use. The market trend seems to be going in the way of the homegrown market. Of course, this trend was predicted early on by the makers of the widely popular Comedy Central Show, South Park.
The next trending opportunity is supplying people with the tools and knowledge to grow their own marijuana in the comfort of their own home.
We recommend this Franchise Opportunity in the Cannabis Industry. As it has a low start-up cost and huge opportunity on the backend.
Homegrown Marijuana is Legal in these States
As of 2019, the following states allow their residents to grow marijuana. Some states allow all residents to grow their own weed recreationally, and some only allow medical patients to grow their own weed. As the cannabis industry goes nationwide, more and more people are going to be growing weed at home. This trend can already be seen in many states across the country. We expect this trend to continue, and the businesses that support this trend will prosper.
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Dakota
- Rhode Island
- West Virginia