The cannabis industry is going to be huge. It’s the modern day internet boom. Some people say it’s a gold rush. Who knows what to call it, but we all know the reality of the industry’s future. And just like any industry boom, businesses want to catch on. Cannabis is popular and the industry inherently promotes creativity and innovation, and is more or less the embodiment of the millennial generation of which composes a notable part of industry drivers and entrepreneurs.
So what will it take to get into this industry? Well, it’s not easy. There are a handful of things to consider that I have learned the hard way while working with the industry. Let’s get into the top things to consider when starting up your company.
Banking and Merchant Services:
One of the first steps of business once officially formed is opening a bank account. Opening your company’s bank account is super exciting. This is basically a rite of passage which represents your new ability to accept payments and pay employees and other expenses, both of which represent the successful operation of your company. The trick here is, however, that not all banks will accept you if you’re in the cannabis industry. The number of banks who will accept cannabis industry is rising, but there is still a level of apprehension due to US Financial Crime Enforcement Network (FiCEN) policies. If your bank is to accept you, they must ensure that your company enables them to follow these policies. Finding a bank will require a bit of research, but it is not impossible. The most important part of the process, however, is reading and understanding the FiCEN rules and making sure that you keep your bank happy. Otherwise, you might lose your account and that could result in an extremely unfortunate situation.
Similarly to the banks, merchant services accounts are also a challenge to acquire. In almost any possible situation, your cannabis company will be required to have a high-risk merchant service account, resulting in extremely damaging credit card processing fees. Unfortunately, there is not much that can be done about this policy at this point, but merchant services are something that most cannabis companies don’t think about until they need them and then run into huge issues finding a supplier. Unless you are a brick and mortar store which can take cash only, you will need a merchant services account. Keep this in mind and make finding a supplier a priority right when your company secures a bank account.
Inventory Tracking and Management:
This part only applies to dispensaries and growers for the most part, but is a crucial part of the business. In any state where growing and selling cannabis is legal, you will have to register your crops with the government. Using intricate inventory management systems mandated by the state, you will have to track every plant grown from the second the seed is planted until it goes out the door to the customer.
The major issue that can arise from this concept is that the government has constant visibility into your company and the quantity of cannabis that your company has growing and for sale. If you haven’t figured it out, this means that your company has to be perfect in its compliance, creating a dire need to have staff who know how to operate the inventory software. Before you get going with things, we highly recommend finding training or finding an external firm who knows how to use these types of software. While it may cost your company a bit of money to find the resources to properly maintain these systems, the costs of government issues will far exceed them.
Industry Saturation
As with everything that is destined to become successful in terms of economics and business, there are a wide variety of industry players and that number is growing rapidly by the day. Cannabis use is growing in popularity as society becomes more accepting of it, and anywhere you look shows the growth in the industry both in terms of stock values and overall company success. This results in high levels of competition and increased entry barriers presented by existing industry leaders.
In order to succeed in this industry, it is imperative that you develop a fool-proof strategy for your business and strive for the highest level of differentiation possible. This concept applies in all industries, but especially in cannabis.
Think You’ve Got What It Takes?
The cannabis industry can be one of the most rewarding but also one of the most challenging and frustrating. From banking to regulations to actually succeeding in the industry post-launch, it is a constant uphill battle. If you think you’ve got what it takes, we definitely recommend looking into it, but be warned.
