The Black CannaBusiness Start-Up Guide

By Kristi Price  |   June 27, 2020

By Kristi Price | June 27, 2020

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How To Start A Black Owned Cannabis Business: The Black CannaBusiness Start-Up Guide

The cannabis business is just like any other business and it takes time and research to make sure that you are making the most informed decisions for your venture.  The Black CannaBusiness Startup Guide will highlight
things to consider if you’re going to launch a black owned cannabis business.
It is a detailed guide with tips on how to successfully roll out your cannabis
business, create your business plan, and market your products.

From illegal to essential service, the appreciation for cannabis business has evolved quite a bit in America. Cannabis start-ups and dispensaries are considered “essential businesses” and were allowed to remain open during a pandemic. This just shows how lucrative this industry is to the general economy of the states in which marijuana is legalized.

The legalization of cannabis for medical purposes in the U.S. has made the cannabis industry an attractive one for investors. But there are many a pitfall between wanting open a cannabis start-up versus sustaining a profitable one.

 

Before we dive into the details, here is a quick video overview of the guide

Read straight through, or jump to the section you want to read!

The State of The Cannabis Industry

Legalizing cannabis in the U.S. has turned it into a booming industry – even as it’s still dominated by a black market. In fact, marijuana sales grew by 30 percent in 2016 and are expected to reach $20.2 billion by 2021 in North America. Presently, one in five Americans lives in a state where they can use cannabis recreationally without a doctor’s report. And in Colorado, which opened the first regulated cannabis market? Marijuana legalization accounts for almost 3% of the state’s budget in 2019.

Today, you’ll see people from all walks of life engaged in this booming industry, mom and pops alongside the mega-corporations. Black owners and professionals  are slowly carving out space for themselves within this billion-dollar industry. From hip hop stars, former NBA players, movie stars, chefs, and other trailblazers, there are many black voices already in the industry. 

They are people who were and are unafraid to roll up their sleeves, cut through the bureaucratic red tape, the stigma of marijuana and its complicated history with black community. Once an aspiring black cannabis business owner gets past these challenges, the next one will be raising the  upfront cash to establish their cannabis start-up.

But we still do not have enough Black players lighting up the industry. Especially in light of the potential for growth that the cannabis industry has. Less than a fifth of cannabis business owners in 2017 were people of color, with only 4.3% being blacks.

The industry, which is still in its infancy, has been riddled with many lapses. These must be filled by forward-thinking and innovative people who can leverage on this opportunity. People like you with something to offer the industry.

“Establishing a cannabis start-up gives you an opportunity to be another pioneer in this growing industry.”

Black CannaBusiness Magazine advocates for more black-owned cannabis businesses but we are not blind to the challenges of launching a successful cannabis start-up. There is a lot to consider before an aspiring cannabusiness owner ventures into the cannabis space. Let’s start with understanding a few of the industry fundamentals.

Understanding the Cannabis Industry

Before diving head-first into the cannabis industry, it is vital to have a decent knowledge of what the industry looks like. You don’t have to be an expert at everything but there are some basic things you should know.

The cannabis industry has two primary sectors: medical and recreational. 

Medical cannabis industry

Medical marijuana is the use of cannabis to get relief from various types of illnesses and disorders. Cannabis is used to relieve pain, anxiety, depression, muscle spasms, and inflammatory bowel diseases to name just a few  of the reported benefits.  The use of cannabis for medical purposes is legal in almost all 50 states in the U.S.

It must be cultivated under exceptional supervision without the influence of toxic fertilizers and pesticides to qualify as medical cannabis.

In most states where medical cannabis is legal, authorizations and registrations are required to establish a medical cannabis business.

Recreational cannabis industry

Today the use of cannabis for recreational purposes is legal in about ten U.S. states, including Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, and Vermont.

People have been known to travel to other states to buy both recreational and medical marijuana. In fact, Colorado has had a massive 51% boom in tourism since 2014 following the legalization of marijuana. So, don’t just look at your state’s figures in determining the potential for a successful cannabis business or how many players are in your state. Think outside of the borders.

Cannabis Industry Categories

There are emerging and established business opportunities in the CannaBusiness industry. Cannabis has set up shop in a variety of sectors, including healthcare, pharmaceuticals, agriculture, and consumer goods.

It pays for new cannabis business start-ups to know the key industries to venture into.

When most aspiring cannaprenuers begin to consider their business concept, determining rather or not the business will be the plant-touching or not is the first decision made. Plant touching businesses are exactly what they sound like. They are business that actually require you to handle the plant or any of its direct products. So, what are a few of the plant touching categories you can consider as a new cannabis business?  Keep reading for a few ideas.

Breeding is the process of cross planting to produce desirable traits and plants with a higher yield. As a cannabis breeder, you focus on developing high-quality cannabis seeds to produce the correct cannabis strains. Or developing new ones.

Cannabis breeding is the major backbone of the cannabis industry, which involves a long interactive process. So, if you’re interested in being a thriving member of the industry’s backbone, then look at creating a cannabis breeding business.

Cultivators grow the plants. But growing marijuana on a large scale requires extensive knowledge of the plant. It also requires the ability to manage a team that handles several activities like planting, cloning, feeding, watering, pest management, grow-house technology, and more.

 Establishing a start-up that focuses on cultivation also involves having good knowledge of the local and federal laws that surround the growing of marijuana for medical and recreational purposes.

Cannabis extraction firms extract oil from marijuana plants and turn them into different products like capsules, gels, tinctures, edibles, and gummies. Extraction emphasizes cannabinoids or compounds which are unique to cannabis like CBD and THC.

Concentrates developed via extraction can either be sold as end-products to users such as vaporizers. Or they can be sold for other uses like cooking.

Cannabis business owners involved in extraction also manage laboratory activities and make sure that things are compliant with strict safety standards and government regulations. As such, extraction requires a significant upfront investment in the appropriate machinery. And you will need intimate knowledge of cannabinoid extraction methods.

Dispensaries are where most cannabis consumers encounter the product legally. This is where you sell cannabis and its related products to the general public.

Most dispensaries offer medical marijuana with a wide variety of CBD and THC products available for walk-in or home delivery. These products include CBD oil, vape cartridges, topicals, THC oils, oral syringes, tinctures, flower, capsules, and concentrates such as wax, shatter, or dabs. These dispensaries also sell accessories like vaporizers, vaporizer pens, and batteries.

For a dispensary, you’ll typically need to apply for a license in your state. Unfortunately, licenses are limited, so it’s a pretty competitive process.

Cannabis manufactures are companies that either support or engage in research, development, distribution, and sale of medical and recreational cannabis products. They create a lot of value-added products like cookies, gummies, and brownies.

Similar to the extraction area of cannabis, manufacturing requires a lot more upfront cost due to investment in machinery and other facilities to manufacture products on a large scale.

ANcillary Cannabis BUsinesses

Not every cannabis business needs to be involved in the actual cultivation and sales of cannabis. You can find success in other cannabis ancillary services like the ones we list below.

The cannabis industry has created room for biotech and medical-based cannabis companies involved in developing technical solutions to solve issues within the general industry.

For example, persons established tech start-ups as quality control inspectors or testers. These are start-ups that ensure cannabis firms meet high standards and that the processes used in the production process adhere to strict regulations. Others may develop devices that can assist with the administration of medical cannabis.

And there are many more areas in tech that can be applicable to the business of cannabis.

Dispensaries, retailers, and cannabis companies need security and security-related tech to keep marijuana products, equipment, and cash safe.

This is crucial since marijuana is considered a Schedule 1 controlled substance by the U.S. federal law. In addition, cultivators, processors, distributors, and testing labs need security, so this category is available in multiple parts of the supply chain.

As a provider of ancillary services, you have the opportunity to take your current skills and pivot to help others in the plant-touching, and other aspects of the industry succeed.

Every canna-business requires some form of administration, and the cannabis industry has created a need for accountants and administrative workers. These are people who ensure business operations run smoothly as well as implement them. It requires a great deal of administration to ensure shipments and accounts are in order, manage customer complaints, and more.

Because cannabis continues to be federally illegal, many banks will not work with a canna-business. Therefore, these businesses, more than others, need accurate and efficient accounting and administrative systems, something you can pivot your current skills to provide.

Marketing includes diverse ways of selling cannabis products, which could be through the establishment of dispensaries, online platforms, affiliate marketing, or social media.

Cannabis marketing and PR is an essential ancillary service to dispel the many myths negatively affecting entry into the industry. For most, it continues to be a process by which many African Americans are incarcerated, and still are in high numbers, even in states that have legalized marijuana.

So, as a marketer or public relations expert, you can:

  1. Help current cannabusinesses get their services and products to the right consumer
  2. Educate other Black professionals on how to enter the industry, and
  3. Support the fight for expunging criminal records of African Americans who should be able to take advantage of the industry that was criminalized to hurt them

Most lawyers involved in the industry work as cannabis consultants. Although they do not have a farm of their own, they are well versed on what it takes to register and start a cannabis business, the various taxes involved, rules and regulations to follow, and various documentation processes needed.

So, as you can see, canna start-ups are not just about plant-touching businesses. There are a lot of sectors and areas in which you can diversify.

Finding the resources to become a black cannabusiness owner

The cannabis industry is a competitive one. Plus, small businesses tend to have a high failure rate. According to the Bureau of Labor Statistics, about 20% of small businesses fail within their first year, and about 50% within their fifth year. So, a cannabis start-up without the right information and knowledge about the industry will end up closing its doors in a short time.

To give you a head start, here are some of the key information you must know before establishing a cannabis business.

The cannabis industry has many rules and regulations that must be thoroughly obeyed. The easiest way to know and understand these rules is by joining non-profit associations like the National Cannabis Industry Association (NCIA) that helps members stay informed and comply with the laws and ethics of the cannabis industry.

The primary concept of social equity is to ensure that people who have been previously arrested for cannabis-related crimes or those who live in a neighborhood that has been impacted by the war on drugs can also participate in the cannabis industry and even establish a start-up if they wish to.

There are many non-profit organizations available to people interested in establishing a start-up in the cannabis industry. For instance, the NCIA is a trade organization for the cannabis industry. It serves to provide canna-businesses with a voice in Washington, D.C.

The organization is led by industry experts with the intent to speak for the needs of the rapidly growing cannabis industry. Joining any of these bodies could help you always get the right information about the cannabis industry.

 

Attending North American Cannabis conferences, events, expos, and tradeshows can help you stay informed with the happenings in the cannabis industry.

These days there are many virtual conferences taking place online that you can be a part of without the added expense of traveling.

Attending conferences will help you to establish a network within the industry. Your attendance at these conferences will not only show you the make-up of the people taking up space in the industry it will further cement why, as a Black cannaprenuer your voice matters in this industry.

 

Accelerate and Sustain Your Black CannaBusiness

So, you’ve identified where to gain knowledge, and you understand the various type of plant-touching and ancillary cannabis business types. It’s time to decide what kind of business you want to establish.

Do you want to start a dispensary or become a marijuana grower? Perhaps you want to start a delivery business, a marketing outfit, or any other?

Decide on the sector you want to join. If you’re going into direct cannabusiness, you must consult with a development team that understands compliance consulting in your state. This is because operating a cannabusiness in some states can only function through state government programs overseen by state departments of Public Health.

Then you need to focus on creating your cannabis business plan.

The Black CannaBusiness Plan

Your business plan must be detailed and fall in line with your state laws and regulations. It’s also essential to write down your business plans, goals, and organizational mission statement and objectives. You can work with a development team or marijuana consulting firm to ensure that you are on the right track.

Ideally, your business plan must include the following:

After creating your business plan, you must register your business name and entity and obtain the requisite licenses and permit.

Each state has different laws that govern the sale and establishment of cannabis start-ups. So, as part of your business planning phase, you need to carry out detailed research and contact the right legal professional in your state who can put you through the registration process. You must also know the right documentation, licensing, regulatory bodies, and state laws to comply with

Marketing Your Canna-Business

A key part of your business plan is your marketing. To quickly get your cannabis business to a profitable state, you need to have a detailed sales and marketing plan that gets your products or services visible to your target customers.

Your marketing plan can include any or all the following. (We don’t recommend you stretch yourself too thin if you’re DIY cannabis start-up without capital).

We are about low price solutions, check out free resources like Canva when you are ready to start designing creative materials for your marketing efforts.

Build a website

The importance of creating a website as a new cannabis start-up cannot be overemphasized. A website does not only help you sell your business online, but it is also a way to gain visibility, engage your potential clients, and convert visitors into loyal customers.

However, when creating a website, you must ensure that your site is easy to navigate, user friendly, and SEO optimized. It should have the type of content cannabis users or your target audience are interested in reading.

Optimize your website for search engine:

Search engine optimization (SEO) can also help to increase online visibility andattract the right customers.SEO is both technical and content related. In terms of content, it is veryimportant to include content marketing as part of your marketing strategiesfor your cannabis products. Content marketing helps you create SEO optimizedand high-quality cannabis content with keywords that rank your website.

Influencer and affiliate marketing:

Affiliate and influencer marketing are two effective and affordable marketing techniques for your cannabis products. With affiliate marketing, it allows online retailers to pay commissions to an external website to drive sales. To effectively promote your products through influencer affiliate marketing, you must first set up the affiliate platform that makes it easy to track affiliate payouts and have systems in place to limit abuse. For influencer marketing,you need to find influencers with active and engaged audiences who align well with your cannabis brands.

Facebook Groups:

Social media is also an important channel to market your cannabis product but there are limitations. Channels like YouTube, Facebook, Google search can help increase the visibility of your products. One social media channel that is often neglected by cannabis start-ups  is Facebook groups. Facebook groups that are populated with high-quality cannabis content and have lots of engagement and conversion can help you generate more sales.

Online and local directories:

Online and local directories also offer dual benefits in helping you market and sell your products. At present, there are so many cannabis directories available online and in your local communities. Try directories such as Google My Business, Leafly, Bing Places, MedicalJane, Yelp For Business Owners, The Dispensary Map, TripAdvisor, Manta and Weedmaps. 

All you need to do is ensure that your company is properly listed and optimized on as many cannabis-specific websites as possible. Apart from helping your business gain visibility, another benefit of online and local directories is that it strengthens your brand reputation because most cannabis users see them as a reliable source for trustworthy and high-quality cannabis products.  

Black CannaBusiness is busy amassing the largest database of African American cannabusiness owners in North America. List your business in our free business directory.

Becoming a black owned cannabis owner

The fact remains that the path to a successful cannabis start-up is not a smooth or easy ride. Rather, it is filled with rules and regulations, taxes to be paid, and other unforeseen roadblocks. Finding professionals to support your start-up can be challenge as well.  

 

Plus, despite the legalization of cannabis for medical and recreational use in the U.S., people of color are still deprived of so many benefits. And in addition to that, our black men and women continue to languish in prisons for assorted marijuana-related infringements. For instance, a recent report shows that in Missouri, African Americans are 2.6 times more likely to be arrested than their white counterparts despite similar rates of marijuana usage.

That is why the only solution to absorbing the people of color into the cannabis business and opening up more space for them is through the introduction of the social equity programs. The goal of these programs is to help people of color, and those most impacted by the criminalization of cannabis, fast track ownership in the legal cannabis industry. For example, Massachusetts has created an official Cannabis Board and Equity Fund, and we look forward to more states following suit

To be effective, however, policies that govern the social equity program must include access to:

Social equity programs offer only one part of the solution. States and local officials must also provide support to minority cannabis start-ups, which is vital to building a sustainable business.

In addition, African Americans could also register to become members of different non-profit start-ups that fight against minority discrimination in the cannabis industry. In fact, there are many African American/ minority associations and groups that can help take your business to the next level.

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