Marijuana has become a major industry and many entrepreneurs want to know how they can join this growing enterprise. When people first think about joining this industry, one of the most common initial thought is to open a marijuana grow (cultivation) center.
UNDERSTANDING THE RISK
Marijuana is still classified as a Schedule 1 drug that has no medical value under federal law. Federal minimum sentencing for cultivating over 99 or 999 marijuana plants still apply. Consult a knowledgeable attorney before embarking on a career or investment in the marijuana industry. The risk is caused by the differences between federal and state laws. The gray area between the federal and state law is what creates the opportunity for entrepreneurs willing to accept the risk in an industry considered too risky for conventional big businesses.
While memos on federal policy for states with medical marijuana laws are released under one administration, those policy guidelines are not law and are subject to change under another administration. We’ve seen smash and grab raids in dispensaries by the DEA where all marijuana is removed but no charges are pressed. We’ve seen asset forfeiture letters aimed at landlords renting to dispensaries and grow centers.
Due to the scrutiny of medical marijuana businesses financial transparency and operating ‘above board’ are requirements for all medical marijuana businesses. Other important procedures include paying taxes and monitoring inventory within the secure medical marijuana dispensary or grow center. Hire the best lawyers and CPAs for legal and financial help and the best consultants for business planning and developing marijuana businesses. Remember you are representing the industry.
STEP 1: BUILDING YOUR TEAM
Build a development team, consult with a lawyer and understand the marijuana laws in your state. Some states have not allowed for medical marijuana at all. Most medical marijuana opportunities are available through a state governed program overseen by a state department related to public health. These programs begin with a highly defined request for application or proposal for interested applicants in which the applicant’s response is graded, or rated by criteria developed by the state division in charge of authorizing medical marijuana businesses. The competition is fierce in all states amongst applicants for medical marijuana business permits.
Dispensary Permits Team recommends that you build a highly qualified diverse team that may include doctors, engineers, horticulturists, administrators rich in marijuana growing experience, managers with security experience and managers with operational, zoning and financial experience in medical marijuana. The quality of your board members and employees is a major factor in first consideration by the division set to grade your organization’s ability to provide medical grade marijuana to the state’s qualifying patients. It may also be a considering factor in the case of 2 applications being tied.
Ideally the team will allow for a master editor and a director to insure all deadlines are met and the proposal comes across as if it is from one voice, even though all team members have contributed items for the application response. During this time, you’ll be running 2 businesses, one business to obtain the marijuana business permit, the other to build out the business plan if awarded a permit. Team members will have to solicit letters of recommendation from mayors, city council members, police chiefs and zoning commissioners while having the medical marijuana experience to build out the facility. Having qualified personnel is the key, as well as the team’s ability to train less experienced members.
STEP 2: FINANCIAL METRICS
Before you embark on opening a marijuana cultivation center, you should take the time to understand the financial and time requirements. It’s important to weigh your investment in time and money. If you are in position where you are well capitalized, ensure you do your due diligence when looking to hire consultants when putting together your project team as it can be very expensive.
The proof of capitalization as required in all of the medical marijuana state’s application responses is expensive, and rarely under $250,000 in proven liquid assets. Since proof of capitalization is such a high priority in these application processes it’s often used as a tiebreaker in the event of applications graded as a tie. As consultants, we recommend having much more liquid capital than the application response requires. Even experienced entrepreneurs may be torn between debt and equity. A Dispensary Permits representative can walk you through the benefits and pitfalls of each.
STEP 3: SUITABILITY OF YOUR FACILITY LOCATION
There are several factors facing any business regarding potential real estate:
- Physical Features of the Real Estate
- Zoning Issues
- Legal and Financial Considerations
- Owning vs Leasing
In most medical marijuana states, the real estate will be part of the application process. Appropriate documents citing compliance with state and local zoning requirements will be required as part of the proposal. This includes a lease, letter of intent, or if owning your real estate- proof of ownership. Consult with a lawyer, CPA and your Dispensary Permits representative on deciding the advantages and disadvantages of owning and leasing. There are greater legal ramifications in owning your own building and you don’t want to purchase a building and then not get a permit. Finding a landlord comfortable with the intended use is a hurdle for those seeking to lease property for this industry. It’s vital to be forthcoming with the landlord over the intended use of the space, you don’t want to get a permit and have issues down the road.
Your Dispensary Permits representative can assist with tips for working with brokers, getting landlord, bank and insurance approvals as well as real estate contract considerations. The distance to sensitive uses and the physical features to look for in a building are other considerations we’re poised to help you with. You need to start building a list of potential properties now.
STEP 4: BUILDING A CULTIVATION PLAN
Define the goals of the division authorizing marijuana cultivation permits and build your organization’s mission statement around that. Some states may prioritize a high-quality product for qualifying patients while another state may prioritize job creation and living wage jobs or staff diversity.
Dispensary Permits has invested heavily into producing high-quality Cultivation Plans. We’re proud of the fact that we can show entrepreneurs what their proposal will look like during an in-person meeting and entrepreneurs can preview the plans online. In the early stages of the process, each member of our client’s Board of Directors has plans they can show investors, elected officials, zoning commissions, engineers, and contractors. With that and our track record of experiences with the permit process in various states are what we consider the Dispensary Permits advantage. We deliver a guide & checklist to clients outlining all executables and deliveries, when they’re due, and who should be responsible for them.
The plans your organization considers varies from one state to another. Most states require Cultivation Plans to include the cultivation overview that includes in detail, an explanation of each stage of the plant production and supply chain process, including:
- Breeding (if applicable)
- Harvesting & Drying
The Cultivation Plan should also describe the technology and facility designed to simplify and streamline the hydroponic growing process; as well as details about quality control and testing. The state will most likely also request for general organizational business planning, financial projection planning, patient confidentiality training, record keeping with seed to sale inventory tracking plans, and security plans. A product safety testing plan should be considered even if it’s not required by the division authorizing medical marijuana business permits. All these components are eventually combined into your business plan and the response your organization provides the state’s request for proposal (RFP) or request for application (RFA). The plans are graded and ranked by the division and the organization considered to best meet the needs and demand of qualifying patients and the regulations of the division are awarded a permit or in some states, a provisional permit and the build-out of the business plan begins. Dispensary Permits partners with national and local providers of engineering, contracting, security, insurance, and other services.
LEARN MORE ABOUT OUR MARIJUNA BUSINESS PLAN TEMPLATES:
- Business Plan
- Cultivation Facility Plan
- Environmental Plan
- Financial Plan
- Fire Safety Plan
- Inventory Control Plan
- Operations Plan
- Patient Education Plan
- Patient Record Keeping Plan
- Product Safety Plan
- Security Plan
- Staffing Plan
- Suitability of Proposed Facility Plan
STEP 5: BUILD OUT THE CENTER
You’ve put sweat and money into the project and you’re just now awarded a permit, and it’s time for more work and expenditures before the organization can deliver a functioning marijuana grow center. With nationwide and local partners, the experience to staff and train as well as all the other services a start-up requires, Dispensary Permits is still here to help. The state’s process starts with a large number of prospects. Finally, the applicants are narrowed down and awarded permits. You are representing the industry now, a dream held by many, but awarded to very few.
SPEAK WITH A CULTIVATION CONSULTANT
Learn about cannabis cultivation from a seasoned expert, Bryce Skalla. As President of Item 9 Labs Corp, Bryce Skalla manages the Company’s day-to-day business operations. Prior to the Airware merger, Mr. Skalla was the co-founder & CEO of Item 9 Labs. As one of the founders and architects of Item 9’s business model, Mr. Skalla was instrumental in establishing Item 9 Labs as one of Arizona’s leading cannabis consulting companies and producers of high quality medical marijuana flower and products over the course of three years. During that period, he designed, developed, and capitalized on strategic opportunities, taking Item 9 from a 1,000 square-foot Caregiver Cultivation warehouse into the highly regulated Arizona Medical Marijuana industry with fifty acres zoned for cultivation. Purchase an Hour Consultation with Bryce Skalla here.