The cannabis industry is huge, and it is only going to grow as more states and countries legalize recreational cannabis in the coming years. All that growth provides ample opportunity for entrepreneurs to find success in this space — but because the industry is so new, it isn’t always clear which business plans will lead to success.
Fortunately, first-time cannabis entrepreneurs can learn from the mistakes of business owners who have gone before. Here are a few of the most common business mistakes in the cannabis industry and what up-and-coming entrepreneurs can do to avoid them.
Rushing the Opening
The cannabis industry is growing right now, so it is tempting to try to get a business open and operating as soon as possible. However, that doesn’t mean entrepreneurs should skip critical steps in business planning and development. Rushing to open is a good way to make devastating mistakes that cripple a business’s ability to function, all but ensuring it will be outmaneuvered in this competitive and cutthroat industry.
Taking one’s time to research the market and build a business and brand that customers crave will yield long-lasting success. Especially in areas where cannabis industry is brand-new, it might be better for entrepreneurs to learn from the wins and losses of a few canna-businesses before solidifying their plan and hanging their shingle.
Neglecting the Business Plan
Speaking of the business plan, canna-entrepreneurs definitely need one. Contrary to popular belief, a cannabis-related business isn’t destined to succeed; even in a bull market, businesses need strategies to attract customers, manage finances and foster growth. A business plan should be a formal document explaining what a business is, what its goals are and how it will accomplish them. For canna-entrepreneurs, there are two critical aspects of the business plan to consider:
Products. Cannabis is an incredibly flexible and diverse drug, and there is an entire world of products for canna-entrepreneurs to consider creating or selling. It might be worthwhile to investigate and perfect niche products as a means of carving out a special space for a new business.
Location. Different states have different regulations regarding cannabis, and some states are much friendlier to canna-businesses than others. Entrepreneurs might consider launching in a state with more established pro-cannabis laws and expanding into other states as possible, though this will mean competing with a larger number of cannabis brands.
Partnering With Just Anyone
Securing funding can be difficult for entrepreneurs in the cannabis industry as many traditional financial institutions refuse to lend money to weed startups. Unfortunately, this means many canna-entrepreneurs are willing to take money from just about anyone — but that probably isn’t a smart business strategy. Business partners tend to exert profound influence on business strategy, and if a partner doesn’t understand the cannabis industry, they might make poor decisions that end in business failure. Cannabis experience is a must for any business partner, and employees, too, should be knowledgeable and passionate about the field.
Ignoring the Cannabis Community
The legal cannabis industry is brand-new compared to the age of the cannabis community. In addition to leveraging the skill and knowledge of cannabis users as partners and employees, entrepreneurs need to be careful to pay attention to the cannabis community at large, working to understand their shifting wants and needs. For example, weed has been available in California for more than a century, but these days, many Cali cannabis consumers are interested in the most cutting-edge products. In contrast, the cannabis culture in Virginia is relatively small and new, and marijuana mainstays will likely meet consumer needs just fine. Entrepreneurs should engage with their customers, in-person and online, to better identify the demands of their market.
Forgetting Shifting Regulations
Cannabis regulations are far from set in stone. Even in states where recreational weed has been legal for approaching a decade, the laws continue to change. For example, most cities and states outlawed at-home cannabis delivery — until the 2020 pandemic, when delivery allowed businesses to operate safely. A canna-business strategy that adheres to the law today might need to be updated tomorrow, especially if laws shift in ways that give businesses more flexibility in fulfilling consumer needs and wants.
The cannabis industry might be big, but canna-businesses can still fail. First-time canna-entrepreneurs can find success while making mistakes — but the fewer mistakes made, the better.
