The cannabis industry is experiencing exponential growth and you’re considering opening up a cannabis dispensary. Before you do anything else, we strongly encourage you to start writing a cannabis dispensary business plan. Having a well written business plan is an essential component for state licensing. It can also help you attract investors and other key members of your management team. Statistics show that entrepreneurs in other industries who have written a business plan are twice as likely to grow their business and secure funding as those with no business plan. Being meticulous about every detail in your business plan will maximize your chances of getting approved for a cannabis business license. You might consider hiring an experienced cannabis consultant to ensure that your business plan is as detailed, concise and well organized as possible. Skipping any steps or presenting potential investors with the first draft of your business plan could potentially be detrimental to the success of your cannabis business.
Some general tips for writing a great dispensary business plan are:
Luckily there are business plan templates and other helpful tools that you can use as a starting point for writing your dispensary business plan. Here is some free information from the U.S. Small Business Association to help small businesses create a business plan. It may be helpful to purchase software specifically designed to help write a business plan. You can find a review of the best business plan software as of January, 2018.
One of the most important factors to consider is securing an ideal location for your cannabis dispensary. You will definitely need to do some research and you might want to hire someone who is familiar with local and state laws that specify where a retail marijuana business can legally operate in your area. Failure to consider this could mean disaster for your fledgling dispensary. Below are some real estate guidelines to keep in mind.
Wherever you are planning to open a dispensary, there are state, county, and city ordinances regulating where you may locate your business. There will be restrictions on placing a dispensary within a certain distance of schools, playgrounds, and even addiction treatment centers. Cities may have set aside certain areas to allow dispensaries to operate and most have a limit on the number of dispensaries they will allow. You must also be aware for new laws enacted in your area. It would be a waste to establish a compliant business now only to be shut down the following year. These factors combined with other zoning laws can create a significant challenge in finding an appropriate location for your cannabis dispensary.
For example, take a look at this marijuana zoning map of Cleveland, where medical marijuana became legal in 2016. The red and pink shaded areas show where a dispensary cannot operate based on a variety of factors including being at least 500 feet away from schools, daycare facilities, rec centers, parks and churches. As you can see on the map, there are significant restrictions in most areas, but there are a few areas which are wide open. To be on the safe side, it’s a good idea to speak with an official with the local zoning office in any area you are considering opening a dispensary to be sure that the area will allow you to operate a dispensary.
Simply because a location is compliant with zoning laws and other regulations doesn’t mean it is the right location for your dispensary. Just like any other type of retail business, you need to determine if the local market is the right place for your product. Is the dispensary convenient to your target demographic? Will the neighborhood be accepting of a marijuana business? How many other dispensaries are in the same area? You may also want to find out if there are any known security risks specific to that particular location?
The financial plan for your dispensary is where you determine how much money you will need, how quickly you will reach profitability and how much you can afford to offer investors. Calculating start-up costs is a natural place to begin. It’s essential to have a complete understanding of the exact amount of money you will need to get your cannabis business off the ground. Take the time to research the actual cost of every line item you can think of. Potential expenses can include an architect, an interior designer, construction costs, shelving and display cases, lighting, wholesale cannabis and various cannabis products, monthly rent for your dispensary, electricity, salaries for your staff, insurance, security cameras, computers, tracking software, accounting software, an accountant, an attorney and a cannabis business consultant. There are also marketing and branding costs such as signage, a website, social media marketing, SEO, graphic design, branded lighters, packaging and other promotional items, for example.
Once you have a sense of your start-up costs, create a month-by-month forecast of revenues and expenses, as your cash flow will not be static over the year. Will you have periods of higher demand — perhaps due to a tourist season or major convention that may increase your revenue? If so, what costs will be involved in increasing your supply the month before to anticipate the expected demand? Be very precise about accounting for expenses. Small ticket items, such as office supplies, can add up quickly. Look for ways to buy in bulk; a larger one-time expenditure will save money down the line.
Finally, we recommend doing a break-even analysis by calculating how much cannabis, how many edibles and ancillary products you will have to sell to cover both your fixed and variable costs. A break-even analysis is one of the key components of any well-written business plan. You need this analysis to prove your business plan is viable, especially if you are planning to take on investors or other debt to fund your cannabis business. Our cannabis consulting team is available to assist you in working through your break-even analysis or with any other aspect of your dispensary business plan.
A few questions you might want to ask are: What problems will my dispensary be solving? What are the key features and benefits of my cannabis products? How do these benefits help my target customer?
We recommend that you spend some time doing market research and analyzing existing dispensaries in your area, if possible. What mistakes did they make that you can learn from?
Are there any additional insights and opportunities you can include in your cannabis dispensary business plan? Is there a niche within your target market that your dispensary can uniquely cater to? Especially if there are other dispensaries in your immediate area, you need to differentiate yourself to ensure that you get your fair share of the overall market.
The success of your cannabis business is dependant on many factors. One of those is having a well planned marketing strategy, including a budget designated for marketing. To get started, create a customer persona (or several personas) that include the following information about your ideal customers:
How many staff and which roles will be needed to ensure all of your customers are served in a timely, professional and courteous manner? What skills and experience does each staff member need to ensure that they will be able to succeed at their position?
Consider the following main points when creating a staffing plan (to ensure adequate staffing at all times).
Understanding how much traffic your dispensary will get on a daily basis is vital information to ensure your business is staffed appropriately to meet and exceed the needs of your customers.
In order to ensure that your customers come back to purchase from you a second time, you need to train your staff to provide outstanding customer service.
Now that you have done your research on what products and services you will offer, who your target customer is, and how you will staff for success, you are ready to create your executive summary. According to Entrepreneur magazine, an executive summary should be placed near the top of your business plan, just after the title page. Potential investors don’t want to have to search for the key information that they will need to make a decision whether or not to invest in your cannabis business. Also, whether or not your business plan is well organized can be the deciding factor for a potential investor.
An executive summary should include only the most critical points of your cannabis dispensary business plan. Be brief and to the point and demonstrate that you have put considerable thought into how your business will succeed. Your executive summary should include;
As you can see, a lot of careful thought and planning is required before taking the final steps of applying for a cannabis business license for a dispensary. Creating a business plan with the help of an experienced cannabis business consultant will help to ensure that you can attract the investors you need and increase your chances of being granted a cannabis business license.
Are you considering opening a cannabis dispensary?
If so, contact 3C to discuss the steps you need to take before applying for your cannabis business license.