The national debate around cannabis in 2021 is in sharp contrast to just a few years ago. Elected officials are no longer discussing if cannabis should be legal, but instead consider how and when cannabis should be legalized.
The cannabis industry has been seemingly pandemic-proof over the last year, with consumer sales holding steady since much of the nation locked down in March 2020. Some states considered cannabis legalization to help alleviate economic losses from the pandemic and, with Democrats now in control of both Congress and the White House, the United States is poised to witness banner cannabis growth in 2021.
With newly approved legalization comes major economic benefits, as well as unique questions and challenges for cannabis startups.
Reaping the Economic Benefits
Legal cannabis presents potentially tremendous benefits to economies on a local and a national scale. As COVID-19 continues to impact economies and millions of Americans still file for unemployment, benefits like increased tax revenues and job growth are increasingly appealing.
California has raised over $1 billion in cannabis tax revenue since January 2018. Colorado also surpassed $1 billion in tax revenue from cannabis since 2014 and newcomer state Massachusetts generated $22 million in tax revenue in its first year of recreational cannabis sales. Some states are considering legalization to help alleviate their own economic losses from the pandemic.
When discussing job growth, cannabis is an industry that often goes unmentioned. According to Leafly’s 2021 Cannabis Jobs Count, the cannabis industry directly employs more than 321,000 full-time workers in the US. With indirect jobs and full-time workers dependent on the legal cannabis industry, that number is even higher. These numbers will only continue to skyrocket as more and more states vote for legalization.
Outlining the Startup Process
The benefits to cannabis legalization speak for themselves, but the path to a successful cannabis business is not an easy one to navigate. After statewide legalization takes place and you’ve decided which sector of the cannabis industry you want to be in, there’s a few key things to keep in mind.
Before anything, do your research. Conduct market research in the area and sector that you’re looking to set up shop. What are the demographics of your potential customers and what does standing market research show to be their likely preferences? What need are you fulfilling for your customer base? The legal cannabis space is becoming crowded so understanding your core consumers and implementing targeted consumer segmentation is increasingly important.
Cannabis can be a lucrative industry. The demand for cannabis in the US in 2020 was estimated to be $18.3 billion. But first timers in the cannabis space should give themselves a major cash buffer before jumping in with both feet, budgeting for every possible expense, and then an extra 20% buffer on top of that. Entrepreneurs will also need to take into account hours that will be spent filling out paperwork, going to various city, county and state buildings for build-outs, licensing and security approvals.
Most importantly, know all regulations in place and how they’ll affect your daily workflows. Law, limitations and regulations vary by state, and changes in regulations can be costly if businesses aren’t prepared to be flexible. Being irresponsible with your business can not only cause huge problems for you (including hefty fees and even jail time), but also for the cannabis industry at large. The industry still has negative stigmas attached to it, and reckless practices can further hurt the industry’s reputation.
Navigating Legal Challenges and Compliance
Depending on what area in the cannabis space an entrepreneur is trying to enter, there will be unique challenges they’ll face along the way. The top challenge I’ve seen in the event of statewide cannabis legalization is the balance of business financial stability and complying with strict regulations.
Obtaining a cannabis business license is a rigorous process that requires abundant time and capital. While state regulations get the most attention throughout this process, a business must also comply with city and county cannabis regulations as well. The process can be tedious, expensive and is often completed on top of already established careers or business ownerships.
Another challenge new business owners can face is finding reliable and trained cannabis industry professionals. This generally affects those who either have experience cultivating cannabis themselves and therefore find difficulty in maintaining traceability or those who can manage traceability but don’t have experience cultivating cannabis themselves. High turnover in the early days of legalization is very common and, unfortunately, very expensive.
It’s an exciting time to get involved in the cannabis industry and there are countless opportunities opening up every day. If you’re willing to work hard and play by the (many) rules, you’ll be well on your way to a successful and profitable future in cannabis.