Interested in starting a Medical Marijuana Business? We don’t blame you. The retail pharmacy industry can be incredibly lucrative. In fact, over a quarter of U.S. medical marijuana dispensaries report earnings of a million or more per year.
Dispensaries at the top end of the earnings spectrum have thousands of loyal patients, professional packaging, heavily tested products, a dozen or more employees, and several locations. While the future looks bright for entrepreneurs looking to dip their feet into a budding new industry, the reality is that you can’t become a million dollar business overnight. Building a successful marijuana business requires hard work, time, and a well developed business plan.
Whether you’re in the process of launching your very first business or you’re a serial entrepreneur, a business plan is absolutely essential. Business plans improve your company’s internal operations by setting tangible goals for your team, as well as, validate your company in the eyes of investors, real estate companies, and other business relationships that will be key to your company’s success.
While marijuana continues to inch closer to the end of prohibition each year, the stoner stereotype still remains for many in the business world. A thorough business plan will allow you to demonstrate your professionalism and overcome the stigma attached to cannabis. Success is just a business plan away and we’re going to walk you through how to develop a thorough one.
Before You Start Writing
Before you put your pen to the paper and begin to write your plan, there are a few things you’ll want to first consider. Keep in mind that the primary purpose of a business plan is to show investors, leaders, and other potential stakeholders how your company plans to turn a profit.
First impressions are everything and you’ll want to ensure that what you write leaves a good one. Every aspect of your startup should be thoroughly fleshed out from your business model to your legal structure. Building a business model canvas before writing out a business plan will help you formulate a better picture for your business vision.
If you’ve never encountered or written a business plan before you may also want to take some time to familiarize yourself with this type of document. The U.S. Small Business Administration offers an online business plan tool which will allow you to familiarize yourself with the elements of a plan and even draft up your very own.
As you research business plans and view samples you may realize that the elements included will differ from plan to plan. Depending on the specifics of your business, you’ll have to use your best judgement to determine which elements you include and which elements you leave out. As a general rule, elements that will help you to plan the launch of your business, or convince an investor to fund your business should be included.
When you feel you’re ready to begin writing, you’ll want to make sure you include the following elements in your business plan.
No matter the industry or the business, every business plan begins with an executive summary. This section will describe an overview of your company and what you’re trying to accomplish. While every section of a business plan matters, the executive summary is particularly important.
Professional investors read through dozens of business plans a month and often use the executive summary as an indicator of whether or not they should continue reading or toss the plan away.
The words ‘executive summary’ mislead many to believe they should use the section to summarize their plan in its entirety. Keep your summary short and concise. No longer than one page is ideal.
Additionally, if you are seeking funding, your summary should include how much money you are looking for, how you will use it, and what you are willing to offer in return. For those investors who aren’t familiar with the cannabis industry it would be beneficial to include polls showing the growing demand for medical marijuana.
This section of a business plan provides a detailed overview of the retail pharmaceutical industry in which your dispensary will participate. You’ll want to include some sense of the size of the market and the segment that you’re targeting. You’ll also want to note the competitors currently in the field and others expected to soon enter.
For a marijuana business you’ll want to focus on the market factors driving the industry. It’s good to touch on the regulatory and legal implications of operating in the cannabis industry.
Organization & Management
This section is used to describe the organizational structure of your business and highlight you and your team. You’ll want to start by discussing the business owners and the characteristics they possess that deem them qualified to run a marijuana business. Reading impressive resumes for proposed business partners makes deciding to invest easier for investors.
You’ll want to pick your partners from a variety of different backgrounds to ensure each partner brings highly specialized skills and experience to the table. You’ll also want to mention other key employees you may have, whether they be security staff, pharmacists, sales associates, store managers, etc. For planning purposes it’s good to include the various tasks each employee will be held accountable for.
This section is fairly straightforward as it is an opportunity to talk about what you will be selling. It’s important to mention whether or not you will be manufacturing your own products in house or purchasing them from somewhere else. If you’re not producing products in-house, then you’ll want to state where you plan on obtaining them from. You’ll also want to include estimated gross margin numbers for the products you plan to sell.
Your marketing strategy will be essential for customer acquisition and the overall growth of your business. In the marketing section of your business plan you’ll want to start out by describing the general approach you will take to create and promote your cannabusiness brand. Consider what competitors are doing and how their strategies can be improved upon.
Once you’ve discussed an overview of your marketing strategy, you can then begin to talk about the specific marketing channels you will utilize and how you will utilize them. Will you be using social media, billboard advertising, email marketing, or radio advertising? How will you use these channels effectively? These questions should be thoroughly answered in your marketing plan.
Your growth plan gives investors an opportunity to realize the full potential of your business. It proves that you are looking ahead and have thought out how you will go about providing a return on investment. You’ll want to mention the additional market segments, products, or locations you may wish to target in the future.
No investor will willingly provide any funding without a sound financial plan. The financial projections of your business will be the backbone of your business plan. If the numbers don’t work out, then nothing else really matters. Your financial plan will be broken down into the two variables of cost accounting: expenses and income.
Expenses will fall under either start-up expenses, or operating expenses and you’ll want to differentiate between the two. Start-up expenses include all of the costs you’ll incur to get your business up and running. Start-up expenses may comprise costs such as the purchase of starting inventory, the procurement of a building, or the installation of a new security system. Operating expenses are the ongoing monthly costs you’ll incur to keep your business properly running. Operating expenses will be comprised of employee payroll, rent, utilities, and more.
Income can be challenging to project, especially for a new industry like the medical marijuana industry. The ultimate goal is to set aside time to come up with your best possible estimation along with an accompanying explanation of how you reached the numbers you did.
Once you match income with expenses you’ll have a budget to work from. You’ll be able to gauge how much money you’ll need to open your doors and how much you’ll have to earn to reach profitability.
No matter how well you feel you’ve accurately estimated your budget, your numbers will equate to the actual numbers. It’s best practice to build in an additional 20-30 percent for contingent risk tolerance. The conclusion of your financial projections will then mark the conclusion of your business plan.
The Next Steps
Once you’ve finished writing your business plan you’ll want to take a considerable amount of time to proofread and make revisions where necessary. At the end of the day, producing a well-written business plan will not only give your internal team more direction, but it will also act as your company’s official resume.
It’s well worth the effort to put in the time to ensure your business plan is as good as it can possibly be. If you have any doubts about your writing abilities, or would like to study a fully fleshed out business plan, we’ve included a free medical marijuana business plan template for you to download below:
With a winning business plan in hand the next step is to identify potential investors and successfully pitch your business to them.
Contact Legally Rooted for More Information
If you have questions about starting your own marijuana business in Pennsylvania, please contact us. You can also sign up for our email list to stay up to date with marijuana business in Pennsylvania.