The court of public opinion underwent a dramatic shift in its views on cannabis over the last decade or so. What was once a shunned substance viewed as dangerous and without legitimate benefits is now something legal in most states for medical and/or recreational use (see below). As attitudes continue to change and new medical uses for cannabis arise, this shift is likely to continue until the product is legal in all states, at least for medicinal purposes. So, is now the right time to consider a cannabis business? Read on!
History of the cannabis business
The use of cannabis and related products, most recently THC, is a long one. As a child of the ’70s, I saw the product go from tacit acceptance despite its legal status to the scourge of our time that earned outrageously long prison sentences, to legalization at the state level. A bill now stands before Congress to legalize cannabis at the federal level, although that faces an uphill battle.
The early mentions of cannabis trace back to 2800 B.C., when the product was seen as a powerful medicine by practitioners of Chinese medicine where it was used to treat various conditions, including [source]:
- lack of appetite
Today, the most common medicinal use of cannabis is alleviating the effects of chemotherapy and treating some types of mental health issues. This begs the question, is a cannabis business now a viable idea?
In 1936 the famous film, Reefer Madness, portrayed drug-addled users as a danger to themselves and others, which led to the effective elimination of marijuana by heavy taxes imposed on the product in 1937. Congress outlawed the use of cannabis in 1970 as a drug with no medical or other legitimate use; bundling the drug with others such as heroin and cocaine. This law was in place until California legalized cannabis for medicinal purposes in 1996, after researchers found out more about the effects of the drug. CBD is thought to explain the medicinal effects of cannabis without causing the “high” because it mainly eliminates THC from the product and is generally considered legal in the US.
Nixon’s War on Drugs resulted in mass incarceration and was interpreted by some groups as racially and socially motivated as a means to demonize Blacks, who wanted equity, and Hippies, who protested against the war. Yet, many of these laws are still on the books and result in continued discrimination against certain segments of society, especially through unequal penalties based on the prevalence of the drug in certain racial groups. But, that’s a topic beyond the scope of this post.
Is a cannabis business a viable option?
The short answer is a resounding yes. In fact, it’s one of the biggest business trends of the last few years. There’s definitely a market for this product, and there are plenty of different ways you can take this concept and run with it. The opportunities are growing from medical marijuana dispensaries to CBD companies to growing hemp as an industrial product. In California, with the most liberal laws, restaurants are popping up to sell you a joint to go with your meal. The remainder of this post deals primarily with dispensaries and growers.
With that being said, there are some key things to consider before determining a cannabis business is right for you:
What are the laws where you live?
Firstly, you need to check the laws pertaining to the cannabis business where you live. These businesses are heavily regulated in the states where it’s legal to grow, dispense, and possess cannabis. Since Federal law still imposes prison for individuals caught with any amount of cannabis, with stiffer penalties for intentions to distribute, State laws govern your cannabis business with a lot of variation from one state to the next. The House recently passed legislation to allow the personal use of cannabis by adults, but it failed in the Senate.
Like alcohol, states impose age restrictions on who can buy cannabis products (although CBD and hemp are now excluded from laws in most states). Some states require a doctor’s order to purchase, while other states allow all adults to purchase cannabis. Growing and dispensing the product is carefully controlled in all states, although some states allow individuals to grow small amounts for personal use. Fairness in allocating licenses to grow and dispense cannabis products is a concern for some, with racial undertones.
Naturally, the laws influence your answer to the second question below:
What type of business should you start?
We mentioned medical marijuana businesses, CBD businesses, and even touched upon a recreational dispensary. But, which one of these ideas, if any, is the best option for you? Obviously, that depends a lot on which state you live in, but all legal cannabis businesses face a series of challenges unique to their industry. One of the most serious challenges is access to banking. Since these businesses, with the exception of CBD distribution, are illegal at the Federal level, access to traditional banking isn’t possible. A medical or recreational dispensary is an all-cash business with owners and managers leaving with bags full of cash that is stuffed into safety deposit boxes to pay bills since banks don’t want to deal with this highly-regulated business.
Where you can open a dispensary or restaurant (like we see in CA) is very restrictive. You can’t allow consumption on the premises, except in the case of restaurants, which need special scrubbers to remove the smoke to avoid exposure to others. In fact, most states restrict where buyers can consume products to private residences.
Finally, you face neighbors and communities that don’t want a dispensary in their area and will fight any proposal with both legal and nuisance methods.
Many people are going down the route of growing their own cannabis and distributing it to other businesses in the industry, with the proper licenses, of course. This is a popular idea as you don’t need that many things to get started. You can find grower kits online, get your hands on Triminator trimmers to prepare the product for the market, and you’re good to go with a small property.
Of course, it all depends on what you can or can’t do in your state. Some of these business ideas aren’t legal right now, while others are.
What licenses do you need?
Even if it’s legal to start a cannabis business where you live, there are bound to be licensing requirements to consider. This is because the industry is so heavily regulated, meaning certain states require you to get specific licenses before starting your company. Things can also get complicated as some states may give licenses out to anyone who wants to start a business, while others limit the number of licenses they hand out. Again, the best approach is to do your research or partner with a legal team to understand all the ins and outs of starting a cannabis business in your area.
The bottom line is that it isn’t too difficult to start a company in this specific industry if you do your research, get legal help, and obtain the proper licenses. It may seem like a risky business idea, but the cannabis business is booming with high profit margins and increasing demand. There’s a lot of money in this specific area because of how attitudes are changing – and thanks to more scientific research on the topic. Things like CBD companies are particularly prosperous because they take cannabis and make it ‘safer’ for people to use in various forms, thus making the product legal in most areas. Regardless, this could be a good business idea to think about both now and in the future.
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