Of all the questions that I get asked, one of the most common is, “How do I get into the (legal) marijuana business?” This post will address the how question briefly. It is followed by an excerpt from my book that I think covers the why fairly well; that is a question worth exploring, too.
Move to Colorado or Washington and start as a trimmer. From there, learn the business. I realize that this is not very appealing to most people as it is long, hard work with a low reward–usually just over minimum wage plus a few balls of scissor hash at the end of the day. Yes, it is a slog, however, you won’t have to do this long before you have a decent grasp of how a cultivation is run, an understanding of state law, and at least a cursory understanding of how a dispensary is run (most cannabis businesses are vertically integrated, so you will get to see both the growing and the public-facing sides). Plus, you will make contacts fast. Distinguish yourself with a curious mind and a good work ethic and you will find yourself moving up the ladder sooner than you realize.
Stop thinking about it as the marijuana business and start thinking about it as business that just happens to have one special species of plant at its center. What you really are asking is how to break into a particular business community. That is as simple as introducing yourself to someone in the business and figuring out how to make yourself useful to some part of that community.
By now, the ancillary services business is developing at a good clip. All of the services required by business in general are required by the marijuana business: bookkeeping, accounting, payroll, web and social media management, security, insurance, and so forth.
What are you doing now? Can you apply those skills to a business operating in the marijuana arena? There’s a good chance you can. Network on LinkedIn, keep an eye out for industry conferences (there’s at least one a month somewhere in the US) and show up at one or two just to meet some people and hand out business cards. Watch for job postings on some of the specialty job sites popping up (420Careers, cannajobs, THCjobs, etc.) and if you can swing it, get a reference from one of the people you have met inside the community (it is a tight-knit, but welcoming community).
If your intention is to start a business in the marijuana industry, things are going to be more challenging. Especially if you intend to cross the green line and handle the plant. There’s good opportunity here, but the best ideas are probably not the ones you are thinking of now. If you are thinking about starting a business in the marijuana industry, please read on. This is a chapter from my book, Marijuana Cultivation Reconsidered. I have posted it here, so you don’t have to buy the book.
If after having read this, you still want to get into the industry, feel free to contact me. This is what I do for a living–I get people into and out of business, and I can even help get you funded.
If you are considering entering the marijuana industry, you should consider a few things you may have overlooked. First and foremost, if you want to grow and sell marijuana, and you don’t have $2M to spend, you can stop reading right now. There are other ways to get into or service the industry with business models that require less startup capital, but you will have to be creative to make one of them work. Cash-on-hand of $500,000 is a good minimum for a small-service enterprise startup. If you have less than that, I think your odds at succeeding long-term are severely narrowed.
With that out of the way, I want to write about a few more often-overlooked aspects of living inside the marijuana industry that you may have failed to consider.
Why You Should Stay Out of the Marijuana Industry
Your Privacy Is History
I have helped many entrepreneurs get into the medicinal marijuana business. The first thing I always want to know from a potential client is: Why? Why do you want to do this? People entering this industry are subjected to a level of scrutiny that is almost beyond comprehension to those who have spent their lives in the private enterprise. Unless you have been in the military, work for the government in a high-level position, have been subjected to an extensive background check, or work in an agency that handles fissile material, you probably do not realize the extent to which your life will be exposed to the scrutiny of public officials.
Every aspect of your company will be examined, recorded and subjected to audits. I don’t mean you must record everything and store the records in case regulatory officials want to audit you. I mean you must record everything and store the records because the regulatory officials will audit you. What do I mean by everything? Every. Thing. Every order, every plant, every plant’s date of creation, date of harvest, its wet weight, dry weight, weight of waste, when and how the waste was disposed of, when and where it was delivered for sale, which route the driver took to deliver it, what time the driver left and arrived, what the product weighed upon delivery, and the video footage of all of this (growing, processing, storage, delivery and sale). Additionally, the inventory of containers for your product must be maintained, the temperature of the water coming out of your hot water tap is regulated, the techniques and dates used to sterilize equipment, the sterilization chemical used, the duration of contact the implement had with the sterilizing chemical, material safety data sheets for all of your chemicals, fire inspection reports, building inspection reports, and police inspection reports. Trash dumpsters are surprise-inspected, water and waste runoff is checked for toxicity, equipment is inspected for UL approval, and the list goes on.
Regulation is intense and there are new regulations being created almost monthly. All of this adds to your overhead and distracts you from conducting business.
If that sounds a little onerous to you (and it is), you should reconsider your motivation to enter the industry. Do you simply want to be around the plants? Has it always been a dream of yours to grow thousands of your favorite plant? Are you motivated by the desire to facilitate social change? Are you motivated by financial gain? There are other, easier ways to accomplish all of those objectives.
It’s More Work than You Bargained For
Work is another aspect that many people underestimate. It would be hard to overstate the number of businesses that enter this marketplace having hired a grower who has assured management that he (it is also a male-dominated industry) is an expert grower. This self-assessment is usually based on the fact that the grower has successfully grown a few dozen plants (maybe more) in a buddy’s basement during his college years, and he figures all he has to do is more of the same. Wrong. Big time wrong.
The proliferation of work that comes along with growing and maintaining thousands of plants is not well represented by a logarithmic curve, but by a mathematical one. More plants equals more work, and there is no way around it. Even automation does not answer this problem adequately, because whatever automation you adopt must then be constantly monitored. The only answer to this problem is hiring and paying lots of well-trained employees. That eats away at your profit margin quickly.
Competition Is Both Fierce and Unfair
If you want to get into the business for financial gain, realize that there are far easier ways to make money. The overhead is going to crush you unless you are prepared to wage, and win, a marketplace war. If you are in a medicinal state with a limited number of licenses available, this is less of a concern. But even people who are lucky enough to be so situated must be prepared for a future free-market situation. If you are entering the business in a free-market state, your competition is going to be fierce. You may have done your pro-forma on what you thought was a conservative per-ounce price of say $250 but will be caught flat-footed when the winter glut drops prices to $100 an ounce.
Winter glut? Yes. California outdoor-grown pot floods the market between Thanksgiving and New Year’s Eve, and those growers have a much lower cost of goods sold than you do, what with no electric bills and ten-pound plants. $1,500 pounds are everywhere. There is a reason why California didn’t go recreational in 2010, and that would be because the black market growers voted against it.
The Public Can Turn Against You
How about a local proposition to ban your already-established enterprise? It can happen. I’ve fought it myself (and won, thankfully, but many other have not been so lucky). The dispensaries that made it through years of hurdles in Ft. Collins, CO survived everything I described above only to be shut down unceremoniously by a local ordinance. Longmont, CO’s board of trustees unilaterally shut down the industry without even taking the issue to vote!
The fact is, a handful of “concerned” citizens with control issues and too much time on their hands can do a lot of damage to your business, even if they don’t ultimately get their way and shut you down entirely. These people, and the officials who regulate your business, neither understand nor care that they could be ruining your livelihood or the livelihoods of the people you employ. They sleep well and get paid no matter what happens to you. It’s a no-risk proposition for them, and an all-in proposition for you, and that makes for an unfair starting place. Get used to it.
Lawmakers Are Not Sympathetic
As a result of pressures placed on them by these few protestors, lawmakers will think nothing of requiring you show up for hearings on short notice, levying additional fees (I mean tens of thousands of dollars), requiring you to change locations or having you retool your entire operation in order to suit their latest whim. This will happen. I guarantee you, it will happen.
There is something about the personality of a person who wants to make laws that is anathema to seeking simple solutions. The only thing that the lawmakers Know (capital K) is that something needs to be regulated here. They don’t know what exactly, but a good place to start is, oh… everything. And if you spot something they missed regulating, be ready, because they’ll also spot it eventually. If you are one of the first (and you will be unless you put this off until 2024), you get to be the butt of that joke for the foreseeable future.
The People Who Made It Happen Are Excluded
There aren’t going to be many activists who end up minted as marijuana millionaires. The people who made this happen are not the business people who are entering the field now. Or, at least, very few are. It is sad to see these people being excluded by the industry they created. At some point, the Budweiser of marijuana is going to get in and many of the activist-entrepreneurs will be transitioned out. At that point, the lineage from activist to activist-entrepreneur to big-business will be nothing but history.
Why You Should Get Into the Marijuana Industry
It Is Right for Some People
If you’ve read this far and you’re still with me, the marijuana industry may be right for you. Here is what I love about it this industry, and why I’m still in it:
Ending prohibition is the right thing to do. Being part of history is exciting and is the kind of thing that the people who are doing it will not regret later in life. Stories will be told to children and grandchildren about how it all came down and what you did to participate in the watershed ending of this prohibition. That is something to feel good about. Such achievements only come at great effort and expense.
The People Are Great
It’s a small industry at present, and right now, everyone knows everyone else. Except for some normal inter-office gossip and occasional petty in-fighting, by and large, the people I know in this industry are fabulous. They have a common goal and have not lost sight of what they are working to achieve. They care passionately about what they do, support one another, are extremely smart and are all in it together. Most of the regulatory officials are solid, easy-to-get-along-with people, too. (The agencies they work for can be difficult, but the individuals themselves are sincerely trying to do good by their communities.) For now, at least, that’s the way it is.
Hard Work Is Rewarded
For every ten people who got in to the business and then dropped out, there is one person who got in, got his or her shit together and succeeded. Yes, the negatives-list is longer than the positives-list. That’s only because the negatives are tangible. The positives are largely intangible and have to do mostly with how you want to conduct your life–or how you want to feel about how you conducted your life when you look back on it years from now. As frustrating as this industry can sometimes be, for me anyway, the few positives simply weigh a lot more than the many negatives.
The people who worked their asses off for years to get things up and running and who are out in front of new regulations are amply rewarded. They have done more than just build a business; they helped to build an entire industry. They are making money, they feel good about what they do and they deserve their success. They help people. They grow pot. They get paid to do it. You can tell who they are by the bags under their eyes and the smiles on their faces. They are my friends, and I am proud of them.