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With 2018 finally upon us, many entrepreneurs are with green rush fever are clamoring to joint the fastest growing industry in the country. However, starting a cannabis business can be an intimidating task and many have no idea where to start. So lets dig right in, here’s how to start a business in the marijuana industry in California:
Step 1: Identify what type of business you want to start. There are many different license types to choose from including: Cultivation, Manufacturing, Packaging, Distribution, Event Organizer, Testing Facility, Retailer (Dispensary or Delivery-Only). There has even been a discussion recently creating a new license type to allow for private cannabis events to take place outside of public fairgrounds.
Step 2: Identify what cities or jurisdictions will allow the type of business you’re looking to set up. Okay lets be honest, we’ve all fantasized about opening up our own dispensary, and everyone seems to know someone who is “about to open a cannabis club” but the fact is that many cities are already capped out with the maximum amount of dispensaries that they’ll allow. When choosing the license type you’re going after, you’ll want to do research if the city you want to open up in will allow it.
Step 3: If the jurisdiction you want to set up in doesn’t allow it, hire a lobbyist. This won’t apply to all situations, but there may be an opportunity for some to hire a lobbyist in order to sway officials to allow their business to set up. Band together with other local businesses that are seeking the same permit and pool your resources together to hire a lobbyist. Or if you’re a larger company, go out and hire a lobbyist for your business to negotiate with local officials to allow you to operate. A good lobbyist is worth their weight in gold and can open up doors and make the impossible seem doable!
Step 4: Hire a Compliance Officer. Compliance officers will know how to set up the framework for your business, including getting your CUP (Conditional Use Permit) and applying for permits from your local city and state in order to operate. A compliance officer may even have leads for you on potential real estate or buildings available for you business as well, which brings us to our next topic:
Step 5: Find real estate for your business. For many, this will be the most challenging step in the process of opening up you new venture. Real estate for cannabis businesses is hard to come by. Many landlords freak out when you mention you want to run a marijuana business out of their property, and large property management firms shun cannabis businesses because if the property owner’s lender finds out they’re renting to a cannabis business, they could call the load due on the property! You could search Craigslist or Loopnet for a property, but a good find will be hard to come by. Your best bet for finding real estate will be through other business owners who are trying to set up the same sort of business, or even networking at local events. If you talk to enough people you will come across something.
Step 6: Do your due diligence about the property. This is a very important step in the process of setting up your business. Many have signed leases, broke ground, and starting burning up capital, only to realized that this type of business simply won’t get permitted at this location. Good due diligence could save you tens of thousands, hundreds of thousands, and even millions of dollars in some cases. Is the property zoned correctly? Is it too close to a school or park? Is the neighborhood vehemently opposed to any sort of cannabis business setting up nearby? Is the City opposed a cannabis business opening up a certain part of town? When in doubt, take a trip with your compliance officer down your city’s code enforcement, and hammer out whether your plan is going to work with the city.
Step 7: Apply for your Conditional Use Permit and Temporary Licenses through your compliance officer. So you’ve moved into your new property, it’s got the right zoning and the city is giving you the go ahead to apply for licensing. It’s time to get your CUP and apply for permits. Depending on what jurisdiction you set up in, the CUP itself can cost upwards of $20,ooo to $30,000. On top of that you’ll need need to obtain permits from the City and the State which could fetch tens of thousands of dollars more.
Step 8: Open up shop – but only if you’ve received a temporary license from the State of CA. Congratulations, you’ve got your business permitted! It’s time to get to work!