When first starting a company, writing a business plan is highly recommended. Whether you’re a rookie in the business world, or a serial entrepreneur, developing a business plan is no easy undertaking. The process requires a dedicated amount of time spent researching your industry, scouting your competition, identifying your market, and setting realistic milestones. It also involves structuring your company management, forming financial projections, and more.
Either way, a business plan is absolutely essential for any company. Not only does the business plan improve your company’s internal operations by setting realistic goals for your team, it also validates your company from the perspective of investors, real estate companies, and other business relationships that are key to your company’s success.
These parties don’t just enter into long-term business relationships with just anyone. They want business relationships with individuals who aren’t going to act on gut feelings and ones who simply plan on winging it. More specifically, these parties seek a venture that takes itself seriously and knows its objectives and goals, and the strategies they will take to get there. The easiest way to determine one’s professionalism is by asking for a well-written and organized business plan.
Even with the legalization of recreational cannabis in 11 states as well as the growing positive stigma around the medicinal benefits of cannabis, the stoner stereotype still remain for many people — and some of these people could be key to the success of your cannabusiness. This is why writing a business plan for your cannabis business can help demonstrate your professionalism and overcome stereotypes that work against you. This is your chance to prove them wrong, and it all starts with a business plan.
Today, the legalization of recreational marijuana in a handful of states has created a large market and a great investment opportunity for many. Once wider use of cannabis is liberalized by federal law, which is the current direction developments have been leaning towards, this is going to be an ever-growing industry with huge growth potentials. The executive summary section will primarily describe the overview of your company, and what you’re trying to accomplish. It is also recommended for those investors who aren’t too familiar with the growing cannabis industry, to include research and polls acknowledging the growing demand for legalization of cannabis.
These types of business plans need to reflect a desire to mine the wider legalization of recreational marijuana for the launch and growth of cannabis-based businesses across the nation. The main goal is to participate in and profit from activities in the various sectors of the overall cannabis industry such as biotechnology, cultivation, retail and consulting services.
Cannabis business plans will need be carried out in two phases.
- Phase I focuses on the number of states that have legalized marijuana for both medical and recreational purposes.
- Under Phase II, the venture will be spread nationwide as legally applicable.
In the executive summary, you will also need to explain your mission (day-to-day objective) and vision (long term objective) for the company. Then, you will have to describe how these objectives will be accomplished. This section could also include a potential list of strategic partners and affiliates that would help you achieve these objectives.
In your cannabis business plan, it helps when investors can see positive resumes of the proposed partners as this helps make their investment decision easier. In this section, they will want to know that the partners have good work ethic, skill sets and are prepared to dedicate the necessary time length in the early growth phase of a company. Basically, partners should have a healthy diversity of backgrounds to ensure that each individual brings specialized skills and experience to the table. In summary, this section will be used to showcase why your team has the capacity to win in your respective business venture. So, you’ll need to clearly articulate how your backgrounds will allow your company to thrive.
Market Size and Development
This section of the cannabis business plan should include research about the general marijuana market size against your company’s proposed market sector so that readers can gain a better idea of your company’s potential growth. This research will also specifically focus on which market segments your company plans to invest most of its energy, whether it be cultivation, extraction, manufacturing, etc. Other examples of market segments would be marijuana retailers, growers, infused products, testing labs, ancillary goods, and ancillary services.
Additionally, the market section helps you clearly define the kinds of customers you will be serving. This includes age, gender, median income, location, etc. Unless you have a comprehensive team and a business plan already created, it is not recommended to try to capture the entire market in the beginning phases of your company. If you do, you’ll be spread too thin and lack direction for your company.
Below are recent insights into the marijuana industry as a whole:
With the legalization of cannabis use for both medical and recreational usage across a majority of states, the sale of cannabis products has shown significantly strong performance in the previous years. By the end of 2018, the recreational segment alone registered an explosive growth of 45.0% as it reached $5.1 billion in total revenues. On the other hand, the medical cannabis segment was forecasted to grow by 17.8% as it reached $4.5 billion. By 2019, the industry grew even more exponentially as revenue increased at an annualized rate of 25.7% to $8.1 billion. These developments are expected to continue in the forecast period to 2024 as the entire industry’s revenue reaches $14.7 billion.
Even if your business has an amazing value proposition and factors that make it stand out within the industry, there will always be other similar businesses competing in your chosen market. It doesn’t matter who does it first; what matters is who does it the best. You will always find competitors. If you can’t identify any, then your search hasn’t been thorough enough.
It all depends on the type of cannabis company you are operating. This will drive the type of competitive analysis that you build. The competition section is also a great place to showcase the research that you’ve done on other companies operating in the industry. Additionally, it helps convey why your company is different and worth investing in. For example, if you are building an extraction-related cannabis company, you will want to show all the features of your competitors and how your company’s features are different and better. This specific section will also tie into your financial section since the additional features that you want to build will correlate to how much funding you are seeking to raise.
Any investor will know instantly if you’ve invested a dedicated amount of time on your company in addition to how well you researched your competition and why your company can do better than them. In summary, you need to know that competitors exist; don’t ignore them. You have to acknowledge them, as one day, you can potentially build strategic relationships with them that could provide enormous value to both parties.
Brand Differentiation and Value Proposition
In the Value Proposition and Brand Differentiation section, which may directly tie to your competition, you can include the following:
- Longer Lasting
- Easier to Use
- Safer to Use
- More Efficient
- Designed by a Well-known Figure or Endorsed by a Celebrity
- Greener/More Ethical
- Approved by a Respected Organization
Company qualities, or value propositions, like the aforementioned examples are important to define in the early stages of the business plan process. This is because they can eventually help display your company’s brand to the public. Additionally, through your customer discovery process, you can discover other needs and desires of your potential customers that could not have been anticipated in the beginning. This is fine, however, since as long as you treat your initial value propositions as hypotheses to be tested in the field, you will be able to respond to your customers’ true needs with agility.
By creating value propositions in the beginning, this will help guide your company and prove to anyone that you know the direction of your business in its early growth stages. In terms of how you and your company will interact uniquely with its customers, you will have to explain how your cannabis products/services will build relationships with customers and how the company will respond to complaints in a quick and calm matter. You can say that your delivery will be fast and hassle-free, compared to others, or you can offer online ordering where competitors don’t. You can even consider leveraging a digital “platform” much like Uber or Airbnb to connect consumers even more with your company and with each other.
A marketing strategy that will be followed by your company, even in combination with other tactics, is developed to reemphasize and even improve on what will make your business successful. By having a solid marketing plan, you can plan how to clearly approach the marketplace and acquire loyal customers. In light of this, you may also want to implement research on how your competitors market themselves and how their strategies are lacking or how they can be improved. To add, building a sustainable and repeatable path to the customers is one of the most difficult aspects of any cannabis company, so make sure you pay special attention to the marketing section since it has the ability to make or break your overall business plan.
Finally, the financial plan is one of the most important sections of any business plan. Whether you are seeking outside investment from an angel investor, bank, or institutional venture capital firm, you will need to clearly show where the money will be allocated. For example, if you are trying to raise $100,000,000 – where exactly will that money go? Will it be buildout? Equipment and genetics? Research and Development?
This financial plan section may also tie in other aspects of your business plan, such as in your marketing plan. Here, you may have Google Adwords as a strategy and found that your CAC (customer acquisition cost) is around $2.50 per new customer. By having a more well-thought and precise financial analysis, the more reputable and reliable you will come across when it comes to investors. So being, make sure to thoroughly research every dollar that will be spent when it comes to the development of your cannabis business.
In summary, having a well-written business plan for your company not only provides your internal team with more direction, but it also acts as a resume for when third parties decide whether or not they want to do business with you.
If you’re not sure you have the abilities to conduct your own business plan, don’t worry! There are numerous business plan professionals out there who can help, such as freelance business writers who usually bid their services online. Before you hire someone to help though, it is recommended to have them sign an NDA in order to keep your business idea completely confidential. However, you have to remember that there are many qualified professionals who will not sign an NDA under any circumstance as it could cause unnecessary legal liability. At the end of the day, what matter is if you feel comfortable with who you plan on working with. With a sense of reliability, there shouldn’t be any issues. By now, we hope that we have given you a thorough rundown of the necessary tools to create an amazing business plan that will help you and your company thrive in the growing cannabis industry.