If you want to get a cannabis license or money to fund a business working in or with the cannabis industry, then you need a business plan. But not just any plan will do. You need an amazing business plan to stand out in the cannabis industry.
Writing a good business plan for any industry isn’t easy. It takes a lot of research, planning, and time to develop a plan that instills confidence in the people who read it, and this is particularly true for cannabis business plans.
Let’s take a closer look at who needs a business plan, what’s required in your plan, parts of the written plan, and how you can get help writing yours.
Why You Need a Business Plan for the Cannabis Industry
A good business plan shows you have more than an idea. It gives you a written path forward, which you may need to reach your goals. Bottom-line, it’s never a bad day to write a solid business plan.
If you’re looking for funding for your business, a bank or other type of lender will likely require that you provide a comprehensive business plan before they’ll consider loaning you any amount of money. They want to see that your business is a good investment (e.g.., that you can repay the loan), and they’ll look at your past experience, credit history, and business plan to make their decision.
A business plan is also necessary if you’re pitching your company to investors. Angel investors, venture capital investors, startup accelerators, and so on will require that you provide them with a written business plan that shows you have a real strategic plan in place to deliver on the goals you claim you’ll reach. Investors want to know that they’ll make money on each investment, so your business plan needs to show them how it will happen when they invest in you.
But that’s not all. If you’re applying for a cannabis business license, state regulators may require that you include a business plan with your license application. Even if providing a business plan isn’t a requirement, it’s highly recommended that you submit one with your application materials. It’s just one more way you can show application reviewers that awarding a license to you is a good choice.
5 Cannabis Business Plan Requirements
Before you start writing your business plan, there are some requirements that you need to consider and be mindful of throughout the entire writing process. Five of the most important requirements are proof, trust, visuals, professionalism, and promise.
1. Give Proof
Investors and the people who review your cannabis license application need to believe under no uncertain terms that you can and will do what you claim in your business plan. Therefore, your plan must be filled with proof, particularly quantifiable proof provided through verifiable data. Do your research, collect your data, and communicate what it is and why it matters within your business plan.
2. Establish Trust
Your cannabis business plan needs to instill trust. The people who review your plan need to have trust that you’re a good investment. To that end, the details included in your plan should clearly explain why you are the right person to start your business and why it will be successful.
3. Use Visuals
An important part of any business plan is visuals. They catch people’s attention and can quickly tell your story (or at least intrigue people to read more). Therefore, include charts, graphs, tables, images, and more when they add value to your plan. Visuals should look very professional and enhance your business plan, not clutter it.
4. Be Professional
No matter what industry you’re in, when you’re seeking investors or a license to do business, you must be extremely professional. Business and money are serious matters, so match your business plan to your audience by making sure it’s written and designed by professionals.
5. Make Realistic Promises
Pie-in-the-sky claims and lofty goals will practically guarantee that investors and license application reviewers will say no. Everything you promise in your cannabis business plan must be realistic. This includes your goals, milestones, projections, and even your financial ask. Back up your claims by providing proof that you’ll hit your goals and promises.
Parts of a Cannabis Business Plan
Your business plan should include these essential parts:
The executive summary of your business plan is a summary of the contents and should only be a couple of pages at most. Keep it short and focused on the points that matter most to the audience who will read it.
What problem will your business solve and how? The problem-solution part of your business plan shows readers there is an unmet or under-met need in the market that you are uniquely able to fill. Moreover, your business plan should show that you can fill that need highly successfully.
Start by identifying the problem/need and quantifying it to the extent possible. For example, if you’re trying to open a cannabis dispensary in a specific town, think about what consumers in that town need and what you bring to the table that will make you more successful than any other dispensary.
Whatever you do, don’t say your business has no competitors. Every business has competitors no matter how new or innovative it is. If people aren’t buying your products or services, then they’re buying something else or choosing to buy nothing at all. Be honest and comprehensive when it comes to analyzing your competitors and proving your solution has to get to market as quickly as possible.
The market opportunity part of your business plan should offer a lot of data related to the market size, trends, growth potential, target customer segments, competitors, and the regulatory landscape.
You need to prove in your business plan that there is an opportunity in the marketplace for your business to grow and thrive. If the market is already saturated, come up with a way to carve out a profitable niche or surpass the competition with your superior products and services.
So far, your business plan has covered why your business is needed and why it has the opportunity to be successful. Next, you need to explain how you’ll do it with detailed plans that include timelines, milestones, and the metrics you’ll track to gauge your success against your goals.
You should include a marketing plan that covers five things:
- Position: How is your brand different from and better than anything else on the market?
- Product: What products will you offer to solve the need you identified at the beginning of your plan?
- Price: What will you charge for those products to successfully seize the market opportunity?
- Promotion: How will you promote your products and services in order to generate sales and revenue?
- Place: Where will you offer your products and services for sale?
The operations part of your cannabis business plan should cover facilities, technology, equipment, security, sales, distribution, and personnel. Explain the physical space your business will need to operate (and the specific property address if you’ve already acquired real estate for your cannabis business) as well as the technology, equipment, and staffing you’ll need to operate for the first year.
How will your business meet the compliance requirements to operate legally in the cannabis industry? Your business plan needs to show not only that you understand what regulations you’re required to comply with when you’re in operation but also, how you’ll ensure ongoing compliance with proper standard operating procedures (SOPs) and staffing.
Company and Team
Who will do the work to make your business successful on a daily basis and in the long term? This includes owners, leaders, advisors, key employees, extended staff, business partners, vendors, and consultants. Include the biographies of your team leaders, owners, advisors, and key employees to prove that you have the expertise to execute your business plan successfully.
In addition, describe the roles your team will have and the knowledge and experience they bring to the company that will add to its success. Be sure to include information about any investors in the company section of your business plan. The goal is to prove that you have a strong team that is highly unlikely to let the business fail.
The financial section of your business plan is arguably the most important. After all, most business plans are used to secure financing, so it’s not surprising that the numbers matter – a lot! Don’t be vague and avoid overpromising.
With that in mind, create a detailed financial plan complete with revenue forecasts, financing, sources of capital, operating costs, budgets, projected profit and loss statement, projected cash flow statement, projected balance sheet, and breakeven analysis. You should include charts, graphs, and tables in this section.
Be sure to focus on both profit and cash flow. This is particularly important since many large cannabis companies have struggled with cash flow problems.
The appendices of business plans typically include more detailed charts and spreadsheets with additional financial information. For example, a sales forecast, personnel plan, pro forma profit and loss statement, pro forma cash flow statement, and pro forma balance sheet could all be included as appendices in your cannabis industry business plan.
How to Get Help Writing a Business Plan for the Cannabis Industry
Writing a comprehensive business plan can be overwhelming if it’s not something you do often – or ever. Fortunately, there are many resources available to you. For example, contact your local Small Business Administration (SBA) office or SCORE office. Small business experts are often available through these organizations to help entrepreneurs with things like writing business plans.
There are also websites dedicated to business planning. Bplans is one such site. You can also join relevant social media groups or attend networking events in search of a mentor who can help you.
If you have a budget, hiring a cannabis industry business plan writing expert is an excellent investment. Check their credentials first to make sure they have experience writing business plans for companies like yours.
Key Takeaways about Writing a Business Plan for the Cannabis Industry
A comprehensive business plan can get quite long, so think about your audience and modify the plan you present to them based on their needs and goals. The most important thing to understand is that a well-written business plan can make a big difference in whether or not you can secure a cannabis business license, attract investors, and/or get funding to start or expand your cannabis business.
Originally published 7/24/19. Updated 1/13/23.