Sun Oct 10, 2021 | | Business, Cannabis, Small Business

How To Create A Cannabis Business Plan?


cannabis business plan

Experts believe that marijuana sales will total $160 billion in annual revenue in the United States by 2025. Even from 2020 to 2021, sales increased by 30%, putting the industry on a significant upward trajectory. 

With figures like this, it’s only natural to wonder whether you have the knowledge and ability to build a successful cannabis company. However, in such a saturated market, having a cannabis business plan might mean the difference between a successful company and one that fails to stand out.

Before you proceed with your ideas, consider creating a business plan that will function as your roadmap to success. Here are some of the things your business plan may need. 

1.  Executive Summary

Aside from the financial components of a business plan, the executive summary is one of the most critical parts. It works as a summary of your entire cannabis business plan and will be what any potential investors will read when trying to learn about your company. 

This part of your plan will be approximately two pages long and should include who your business is, what you offer, and any problems your business will solve. It should also touch on your target market and competition, your company’s management team, milestones, and a financial summary of costs, revenue, and funding

2. Problem and Solution

The number of marijuana-related businesses in the United States is increasing, with up to 28,000 operating in 2017, and more are expected to open their doors each year. As a result, prospective customers have plenty of options to choose from. 

The problem and solution part of your business plan needs to outline a problem within the industry that you believe your business will solve. Essentially, you’re highlighting why your business will stand out and be profitable. 

You might identify that your town or city lacks options and that your offerings and convenient service will solve that problem. 

3. The Market

Learning your market is one of the most critical parts of forming a detailed business plan. It requires in-depth research not only for you but for potential investors. Be sure to include plenty of data on the size of the cannabis market, any trends that are present right now, your target customer, growth potential, and any competitors. 

In this section, refer to total available market (TAM), segmented available market (SAM), and share of the market (SOM). This will enable you to target your preferred customers and the number of prospective customers you can reach in the early years of your business, instead of just targeting everyone. 

To learn your market and ideal customer, consider looking at social media and demographic information. 

4. Execution

After touching on the importance of your business and how it can be successful, you can include a section on the execution of goals. This refers to how you’ll measure your success against your goals and any timelines, metrics, and milestones. 

This section might also include information about your funding request, if applicable, and an exit strategy. 

5. Marketing and Sales

Inside the average business plan for a cannabis company is a marketing plan. Without one, your business may struggle to make itself stand out from the competition or even generate the sales you anticipated. 

The five Ps can form this part of your plan: position, product, price, promotion, and place. Position refers to how your business will be different and possibly better than others in the market, while product describes the products you’ll offer and how they’ll solve a need. 

Price refers to the thoroughly researched pricing structure you’ll include for your products, while the promotion is how you’ll promote those products to generate revenue. Finally, include a place, which is where you’ll be offering your products for sale. 

6. Operations

It can be exciting enough outlining what you’ll be selling and how you plan on making money, but the operations part of your business plan is where you’ll get to look at how your business exists in a physical sense, such as the facilities you’ll have, equipment and technology, personnel, security, and more. If you have already secured a premises, include its address under the ‘operations’ part of your cannabis business plan. 

7. Compliance

Even though there have been significant legal reform around cannabis use, growth, and sales, that doesn’t mean it’s easy for anyone to start a cannabis business. There are many different legal hoops to jump through to remain compliant. 

Include information in your plan that outlines how you plan to show compliance, the regulations you have to comply with, and how your standard operating procedures will allow you to comply. This section might also include information on banking and how you plan to open a bank account as a cultivator, distributor, or manufacturer.

8. Company and Team Roles

A cannabis company needs a team of people with experience and knowledge to help it succeed. Dedicate a portion of your business plan to introducing owners, advisors, vendors, consultants, partners, and other staff. Describe these roles and how they will contribute to your business’s success. 

9. Financial Plan

If there’s a portion of your business plan that will require the most time, effort, and care, it’s your financial plan. This section may help you secure financing, which means the numbers have to be accurate. The key elements to include in your cannabis financial plan include: 

  • Revenue forecasts

  • Financing

  • Capital sources

  • Operating costs

  • Budgets

  • Profit and loss statement

  • Cash flow statement

  • Balance sheet

  • Sales forecast

  • Personnel plan

  • Use of funds

  • And more 

Your financial plan needs to be highly detailed, with graphs, tables, and information outlining how your business will make a profit, how much money it has currently brought in if it’s already operating, and your expected sales in a specific timeframe. 

The costs of your employees, the use of funds you’re requesting, and your entire current financial situation, including how much you have in the bank, what you’re owed, and what you owe, are also crucial. 

Essentially, you need to lay your finances out bare to show potential investors what you’re capable of and how your business can succeed. 

A business plan can be the difference between securing licensing and funding or not. It needs to be thorough, focusing on your current situation and projected successes. If you need a helping hand with your plan, contact CFO Strategies for help. We can assist with a business assessment for cannabis business funding and help you navigate the intricacies of the business world.