As the legalization of cannabis continues to expand across the United States, the momentum behind business start-ups continues to heat up. By many measures, it’s the fastest-growing industry in the U.S.
The year 2020 saw a 15% growth in job creation in this sector over 2019. More than 340,000 have jobs in cannabis. It’s a $14 billion industry. It’s natural for entrepreneurs and investors to want to get in on the action, but what should you know before plunging in?
The competition in cannabis is extraordinary. Even the most optimistic prospective grower or distributor would be wise to take a step back and re-think the landscape based on the competition factor alone.
Newcomers will be greeted by thousands of already operating tough and savvy entrepreneurs. The importance of the experience factor cannot be overstated. A word of warning to first-time cannabis entrepreneurs: Experience in the cannabis field may be the No. 1 advantage anyone can have.
Government Regulation Environment
It may be legal in many states, but cannabis is a regulation magnet for lawmakers. Fear of the negative consequences of unleashing a drug for legal use makes cannabis among the most regulated commodities in the U.S. If you are not ready to learn, understand and comply with complex rules and regulations, you stand little chance of succeeding in this industry.
Marketing Challenges — No Advertising?
If you plan to tap into the powerful social media platforms like Google and Facebook to market weed, you’re in for a rude awakening. Both Google and Facebook forbid any kind of advertising or marketing of cannabis on their platforms.
The majority of traditional media outlets are also leery of taking cannabis advertising business. The situation is spotty at best. Sellers of cannabis must necessarily get incredibly creative to find ways to reach out to markets to sell their products. It’s a significant challenge.
Bankers love to make money more than anyone else, but few-to-none will touch a cannabis business with a loan or any other kind of support. The problem for banks is that cannabis remains illegal on the federal level. That makes something as common as an SBA (Small Business Administration) guaranteed loan impossible. But many other snags arise as well because even the most local of banks is inextricably intertwined with federal monetary policies and regulations. This means you may not even be able to deposit your earnings in a bank.
Even though some challenges come with starting a cannabis business, it is possible. You have to be willing to work hard and think outside of the box.