The marijuana industry continues to grow, and savvy entrepreneurs continue to seek ways to cash in on that growth. For many marijuana entrepreneurs, the barriers to entry into the industry combined with daily operational barriers make it difficult to generate a profit – let alone to stay in business.
Before you jump into the cannabis industry, consider the 10 factors discussed below that could determine a marijuana entrepreneur’s success or failure.
1. Your Commitment to Starting a Business
It doesn’t matter if you’re starting a business in the marijuana industry or any other industry, you need to do it right from the very beginning. That means you need to invest in legal, insurance, finance, and tax help from experienced professionals who understand the industry and your business.
This is an industry where finding financing can be difficult, navigating tax rules can be challenging, and securing insurance can be even harder. You’ll need help to ensure your business is set up for success, because the costs of getting it wrong could end up putting you out of business sooner rather than later.
2. Your Belief in the Product
It’s common sense that an entrepreneur should believe in their product in order to be successful, but in the cannabis industry, you need to believe not just in the specific product or service you’re selling but in marijuana, itself. You shouldn’t just be in this industry for the money because it’s unlikely to come quickly.
Marijuana is still illegal at the federal level, and while more people support it for medical purposes than ever, you’ll probably face scrutiny and negativity from some members of the community where you do business. Therefore, you’ll need to educate, defend, and advocate marijuana as well as your products and services. Are you willing to wear all of these hats? If not, then this might not be the industry for you.
3. Your Ability to Navigate Change
The one thing you can count on in the marijuana industry is that it will change often. You’ll face a lot of uncertainty as a marijuana entrepreneur as the industry continues to evolve. State laws, county laws, town laws, and even neighborhood rules change all the time, and you’ll need to keep up.
Even in states where medical and/or recreational marijuana have been legal for years, things change. You’ll need to stay in front of the macro- and micro-environments where you do business, as well as competitive threats, and you’ll need to be flexible enough to adapt quickly.
4. Your Resilience
As a marijuana entrepreneur, you’ll face roadblocks. In fact, you’ll inevitably face many roadblocks when you start your business and as you operate it on a daily basis. For example, you’ll probably have trouble getting financing to start or scale your business. You’ll face tax complications that businesses in other industries don’t have to worry about, and as discussed in #2, you’ll probably face backlash from some members of your community.
Are you resilient enough to keep going despite the many roadblocks you’ll face along the way? Will you still be motivated after the fifth roadblock? What about after the twentieth roadblock? The fiftieth? Only you can answer that question, so think about it before you dive into the industry thinking it’s an easy way to make a lot of money.
5. Your Ability to Learn and Follow the Laws
As mentioned already, the laws of the marijuana industry change all the time. Every state and municipality has its own set of laws, and you’ll need to learn all of them for the areas where you do business. This means you might have to invest more money than you’d expect on things like logistics, marketing, sales, distribution, and more, because what you’re allowed to do in one town might not be allowed in the next.
In addition to learning and following the often-changing laws, you’ll also need to understand how those laws can affect your business’ profitability. Many areas where businesses in other industries can benefit from economies of scale and streamlined processes will not be available to you.
6. Your Willingness to Stay Focused
The marijuana industry offers a lot of opportunities, and since it’s growing and changing often, new opportunities will pop up all the time. The key to be successful as a marijuana entrepreneur is to be able to recognize when these opportunities are strategic low-hanging fruit and when they’re distractions that lead to mission creep.
In other words, you need to define your business plan, create a strategy to reach your goals, and stick to it. I always say a focused brand is a strong brand, and that’s true in the marijuana industry just as much as it is in any other industry. Don’t lose your focus!
7. Your Skills
Some entrepreneurs are attracted to the marijuana industry because they see easy money. They might have no retail, sales, or customer service experience, but they decide to open a marijuana dispensary because it sounds like a great money-maker. Unfortunately, the reality is quite different.
To be successful as a marijuana entrepreneur, choose a business that leverages your existing skills, knowledge, and experience. Yes, you can always learn more or hire employees to fill skills and knowledge gaps, but if you start out in your comfort zone by picking a type of business that matches your talents and abilities, you’ll have a much better chance for success.
8. Your Ability to Hire and Lead a Team
As an entrepreneur, you’ll need a strong team to be successful. You simply cannot do everything yourself and expect to grow. Therefore, you need to brush up on your leadership skills and hiring skills. Take an inventory of your skills and knowledge. Where do you need help? What areas of business are outside of your expertise? With this information in hand, you can build a powerful team to ensure everything is covered.
A good leader recognizes that they don’t know everything. A good leader also understands that investing the time and money into building a high-performance team can make the difference between success and failure. Therefore, be willing to pay enough to attract the right talent, and once you find that talent, let them do what they do best.
9. Your Understanding of the Competition
Competitive research is critical to your success as a marijuana entrepreneur. With so many opportunities in the marijuana industry, you need to do your due diligence and identify where there is room for a new business to do things better and steal market share.
Once you identify the type of business you’re going to start, maintain competitive analysis reports on each of your direct and indirect competitors. Monitor their blogs, content, and social media profiles. Track the events they attend, advertising they invest in, and keywords they use to drive traffic to their websites.
Invest in tools like SEMrush and Spyfu to gain powerful insights that you can leverage to improve your own chances for success. The Cannabiz Media License Database is another important tool that many entrepreneurs and businesses of all sizes use for competitive research.
10. Your Style
If you run your business like a stoner, you’ll fail. Instead, you need to run your business like a savvy, success-oriented entrepreneur. That means you should dress the part and act the part.
As a marijuana entrepreneur, you’ll need to invest time and money into building your brand (including both your business and personal brands), being a leader for your employees, and establishing credibility and trust among a wide variety of stakeholders and audiences, including the community, your industry peers, and even the media. If your internal and external audiences don’t perceive you as capable of doing your job, your business is likely to fail.
Is Being a Marijuana Entrepreneur Right for You?
Bottom-line, proceed with caution when you consider entering the marijuana industry. It’s not for everyone, and only true marijuana entrepreneurs have a chance for success. With the many laws that make it difficult to operate, the taxes that make it hard to generate a profit, and the misunderstandings about the benefits of marijuana that make it impossible to act solely as an entrepreneur without investing time into education and advocacy, many entrepreneurs feel like they’re being set up for failure in the marijuana industry.
However, for the marijuana entrepreneurs who understand the obstacles and risks and are willing to stick with it for the long haul, the results can be worth it. Are you one of those marijuana entrepreneurs? Leave a comment below and share your thoughts about factors that determine the potential success or failure of a marijuana-related business.
Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.