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5 Absolute Need To Knows For New Cannabis Entrepreneurs In California

It’s a hard business, but a worthwhile one if you do the legwork

California is undoubtedly shaping the cannabis industry as the state emerges as the biggest hot spot for legal cannabis. With the new licensing, distribution and sales regulations that were dropped last year, many new entrepreneurs are eager to get into the gold rush.

With the California industry forecasted to be worth anywhere between $9 billion and $20 billion per year, it sounds like a promising industry – why wouldn’t anyone want a slice of the legal cannabis pie?

If you’re a new cannabis entrepreneur putting your eggs in the basket of making it in legal cannabis, good for you; it’s a very exciting industry where many have made millions. However, if you’re emerging as a new entrepreneur in California, there are a few essential and absolute ‘need-to-knows’ before you jump in with both feet.


Some predict a crisis in legal cannabis in California

Early this year, the California Growers Association released a 36-page report detailing why there is low participation in the regulated cannabis business. They brought many issues to light with a purpose to dispel some myths, and show some of the barriers to participation. They showed that of all the cultivators in the state, less than 1% (0.78%) are actually licensed.

One of the biggest concerns highlighted is that the state didn’t live up to the intended and promised spirit of being accessible to small- and mid-sized businesses for licensing. This is leaving many out of the cold for legal participation, even if they’ve been doing it longer than anyone, and have a desire to work above the law.


Cannabis taxes are steep in California

The projected annual total of California’s cannabis taxes is $1 billion. If you’re wanting to sell cannabis, get ready to tax your products high and adjust your prices for your customers. Sales tax on cannabis products is 15%, which was initially a worry that it would be a deterrent for recreational users entering the legal market.


You can’t get around these taxes, so prices within retail operations should be adjusted so that your customer doesn’t feel the blow of being highly taxed for their own participation in the legal market.

If you’re a cultivator, taxes are at $9.25 an ounce on flower and $2.75 an ounce for trim. Every single gram of cannabis will produce money that will go directly into the government’s pockets… someone has to make that $1 billion.


Compliance is a tall order and not for the faint of heart

Compliance is the name of the game for legal cannabis, and a significant part of cannabis business’ efforts must go into ensuring you’re crossing the T’s and dotting the I’s of compliance.

The unfolding of the legal cannabis regulations in California was messy; most critics have acknowledged this, but are willing to abide by the regulations in order to participate. This involves seed-to-sale tracking, reporting, compliance checks, and being completely airtight in case you are ever audited.

Fortunately for the cannabis industry, many POS and ERP systems have emerged to help with compliance in big ways, to make sure that data and information science help cannabis businesses stay on track with their compliance requirements. However, it can never be underestimated the dedication required when undertaking cannabis business in terms of compliance – you need to be 150% on the ball at all times.


Unlicensed cannabis businesses are getting warnings

Despite the barriers to participation in the legal cannabis market, the state isn’t showing much mercy for those who haven’t acquired the proper licenses.


Last week the state sent out several warning letters to unlicensed businesses, including retail storefronts, warning that they needed shut down unless proper avenues were taken for legal participation.

The threats of action also included civil and criminal penalties.

Simply, if you’re thinking of jumping the gun and getting started without the right licenses, you will be shut down before you even get out of the gates. The grey area era in cannabis sales in California is coming to a close.


There’s a huge growing saturation in service providers

There are huge opportunities for entrepreneurs who possess certain skills that will translate into service providers or ancillary services for the cannabis industry. These are known as non-plant touching careers, and these service providers are growing alongside the plant touchers.

If you are a marketer, data manager, information scientist, retail specialist, security specialist, business planner, lawyer… or just about any professional vocation with a defined skill set, the cannabis business can definitely be lucrative. But don’t think you’re being a pioneer. The cannabis service providers caught onto the green rush long ago, and it’ll be up to you to stand out amongst a potentially saturated market.


Proceed with Caution

There is nothing “easy” about cannabis entrepreneurship. It requires certain competencies to survive, and it’s certainly not a quick path to big bucks. Being a cannabis entrepreneur means giving up a 9 to 5 work week for a 100-hour work week, and a lot of the devil is in the details of licensing and compliance. It’s certainly not for the faint of heart. Nonetheless, someone has to make those billions in California… will you be the next cannabis entrepreneur to watch?


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