How to write a business plan for the cannabis industry

If you want to get a cannabis license or money to fund a business that works in or with the cannabis industry, you need a business plan. But not just any plan is enough. You need an amazing business plan to stand out in the cannabis industry.

Writing a good business plan for any industry is not easy. It takes a lot of research, planning, and time to come up with a plan that will inspire confidence in the people who read it, and that’s especially true with cannabis business plans.

Let’s take a closer look at who needs a business plan, what is required in your plan, parts of the written plan, and how to get help writing your plan.

Why you need a cannabis industry business plan

A good business plan shows that you have more than just an idea. It gives you a written path forward that you may need in order to achieve your goals. Conclusion: It’s never a bad day to write a solid business plan.

If you are looking for financing for your business, a bank or other type of lender will likely require that you submit a comprehensive business plan before they will consider lending you any amount of money. They want to see that your business is a good investment (e.g. that you can pay off the loan) and they will look at your past experience, credit history and business plan to make their decision.

A business plan is also necessary when presenting your company to investors. Angel investors, venture capital investors, startup accelerators, etc. require you to provide them with a written business plan that shows you have a genuine strategic plan to achieve the goals you claim you will achieve. Investors want to know that they’re making money with every investment, so your business plan needs to show them how it’s going to happen if they invest in you.

But that’s not all. When applying for a cannabis business license, government regulators may require that you include a business plan with your license application. Although providing a business plan is not a requirement, it is strongly recommended that you submit one with your application. This is just another way to show the application’s reviewers that licensing you is a good choice.

5 Cannabis Business Plan Requirements

Before you start writing your business plan, there are a few requirements you need to consider and keep in mind throughout the writing process. Five of the most important requirements are Proof, Trust, Visuals, Professionalism and Promise.

1. Prove

Investors and those reviewing your cannabis license application must have unequivocal confidence that you can and will do what you promise in your business plan. Therefore, your plan must be filled with evidence, especially quantifiable evidence provided by verifiable data. Do your research, gather your data, and communicate what it is and why it matters in your business plan.

2. Build trust

Your cannabis business plan needs to inspire trust. The people reviewing your plan need to be confident 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 the visual representation. They grab people’s attention and can quickly tell your story (or at least get people to read more). So add charts, graphs, tables, images and more if they add value to your plan. Visuals should look very professional and enhance your business plan, not overload it.

4. Be professional

No matter what industry you are in, if you are looking for investors or a business license, you need to be extremely professional. Business and money are serious business, so tailor your business plan to your audience by making sure it’s written and designed by professionals.

5. Make realistic promises

Incredible claims and lofty goals virtually guarantee that investors and license application examiners will say no. Anything you promise in your cannabis business plan needs to be realistic. This includes your goals, milestones, forecasts and even your financial questions. Back up your claims by demonstrating that you are delivering on your goals and promises.

Parts of a cannabis business plan

Your business plan should include these essential parts:

summary

The executive summary of your business plan is a summary of the content and should be a few pages at most. Keep it short and focus on the points that matter most to the audience that will be reading it.

Troubleshooting

What problem will your company solve and how? The problem-solving portion of your business plan shows readers that there is an unmet or unmet need in the marketplace that you can uniquely fill. In addition, your business plan should show that you can meet this need very successfully.

Start by identifying the problem/need and quantifying it as much as possible. For example, if you are trying to open a cannabis dispensary in a particular city, think about what consumers in that city need and what you are bringing 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 company, no matter how new or innovative, has competitors. If people don’t buy your product or service, they’ll buy something else or choose not to buy anything at all. Be honest and comprehensive when it comes to analyzing your competitors and proving that your solution needs to get to market as soon as possible.

market opportunity

The market opportunity portion of your business plan should provide plenty of data related to market size, trends, growth potential, target customer segments, competitors, and the regulatory landscape.

You must demonstrate in your business plan that there is an opportunity in the marketplace for your business to grow and prosper. When the market is already saturated, find a way to carve out a profitable niche or outperform the competition with your superior products and services.

Strategic Execution

So far, your business plan has covered why your business is needed and why it has a chance to succeed. Next, you need to explain how you will do it with detailed plans that include timelines, milestones, and the metrics you will track to measure your success against your goals.

marketing

You should include a marketing plan that covers five things:

• position: How is your brand different and better than anything else on the market?
• product: What products will you offer to meet the need you identified at the beginning of your plan?
• Price: What will you charge for these products to successfully capitalize on the market opportunity?
• advertising: How will you promote your products and services to generate sales and revenue?
• location: Where will you offer your products and services for sale?

operations

The operational portion of your cannabis business plan should include facilities, technology, equipment, security, sales, distribution, and staff. Explain the physical space your business will need to operate (and the specific property address if you have already acquired real estate for your cannabis business), as well as the technology, equipment, and staff you will need to operate for the first year.

attention

How will your company meet the compliance requirements to legally operate in the cannabis industry? Your business plan must demonstrate not only that you understand what regulations you need to comply with once you are in operation, but also how you will ensure continued compliance with proper Standard Operating Procedures (SOPs) and staffing.

company and team

Who does the work to make your company successful on a daily and long-term basis? This includes owners, officers, consultants, key employees, extended staff, business partners, vendors and consultants. Add the bios of your team leaders, owners, consultants, and key employees to prove you have the expertise to successfully execute your business plan.

Also, describe the roles your team will take on and the knowledge and experience they will bring to the company and contribute to its success. Be sure to include information about all investors in the company section of your business plan. The goal is to prove that you have a strong team that most likely will not let the business fail.

financial plan

The financial part of your business plan is arguably the most important. After all, most business plans are designed to secure funding, so it’s not surprising that the numbers matter – a lot! Don’t be vague and avoid over-promising.

With this in mind, create a detailed financial plan that includes revenue forecasts, financing, sources of capital, operating expenses, budgets, forecast income statement, forecast cash flow statement, forecast balance sheet, and break-even analysis. You should include charts, graphs, and tables in this section.

Make sure you focus on both profit and cash flow. This is especially important given that many large cannabis companies are struggling with liquidity problems.

Attachments

Business plan appendices usually contain more detailed charts and spreadsheets with additional financial information. For example, a sales forecast, workforce plan, pro forma income statement, pro forma cash flow statement, and pro forma balance sheet could be included as appendices in your cannabis industry business plan.

How to get help writing a cannabis industry business plan

Writing a comprehensive business plan can be overwhelming if you don’t do it often — or never. Luckily, there are many resources available to you. For example, contact your local Small Business Administration (SBA) office or the 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 to find a mentor who can help you.

If you’re on a budget, hiring an expert to create business plans for the cannabis industry is an excellent investment. Check their references first to make sure they have experience writing business plans for companies like yours.

Key takeaways for writing a business plan for the cannabis industry

A comprehensive business plan can get quite lengthy, so think about your audience and tailor the plan you present to their needs and goals. The most important thing to understand is that a well-written business plan can make a world of difference in securing a cannabis business license, attracting investors, and/or obtaining funding to start or expand your cannabis business.

Originally published on 07/24/19. Updated 01/13/23.