The Ideal Cannabis Business Plan

Whether you are starting up a company for the first time or you are a serial entrepreneur, someone in your company will inevitably pop the question: “Should we write a business plan?” At this point, many might grumble and opt for the group to pick straws to determine who is going to write it. Simply put, a business plan is no easy undertaking. It requires a considerable amount of time spent researching your industry, scouting the competition, identifying your market, setting realistic milestones, establishing key value proposition, structuring company management, forming financial projections… the list could go on forever.

For better or worse, a business plan is absolutely essential. Not only does it improve your company’s internal operations by setting tangible goals for your team, it also validates your company from the perspective of investors, real estate companies, and the other business relationships key to your company’s success.

Do you think any of these parties enter into long-term business relationships with just anyone? Not a chance. They want to know that you are not just acting on gut feelings and are going to simply wing it. Much like qualifying someone for a romantic relationship, they seek a company that takes itself seriously and has its ducks in a row. The easiest way for them to assess this professionalism is by asking for a business plan.

Even as cannabis inches closer each year to the end of prohibition, the “reefer madness” stigma and stoner stereotype still remain for many people — and some of these people could be key to the success of your cannabusiness. This is why demonstrating your professionalism and overcoming stereotypes that work against you is more important than ever in this industry. And it all starts with a business plan.

Executive Summary

The legalization of recreational marijuana in numerous states has created a market and a great investment opportunity. Once federal law is liberalized to allow wider use of cannabis, which is the direction current developments have been leading to, this is going to be a sunrise industry with huge growth potentials. This section will describe the overview of your company, and what you’re trying to accomplish. For those investors who aren’t familiar with the cannabis industry, it might be important to include polls showing the growing demand for legalization of cannabis.


This business plan reflects a desire to mine the wider legalization of recreational marijuana for the launch and growth of a cannabis-based business. The goal is to participate in and profit from activities in the various sectors of the industry—biotechnology, cultivation and retail and consulting services.

The plan will be carried out in two phases. Phase I focuses on the particular states that have legalized marijuana for medical purposes.  Under Phase II, the venture will be spread nationwide as legally applicable.

In the description, explain your mission (day-to-day objective) and vision (long term objective) for the company. Also, describe how these objectives will be accomplished, such as “leveraging X platform,” “supported by X”, etc. This section could also include a potential list of strategic partners and affiliates that would help you achieve these objectives.

The Team

From an investor’s standpoint, seeing positive resumes of the proposed partners makes their investment decision easier to make. They want to know that the partners have good work ethic and are prepared to dedicate the long hours necessary in the early growth phase of a company. Partners should also have a healthy diversity of backgrounds to ensure that each partner brings specialized skills and experience to the table.

This section will also be used to showcase why your team is the team has the capacity to win in your respective business venture. Clearly articulate how your backgrounds will allow your company to thrive.

Market Size and Development

Including research about the general marijuana market size against your company’s proposed market sector gives readers an idea of your company’s potential growth. This research draws some lines in the sand for which market segments your company plans to invest most of its energy. These market segments would include marijuana retailers, growers, infused products, testing labs, ancillary goods, and ancillary services.

Additionally, it gives you an opportunity to clearly define the kinds of customers you will serve (including age, gender, median income, location, etc…) Unless you have a comprehensive team and plan already created, it is wise not to try to capture the entire market in the beginning phases of your company, as you will be spread too thin and lack any direction.

Here is a sample of recent macro trends and insights into the marijuana industry as a whole:

Investment firm Viridian Capital & Research recently published its outlook for the cannabis industry in 2015, including a look at some 75 companies that participate in the various sectors of the industry. Viridian noted that marijuana-related firms raised $80.4 million in capital during 2014, with the three largest segments being consulting services ($20.1 million), ancillary cultivation and retail ($18.9 million) and biotechnology ($12.3 million).

Viridian also maintains an equal-weighted total return cannabis index that posted a gain in 2014 of 38.4%, primarily on the basis of a 939% return in the first quarter of last year. That is when sales of marijuana first became legal in Colorado. Sales began in Washington in June. Consulting services posted the highest return, 170%, followed by biotech (nearly 85%), infused products (57%) and cultivation and retail (33%).

The same investment firm noted that the estimated $10-billion sale of marijuana in 2015 is far too low. In effect, the industry could yield more.


No matter how unique your company is, there will also be another business competing in your chosen market vertical. It really does not matter who does it first; what matters is who does it the best. If you cannot identify any competitors, then your search has simply not been thorough enough.

Depending on the type of cannabis company you are trying to build, this will drive the type of competitive analysis that you build. The competition section is a great place to showcase the research that you’ve done on other companies operating in the industry and also allows you to convey why your company is different and worth investing in. For example, if you are building a technology related cannabis company, you will want to show all the features of your competitors and how your company’s features are different and better. This will also tie into your financial section where you will need to clearly convey that the additional features that you want to build will correlate to how much money you are seeking to raise.

A savvy investor will know right away if you’ve done your due-diligence on your company with regards to how well you researched your competition and why your company can do it better. In sum, don’t pretend that your competitors don’t exist. Acknowledge them. You may even be able to build a strategic relationship with them someday that could provide enormous value to both parties.

Brand Differentiation and Value Proposition

In terms of Value Proposition and Brand Differentiation (which may directly tie to your competition), below is a list of things to consider:

– Longer lasting
– Rarer
– Easier to use
– Safer to use
– More efficient
– Designed by someone cool or endorsed by a celebrity
– Greener/more ethical
– Approved by a respected organization

Company qualities (aka value propositions) like these are important to define as best you can early in your process. They will eventually inform how to brand your company to the public. Through the customer discovery process, you are sure to discover other needs and desires of your potential customers that you could not have anticipated. This is fine. As long as you treat your initial value propositions as hypotheses to be tested in the field, you will be able to respond to your customers’ true needs with agility.

Nevertheless, creating value propositions like these in the beginning will help guide your company and prove to anyone that you have some sense of direction early in your growth.

In terms of how your company interacts uniquely with its customers, explain how your cannabis products/services will endeavor to build relationships with customers and respond to complaints quickly and calmly. Delivery will be faster and hassle-free at all times. Offer online ordering where competitors don’t. Consider leveraging a digital “platform” much like Uber or Airbnb to connect consumers with your company and with each other.

Marketing Plan

A strategy that will be followed, even in combination with other tactics, is to reemphasize and even improve on what makes a business successful. A solid marketing plan will clearly show how you plan to approach the marketplace and acquire customers. You may also want to consider what the competitors are doing and how their strategies are lacking or how they can be improved.

Building a sustainable and repeatable path to the customers is one of the hardest aspects of a company so please make sure to pay special attention to this section as it can make (or break) your overall business plan.

Financial Plan

The financial plan is one of the most important parts of your overall business plan.  If you are seeking outside investment, either from an angel investor, bank, or institutional venture capital firm, you will need to clearly show where their money is going.  For example, if you are trying to raise $100,000 – where will that money go? Will it be marketing? Headcount? Research and Development?

This section may also tie in other aspects of your business plan.  For example, in your marketing plan, you may have Google Adwords as a strategy and found that your CAC (customer acquisition cost) is around $2.50 per new customer.  The more research and well-thought financial analysis you have, the more reputable and reliable you will come across.  Make sure to thoroughly research every dollar that will be spent.


At the end of the day, a well-written business plan not only gives your internal team more direction, but it also acts as your company’s resume for when third parties decide whether or not to do business with you. In other words, it can make or break you.

If you have doubts about your writing abilities, rest assured there are plenty of professionals out there who can help. There are even some good freelance business writers who bid their services online. Before using anyone to help, it’s always wise to have them sign an NDA to keep your business idea confidential. Keep in mind though, that there are many qualified professionals out there who will not, under any circumstance, sign NDA’s since doing so would open them up to unnecessary legal liability. As long as you feel comfortable with who you’re working with, there shouldn’t be any problems.  Hopefully we have provided you with the necessary tools to create a brilliant business plan that will thrive in the growing cannabis industry.

Photo Credit: waferboard

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