Starting a Marijuana Business – A Step by Step Guide for Beginners


Starting a Marijuana Business – A Step by Step Guide for Beginners


Has starting a cannabis business been on your mind off late? Well, well! We don't blame you at all. Companies in the cannabis industry are booming, and how. Undoubtedly, the cannabis sector has scope for exponential growth and provides a magnificent opportunity to earn huge profits over time.

The cannabis industry is still in its infantile stages and shows immense promise. It is the ideal industry for budding entrepreneurs. If you have an innovative concept and a forward-thinking ability, you can make something huge for yourself with a marijuana business. 

Wait a minute, though. There's a catch! Starting a marijuana business is not as straightforward as other traditional businesses. The process of operating and starting a marijuana business can be quite tricky.  You will have to consider several aspects before you can venture into a cannabis business. 

Here are seven steps that can assist you in starting a marijuana business or a "canna-business" of your own:

  1. Decide the type of marijuana business you want to start

The first and foremost step is to figure out which aspect of the industry attracts you the most for your marijuana business. It could be running a dispensary, growing marijuana, delivering it, or a combined venture. It could also be all of the above operations! If you wish to grow and sell your cannabis products to dispensaries, you will need a license. A separate permit is required to start a dispensary. 


However, there is more to the marijuana industry than just dispensaries or growing operations. If you have a knack for food, you can create a unique edibles line consisting of marijuana. For example, some people are setting up their own "bud and breakfast" – cannabis-friendly lodging and stays for people.  You can also get into the marijuana-infused oil massage and therapy segment. Technology geeks can design a unique product to help marijuana users ingest their medicine effectively.


There is a vast scope in the ancillary marijuana segment, too, primarily because it is not overburdened with high taxes. Selling hydroponics and cultivation products are some of the very popular businesses within this segment. 


  1. Don't forget to research and do some groundwork


Once you have decided the kind of marijuana business you wish to start, you can proceed with the following three research steps.


  • Understand the specific challenges of the industry

After deciding the type of marijuana business you are getting into, it is crucial to do thorough research before moving further. Since the laws for marijuana business differ from State to State, it is vital to be acquainted and updated with the state laws where you want to operate your business. Understanding the basic requirements to start a business in your state will help you sell or grow marijuana without a hassle.

Also, because the cannabis industry is new and not regulated fully as yet, it is all the more crucial for new entrants to get in touch with the local institutions and industry groups for their guidance and tips. 


  • Understanding the customer base and their unmet need

Since you are entering a booming industry, there are high chances that many more marijuana business owners might crop up along with you or in the following years.


You will be required to assess the demand in the area before setting up your marijuana business there. Understanding your prospective customers and their unmet need can fuel your business strategy further. With the increasing legalization of cannabis, the legal cannabis space is fast becoming crowded, making targeted consumer segmentation crucial for the success of your marijuana business. 


Talking to people already in the cannabis business and learning from their experiences can add more value to your research. Build relationships with the local cannabis community for the best results. 


  • Assessing the competition and their offerings


Other critical factors to assess are the earning potential, the risks, and the competitors in the area you wish to operate. It is vital to evaluate your competitors' offerings and strengths.


This assessment will help you develop a viable business strategy that places you better in front of your customers. Besides providing top-notch cannabis products, it is also important to customize and enhance the cannabis packaging for your brand. This cannabis packaging guide can help you differentiate your marijuana packaging and make it stand out. 


  1. Chart out a detailed business plan

Any business related to marijuana is strictly regulated, unlike others like toys, apparel, or jewelry. Developing a business plan that follows the laws in your state and summarize your strategy is crucial. Your business plan should consist of some specific key components.

Key components of a business plan:

  • Prospective suppliers and their best offerings
  • Cost estimation for the setup and day-to-day operations
  • A unique business idea that sets you apart from your competitors
  • Legal counsel to maintain everything in order
  • Premises to run your business from
  • A marketing plan to attract customers
  • An estimation of how soon you will start making a profit

Remember that your business plan should be flexible in order to adapt as per the changing laws and regulations of the state.

  1. Choose a business entity and name

Even if you are starting as a local business, you must choose a business entity that suits your marijuana business the best. This aspect is crucial because it impacts two critical factors that are:

  1. The amount of taxes you are liable to pay.
  2. The degree of risk you are exposed to as a business owner.

Your business can be a Limited Liability Company (LLC) or a corporation as these entities protect the business owners from personal liabilities. 

Once you have finalized the entity, you will need to choose a catchy name for your marijuana business. This will be helpful when you register a marijuana business under your name. It would be ideal to choose a unique name related to marijuana to boost your future website's search engine ranking on the internet. Choose a name that is available and reserve it. Depending on the State, you will have to pay a fee to reserve the decided name for a set amount of time.


  1. Prepare for business registration, necessary licenses, and permits

Registering your business in a particular state will only give you a clearance to run your business in the state. Other than this, you will require various cannabis-specific licenses, permits, and registrations to comply with the State laws and guidelines.

Contacting a legal expert to help you obtain the business registration and essential permits is a good idea. At the same time, you must read up and research well about the licensing and regulatory bodies to make the process smoother and quicker. You can find the permits and licenses as are necessary for marijuana business in your State on FindLaw.

Suppose you are retailing marijuana or want to start a dispensary. In that case, the rules and regulations will be different from those laid out for a growing or delivering business. As a dispensary, you'll need to have appropriate licenses to sell medical marijuana. In many states, business owners need to have proof of a minimum of $1 million available cash just to obtain a dispensary license. You will also need to label all marijuana products to stay compliant. A detailed labeling guide for cannabis products can help you in this process. 


Businesses need to pay an average of $5,000 non-refundable application fee for starting their business in states where medical marijuana is legal. 


  1. Registration for taxes

Apply to get the employee identification number (EID) directly from the IRS website. Once you get the approval, you will get a unique EID or a business tax number required to open a business bank account and apply for a credit card or funds. It comes in handy when you are paying payroll or income taxes for your business. Although the taxes depend on the state where you're starting the business, you need to apply for it irrespective of where you wish to set it up. 

  1. Raising capital for your business

Stay prepared for the business start-up costs that will come your way. The marijuana business, in particular, is steeply expensive because of the application, licensing, equipment, marketing, and rent costs it involves. Many entrepreneurs prefer to self-fund their marijuana business to avoid delays.

But in case you aren't prepared to self-fund the initial expenses of your marijuana business, you can always look for funding to set up your start-up. A well-designed business plan that you have previously created will help you attract suitable investors and raise capital. Ensure you cover all kinds of costs such as rent, licensing, operation, inventory, equipment, workforce, taxes, etc., in your business plan. Securing enough capital not just to sustain but also to compete fiercely should be your goal.

It would be best to approach private investors. Although it is true that many investors are wary and might not want to invest in your business, many investors have realized the potential of the marijuana industry. They want to be a part of it. Having experienced and expert investors can add a lot more to your business than just funds. 


These were some steps that are essential to start a marijuana business of your own. But before venturing out into the marijuana world, let us also assess the pros and cons of starting a marijuana business. 

Advantages of a Marijuana Business

  1. It has evolved as the prime industry for local businesses

The big businesses have stayed away from the cannabis industry till now. The primary reason for this is because marijuana is not legal federally. There are national prohibitions and restrictions on the interstate sale of cannabis. This leaves the path wide open for entrepreneurs to enter and thrive, making cannabis a prime industry for local businesses.

  1. Increasing Profitability and Scope 

The primary motivating factor for budding entrepreneurs to shift into the marijuana industry is its increasing profitability. The cannabis industry is highly profitable and serves as a lucrative business arena for many. Estimated to be valued at $20.5 billion in 2020, a recent report by Research and Markets projects that the global cannabis market will be as massive as $90.4 billion by the year 2026. Many other projections for longer timeframes and even shorter timeframes suggest a favorable position of the cannabis market in the future. This is only natural as more and more states are reforming their cannabis-related laws. There is also an increase in the legalization and social acceptance of marijuana.

  1. Rewarding and Impactful

Cannabis has the power to heal, and when you are in a business that enables people to possess that power, you feel positive and satiated. Also, working for medical cannabis patients can be rewarding and often helps you impact society on an extensive level. 

Challenges in Starting a Marijuana Business

  1. Lack of financing options

There are limited financing and funding options for new marijuana businesses as compared to other traditional businesses.  The primary reason for this is because marijuana businesses are federally illegal businesses. Generally, big federal banks don't wish to aid any activity that is considered illegal under federal law. So, relying on banks to grant small business loans for your marijuana business might not be the best idea.

  1. Regulatory Burden

You might get overwhelmed with the amount of regulation that a marijuana business must adhere to and how frequently it gets modified. Every activity from growing, selling, packaging, and delivering marijuana is regulated and needs to be compliant. The cannabis business is limited to operating solely on cash transactions due to strict regulations. This can make a simple process of accepting payments a complex one. Ensure that your products are legally safe, make sure to check local labeling guidelines. You can also read this article that covers core labeling guidelines in the united states. Making sure you follow Packaging guidelines is also very important, check out this article to make sure you pick packaging that is legally safe for consumers.

More complicated and intricate

The marijuana business is not as simple to operate as compared to other small businesses. Many complications might arise if you aren't responsibly compliant with the laws of your state. 

If you become irresponsible with your marijuana business, it can lead to a hefty fine or even imprisonment. Not only this, it can harm the cannabis industry as a whole. This is because a marijuana business with reckless practices adds to the stigma around marijuana in society. It also hurts the reputation of this evolving and expanding industry considerably. Irresponsible business practices allow opposition groups and regulatory agencies to make it all the more difficult for marijuana businesses to survive and thrive.

A marijuana business involves several intricacies that need to be considered beforehand. An entrepreneur needs to be ready to make several extra efforts to establish and operate a marijuana business.


Many budding entrepreneurs get into the marijuana business solely with the thought that the industry is highly profitable. But that's just not it. Undoubtedly, this rapidly growing industry is lucrative and profitable, but it comes with a distinct set of challenges seldom faced by other businesses. We are sure that you are aware of the pros and cons of setting up a marijuana business by now. 

Ideally, upcoming cannabis entrepreneurs should weigh the pros and cons of starting a cannabis business before setting foot in the zone. They must also have a clear understanding of the responsibility that comes along with it. 

The marijuana industry is boundless for all those willing to work hard and follow the rules. It is a great time to be a part of this booming industry and collaborate with other businesses all the same. Remember that you should work on creating a competitive edge so you can get your products into dispensaries. Read this article to learn more about getting your products on to the shelfs of dispensaries.

In conclusion, if you are passionate about marijuana, well-funded, have a business plan ready, willing to adapt to the regulatory burden – here's a warm welcome to the Marijuana world.  Good luck!

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  • Matthew Centeno