How to Start a Cannabis Grow Operation
The US Cannabis industry has experienced tremendous growth over the last decade. This has attracted a large number of entrepreneurs and investors looking to capitalize on this booming industry.
Apart from cannabis dispensaries, there are many other profitable ways that you can cash in on this newly-legal, fast-growing industry. Many entrepreneurs have set their eyes upon cannabis growing, manufacture, and processing. Cannabis cultivation is increasingly becoming an accessible avenue as legalizations escalate throughout the United States.
Why Start a Cannabis Grow Operation?
Cannabis grow operations are a fundamental part of the industry’s supply chain. They play a central role in providing high-quality legal products to end customers, regardless of intent. Since 2012, legal cannabis growing has raked in billions of dollars in profits, enough for many to consider placing huge investments in these operations. If you plan to start a cannabis grow operation for yourself or along with others, this guide will cover the basics and give you a solid footing from which to take action.
Understand the Risks Involved in Growing Cannabis
Risk-taking comes with many great opportunities. This is especially true for marijuana businesses. Under federal law, cannabis is still classified as a Schedule I drug, which naturally makes it illegal. Despite being prohibited on a federal level, 37 states offer medical cannabis while 15 allow legal recreational variants. Even with widespread legalization on the state level, federal prohibition is arguably the biggest risk factor. Consulting an attorney experienced in the field allows you to better navigate the legal climate as you build your company.
Indoor vs Outdoor Grow Operation
Choosing a grow site is the first step to setting up your cultivation operation. Compared to cannabis retail stores, grow farms give you more freedom when choosing the perfect location. This is because considerations such as customer traffic, aesthetics, and vicinity restriction concerns are out of the picture. Essentially, grow operations can either be outdoor or indoor.
Leaf photo created by aleksandarlittlewolf
Outdoor Grow Facility
Outdoor growing is suitable in places where there is sufficient sunlight. Natural cannabis plants rely heavily on sunlight to grow healthy and produce the coveted cannabinoid. Outdoor facilities must be built in an open expanse that is enclosed by a wall or fence. In many states, growing cannabis outside of a secured, fully-enclosed location is prohibited. Outdoor growing is a natural way to produce high-quality buds, assuming the right combination of water, air, and sunlight has been met. Though this method relies less on electricity, just like any other farm, it is vulnerable to harsh weather, drought, and pests.
Indoor Grow Facility
Indoor growing is performed inside enclosed spaces with walls, windows, artificial lights, and ventilation. Many growers prefer this method as it gives them more control over humidity, lighting, and harmful pests. Using complex equipment allows growers to artificially create the perfect environment to produce high-quality products. However, indoor facilities are costlier to build and consume massive amounts of electricity.
Create a Cultivation Business Plan
Similar to a traditional business plan, a cultivation plan is your primary tool to steer your startup into realization. A good plan outlines every aspect of your cultivation business in complete detail. It compels you to ask questions and discover answers by way of thorough research and study. A detailed plan also makes it easier to convince investors to provide funding, and license regulators to award you with a grower’s license.
Every cultivation plan should address:
The financial plan and model of your business
Opportunities and potential rewards
Key customers such as dispensaries, shops, and home growers
Standard operating procedures
Equipment and technology
Leadership and staffing
A robust cultivation plan can't materialize your vision on its own. As with any startup, you will need to secure the necessary capital. If you plan to start a large grow operation, you will need hefty funding to get off the ground. Licensing fees and asset proof alone costs thousands of dollars. We haven’t even touched on setting up the actual business. A grow facility will require sufficient space, raw materials, growing equipment, irrigation, lighting and ventilation systems, security, and many other costly essentials. Expect to spend a couple of hundred thousand dollars just for a medium-sized operation.
If you are short on capital, you can always ask investors to jump on board. Just make sure that you pitch your ideas well and present a sound business plan. While banks tend to avoid this field due to federal regulation, it is always worth the approach if you need a business loan. You can also engage alternative lenders that do cannabis financing.
Apply for a Cannabis Grower’s License
Every grow operation needs a grower’s license to be considered anything legal for profit. License requirements vary per state so it is best to get in touch with your local licensing authority or refer to this handy guide.
The varying state regulations can get tricky and confusing especially for newcomers, but as a rule of thumb, be prepared for a lengthy process that requires tons of information. Some states have less leniency when awarding licenses to qualified applicants. Comprehensive personal and business information must be provided. These include personal background, operating procedures, financial model and capital, location details, equipment, and cultivation processes. A business cultivation plan is helpful and may accelerate the process as many of the required details are arranged beforehand. Just make sure that your plan strictly considers the laws and regulations of your state.
Hire Professional Services
Professional services can be valuable for your mint cannabis business. In fact, many cannabis startups spend thousands on professional services such as attorneys, consultants, and insurers. At every stage of starting your business, there are bound to be professionals that can compensate for what you lack in expertise and know-how. From cultivation planning, grower license application, to planning your facility’s security, these professionals can bring invaluable experience and expertise to the table.
Due to the confusing legal climate, hiring an attorney is imperative and could help minimize the risks of running a marijuana business.
Consider Cannabis Cultivation Insurance
Apart from legalities, there are also operational risks involved in cannabis cultivation. Despite being a finicky business, it is often prone to product loss, damage, internal and external theft, and vandalism. As a cannabis grower, you must be prepared for any unforeseen event. It is always recommended to hire a reliable insurer to make sure your crops, property, equipment, and employees are covered in case of any accidents or unwanted events.
Here at The Shands Agency, we offer the best policies designed with your canna-business in mind.
Get a Free Quote and Consultation Today.