There are several ways you can approach cannabis growing in your Cannabis Growing Business Plan. One is to focus on a retail model or bringing cannabis to the end customer and creating unique customer experiences. Other models include developing equipment for cannabis growers and optimizing business practices for multiple product categories. The type of business you want to create will dictate what kind of start-up costs and financial projections you need for your Cannabis Growing Business Plan.
This article will explore how these different models work, how they impact cannabis growing investment, and ways to maximize potential revenue once your grow site is in operation.
What are the Different Cannabis Growing Business Models?
Retail Model of Cannabis Growing
The retail model for cannabis growing is about making a profit by growing and selling marijuana. This model is less profitable than others that we will discuss. Still, it does allow you to create a physical storefront for your business. Without the need for extensive growing equipment or massive indoor growing space. As with any retail shop, you’ll need to get a food license, hire staff members and coordinate with an accountant and HR department. We’ll discuss these subjects in future articles on this site. The key point here is that this sort of business can be profitable if you can dedicate the resources necessary to make it so.
Manufacturing Model of Cannabis Growing
The manufacturing model is the most common as it produces high-quality cannabis products. It’s not surprising that most people who expand into this industry work in this area. You’ll need a lot of capital to start up, but once you get your products on the market. You’ll be able to sell at a profit and make sizable profits over time. But be warned, this is a more labor-intensive business model requiring more specialized equipment, including high-quality grinding machinery and extraction systems for various cannabis products. Still, if you pursue this type of opportunity, you’ll be able to earn sizable profits with minimal investment required.
Cannabis Wholesaling Model of Cannabis Growing
The wholesaling model is a bit different than the rest we’ve discussed. The goal is to sell your cannabis product through a licensed producer or dealer rather than establish your growing facility. This is an option for those who don’t have the time and desire to run their own business but still want to grow cannabis. There are risks and benefits in this type of business since, as with any retail model. You’re accepting that you may only be able to make a little profit in the initial years. This is especially true about the cost of license fees at first. However, once your product is established, you can make a healthy profit by selling wholesale to licensed growers.
How To Make A Perfect Choice For Your Cannabis Growing Business Plan
The cannabis wholesale model is a step up from the growing recreational industry. It’s not surprising, then, that many investors pursue this option. Ultimately, it would help if you did what was right for you and your operation. But at this point, the most profitable cannabis-growing business model is getting into the distribution channel instead of running your shop or manufacturing operation. This allows for certain types of consistent profit margins and allows you to get around high taxes on retail sales, which will be eventually passed down to consumers in the form of higher prices.
If you choose the retail route, you’ll have to get creative. It’s important to note that with the retail model, much of your revenue will come from cannabis consumers in the initial years. Still, as you grow your product lines and develop partnerships with other licensed producers, you can expect to see a steady revenue stream for years. Either way, all these models are viable and profitable, so it’s up to you what works best for your operation.
What to Consider Before Making a Perfect Cannabis Growing Business Plan?
We’ve discussed the types of cannabis business models that are available to you in this article, but before we move on to what it takes to create a working Cannabis Growing Business Plan, there are a few points we want to make clear. First, you must examine your financial projections before you get into the details of creating your Cannabis Growing Business Plan. Second, as is true for any project, starting a business will always involve risks and challenges. With that said, it’s important to understand the risks involved with cannabis growing. Third, the following sections are general guidelines for creating a business plan. Please read the rest of this article series, where we will walk you through all the steps of creating a business plan from scratch.
Financial Projections for Your Cannabis Growing Business Plan
As with any other business, your profits will determine your success. Thus, creating a detailed financial projection for your cannabis-growing business and cash flow projections for your balance sheet is important. This will help you determine if your business will be profitable in the long run and how much money you’ll need to invest in making it so.
Here are the three important financial projections you should make for your cannabis-growing business:
1. Profit and Loss Projection:
With a projected profit and loss statement, you’ll be able to measure the success of your cannabis-growing business over time. This will help you determine how much capital you’ll need to invest in making your business profitable. You can also see how high your expenses are compared to your revenue, and if the two are close. Then you’re most likely going to turn a profit with this business model, as well as how quickly it will happen.
2. Cash Flow Projection:
A cash flow projection is different than a profit and loss statement in that it shows your daily activities and how much money is coming in and out of your business. This allows you to see exactly where the money comes from, when it comes in, and when it goes out. It’s also important to note what effect, if any, this has on your future projections for profits.
3. Balance Sheet Projection:
A balance sheet projection shows you exactly what your assets are worth compared to your liabilities. This allows you to determine whether or not you have enough capital to start up this operation without having to use a significant amount of borrowed funds — which will lower your profit margins from the start. It’s also important to see how you can use your revenue to purchase new assets and equipment needed to increase your revenue stream. It not simply pay interest on the money you’ve borrowed.
You may ask yourself if you need to include these three financial projections. The answer is yes because it gives you a better idea of how this business will turn out in the long run. However, it would help if you kept in mind that any of these three types of forecasts can change over time based on changing circumstances in the cannabis industry or other factors that could affect your sales.
Costs to Production in Cannabis Growing Businesses That Grow Their Plants
There are many different cannabis business models that you can choose from. Still, as you can see in the previous section, a good cannabis growing business will be determined by the costs of your product. Your expenses for purchasing your cannabis plants or seeds, and your market prices. In this section, we’ll take a closer look at the financial aspects of these three.
As we discussed earlier in this article series, the production costs will be determined by how much you’re producing and any safety regulations that may apply to your type of operation.
Here are the potential costs involved with running your cannabis-growing business:
1. Product (marijuana):
The cost of marijuana will be a major factor in how much money you make with this business model. As more states relax their laws and medical marijuana becomes legal in more and more states. The cost of your product will likely decrease since it will become easier to grow and distribute legally across state lines. The other consideration is the quality of your marijuana, which will impact your market prices and your customer base. In addition to these factors, other costs may be associated with transporting and distributing your products, depending on local regulations.
2. Purchased Plants or Seeds:
In addition to the cost of your product, you should also have a projected budget that covers the costs for any seeds or cannabis plants you will need to purchase to grow these at your operation.
3. Labor:
The labor costs will depend on the size of your growing facility, the quality of your labor force, and whether you will manage day-to-day operations. As with any other business, you must ensure that all of your employees are willing to keep accurate and up-to-date records and follow any safety regulations that may apply to your type of operation.
4. Insurance:
You should have a budget that includes the cost of general liability insurance, which will cover any injuries or damage to property involved in your business operations, either inside or outside of your facility. You may also want to include worker’s compensation insurance, which is required by law in some states. This insurance covers injured employees and provides them with medical coverage and partial income during recovery. Suppose you want to spend the money on something other than worker’s compensation insurance. In that case, you can usually opt for a larger general liability policy that covers work-related injuries and any damage caused by employees on company property.
5. Other Expenses:
There may also be other expenses that you’ll need to include in your budgets, such as advertising, marketing, promotions, shipping costs, and investment income. Once you’ve created your budget, you can determine how much money you’ll need to start up this Cannabis Growing Business Plan. As with any other business start-up or expansion, you must create a cash flow projection to determine the capital needed to keep your operation running at optimal levels.
Conclusion
As you can see, the first step is to figure out how much money you will need to start up your growing operation. The next step is figuring out what business model you will use and then creating a cash flow projection for your business. A cannabis growing operation that grows its Cannabis Growing Business Plan has many similarities to a microbrewery, winery. Any other small-scale farming operation where every product grown and raised by the same family. However, it’s important to understand that this business model has fewer regulations because it’s much smaller than large-scale agribusiness operations.