Legal cannabis business sales reached $33 billion at the end of 2022. These outstanding statistics are drawing more individuals into the cannabis industry to start their very own dispensaries as more states in the US legalize recreational marijuana.
However, getting a foothold in this industry is not as easy as it may sound, especially with stringent compliance regulations. If you're considering opening a dispensary and getting involved in this line of work, you must know what you're doing. That's why you need a solid cannabis business plan, just not to obtain a legal dispensary license but also to ensure that you always remain compliant with all cannabis laws and regulations.
A business plan helps you organize your goals and objectives, next steps, financial situation, and any other information you need before opening a cannabis dispensary. But keep in mind that your business plan should be flexible as it’ll need updates according to the constantly evolving regulations and trends in the cannabis market.
Writing a Cannabis Dispensary Business Plan
A business plan for a dispensary lays out your purpose for opening one, along with the strategies that can help you reach that purpose. You may need to conduct market research and measure relevant metrics to write a data-driven cannabis dispensary business plan.
You may think that writing a business plan is a drag, but it's worth your time. Take the time to write the perfect business plan, and save a lot of time and energy in the future.
We prepared this step-by-step guide to help you quickly get through this stage.
1. Executive Summary
The first section of your cannabis dispensary business plan outlines an executive summary of the whole plan. This section is very important because if you want to sign a contract with an investor, they will first look at this part of your plan.
Surely you don't expect an investor to work with a cannabis company that doesn't have a business plan?
Here is all the information you need to include in your summary.
- Your business information: In this section, you need to provide information about who you are, if you're a start-up or a well-developed company, your location, and all your contact information. You can also prepare a description of the cannabis business for those who don't know it.
- Your products and services: Write down all the products and services you will offer.
- Your target market: Who could be your ideal customer? What are their age bracket, habits, income, and job? Create a buyer persona with all this information so you can target the right audience - those who are interested in your products and with a high chance of purchasing them.
- Your competitors: Who are your competitors that offer the same products? Keep them under close watch. Analyze them fully- understand what strategies they're implementing, who their customers are, what their pricing is, etc.
- Your team members: Determine what roles your company needs and who will be positioned in those roles.
- Financial summary: Your financial summary should contain the profitability of your business, your operating costs, revenue, debts, and anticipation of future growth.
- Problem and solution: Think about your value proposition carefully. What is it that your company offers that your competitors don't? Why would they need to choose you over the others? What problems can your products solve? In what way?
2. Company Analysis
In this section, you must explain what kind of cannabis business you're running. We prepared some examples of cannabis businesses here below.
- Cannabis producers or cultivators: They grow and harvest cannabis on farms or greenhouses or run any growing operation, such as a hydroponic farm.
- Cannabis product manufacturers: They are the ones who take the cannabis from farmers and make products out of them, such as oils, drinks, textures, vapes, etc.
- Cannabis dispensary: They provide cannabis-related products for adults, medical, and recreational use.
- Cannabis retailers: They sell cannabis products to customers, such as the dispensaries we mentioned above.
- Vertically integrated operation: They grow cannabis, make products with them, and retail themselves.
Other types of cannabis businesses include:
- Delivery services
- Laboratories for testing and researching
- Places for social cannabis consumption
Aside from the type of business, there are other pieces of information you need to include in your company analysis:
- The time and the reason you started the business.
- The milestones you achieved, such as the number of products you created, etc.
- The retail structure of your business; Are you an S-Corp, sole proprietorship, or maybe an LLC?
3. Industry Analysis
Another important part of the cannabis dispensary business plan is industry analysis.
Industry analysis is an overview of the cannabis industry. You need to conduct an industry analysis for several reasons:
- Educating yourself about the cannabis market you're working in
- Identifying market trends and improving your marketing strategies
- Proving your professionalism and expertise to your readers
You should also include the following information in your industry analysis section:
- Cannabis industry's worth in dollars
- If the market is growing or decreasing
- Your key competitors
- Your key suppliers
- The trends affecting the industry
- The industry's growth forecast over the next 5-10 years
- The relevant market size to understand your chance for growth
4. Customer Analysis
You should think about your customers carefully so you can include the right type of audience in your cannabis business plan. Customers are the core of any business, so if you target customer segments who are not your ideal ones, it may result in losing precious time, money, effort, and resources.
There are several things you need to pay attention to while looking for your target audience:
- Segmented Available Market, or SAM
- Total Available Market, or TAM
- Share of the Market, or SOM
Based on the total available market, your customers are the ones who are over the age of 21. The segmented available market shows the groups of people who are willing to pay for your products. The market share is the number of customers you can reach in a few years.
You should know that legality will impact your total available markets, so not everyone can be your ideal customer. But keep in mind that you can have a bigger TAM for products known to be widely legal, such as CBD oils and hemp.
Also, cannabis businesses react differently to marketing methods. For example, a strategy that works for cannabis dispensaries will not work for manufacturers.
To conduct customer analysis, you can also consider their demographics and psychographics aside from SAM, TAM, and SOM. Customer demographics are about your ideal customer's age, income, gender, location, education, etc.
Psychographics is about customers' values, wants, needs, and expectations. The more you get to know them, the better you understand what will attract and repel them.
5. Competitive Analysis
A competitive analysis analyzes your direct and indirect competitors in terms of products, services, prices, etc.
As a cannabis dispensary, your direct customers are other dispensaries that work in the same location as you, and your indirect customers would be the producers. Here is the information you need to provide in this section of your cannabis dispensary business plan:
- An overview of their businesses
- Their strengths and weaknesses
- The product types they offer
- Their distribution to a particular dispensary type, such as medical or retail
- Their pricing
Also, mention the following information regarding these matters:
- If you can provide a wider range of products or services
- If you provide a better customer service
- If you offer cost-effective pricing.
Write down all the ways you can win the competition and why consumers need to choose you above the others.
6. Cannabis Marketing and Sales Plan
Without marketing, you won't be able to find new customers and increase revenue. A solid marketing plan is important for a cannabis business plan. A marketing plan includes your marketing options in terms of all the factors mentioned below.
- Product: Again, mention the type of your cannabis business. Then write down your products but add more details.
- Price: Include the prices for each product and how your pricing differs from your competitors.
- Place: Place refers to how customers are going to access your products. Do you have a physical store? Document the location and also include how it can benefit you. Do you own an eCommerce website? Document the site address.
- Promotion: Here, you need to mention how you will advertise your business and products to attract more customers. These methods would include:
- Online: Such as social media marketing
- Print: Such as advertising in magazines
- Networking: Such as using independent representatives
7. Operations and Security Plan
Your operations plan is about how you will meet your business goals. Your operations plan should include two sections:
- Short-term process: Include all the tasks you and your team will do to run the business in this section. It might include:
- Security of Products and Facility
- If you grow or manufacture cannabis
- Packaging products
- Dispensary SOPs
- Long-term goals: Your operations plan should contain the milestones you wish to achieve in a specific period.
8. Your Financial Plan
Here is what you need to include in your financial plan:
- Balance sheets: This includes the amount of money you have in the bank, the amount your clients owe you, and the amount you owe your vendors. Your balance sheet illustrates how your business is doing at any particular time.
- Cash flow statement: This shows the amount of cash the business received, spent, and has after the financial year.
- Total net profit or less: This outlines how your company generated a profit or suffered a loss over a specific period (usually three months), outlining all revenues and outlays before calculating the overall net profit or loss.
- Sales forecast: You have to forecast how much product you will sell in the future. The time frame is usually 1-3 years.
9. The Technology You Need to Use
As a cannabis business owner, you will need to use software, for instance, to sell products and manage transactions. You should know that having a website is essential for cannabis-related businesses so that consumers can browse through different categories and products.
A dispensary POS system allows you to take your business to the next level and enter the world of online transactions instead of being solely cash-based. COVA helps you to manage inventory and streamline sales. Also, we tweak our software as per the cannabis laws in each region so that your business always stays compliant.
Our cannabis POS verifies the customers' age and prevents underage people from purchasing. On top of that, it calculates the amount of THC in cannabis products and stops sales that exceed legal limitations. This means that you don't have to worry about breaking the law accidentally and can focus on finding better marketing strategies and providing superior customer experiences. Book a demo with us to learn more about the tools you need.
The appendix should contain any remaining financial projections along with charts, graphs, and images that make the document easy to read.
Any business needs proper preparation before launching to determine what it will achieve. Dispensaries are not exempted. They need even more planning due to the nature of the cannabis business. One mistake in planning and everything can go downwards. Read and revise your plan multiple times before launching your dispensary.
Aside from the things mentioned to include in the business plan for your dispensary, you can also write down each team member's role, especially from your management team. Writing down your product distribution plan has its benefits as well.
Now that you have an idea about how to write a cannabis business plan, you should also consider reading this guide for more information: 5 Key Elements of a Successful Cannabis Retail Business Plan, or check out our cannabis guides and resources page to learn more about how you can succeed as a cannabis retailer. Contact Cova to see how we can help you succeed.