From the Cannabis Business World

In the world of cannabis businesses, having a solid business plan is essential because it will allow you to have internal direction and attract other companies and investors who want to get to know you, your business, and services or products.

For any cannabis business owner, it is a good idea because it will attract investors that like to evaluate business plans to make sure the depth of knowledge of the vendor is enough. They will look for solid operating principles based on projections and trend research. It will also tell them how your business will respond to unforeseen changes. It is, in fewer words, the path that your company will follow.

However, creating a cannabis business plan requires time and industry research because it will need to detail how your business will differentiate itself from other existing cannabis businesses, your milestones, and your company’s structure. In states where cannabis is legal, markets are saturated, and cannabis companies can end up with unsold products, a properly written and thought-out business plan will help you avoid issues like this.

How to Set Up Your Cannabis Business Plan

You should know that different business plans depend on your needs; If you need investment, you should go for a traditional business plan. If you want to map out the aspects of your operations for internal use, you can use a lean business plan, for example. A lean business plan is faster to create than traditional business plans because it does not include summaries, descriptions of background details that you and your employees already know, and specific deadlines, milestones, and budgets to meet each one. Each purpose or objective you have will demand a different business plan.

A living document is another essential characteristic in mind when you build your cannabis business plan. This means that you have to revisit it regularly as your cannabis business grows.

If it is your first time creating a business plan for your cannabis business, you can follow the following steps to start.

Write and Executive Summary

As the name says, an executive summary must be concise. It shouldn’t be more than two pages long, and it should detail your company, what you do, and what you want your investors to do. Make sure you define everything precisely because investors will read this section to ensure you and your company are a good investment.

When writing it, make sure to include information about investors that don’t know a lot about the cannabis industry, do not assume that everyone that will read it will have your knowledge. Include facts and data that show how the cannabis industry has grown and the projections made around it for upcoming years.

The must-have sections of your executive summary are:

  • Who you are, your name, business name, contact information, and location.
  • Why what you offer is needed, what you offer, and the problem you solve.
  • Your target market, meaning your ideal buyer.
  • Your competition, showing who else offers similar services and products and why you are the best option.
  • Your team, meaning your management team and strong players.
  • A financial summary that explains your business model, startup costs, revenues, liabilities, and, of course, your funding needs.
  • And your milestones and traction, meaning how you have validated a need for your company in the industry and your specific location. Remember that your site matters in cannabis because each state and municipality have different restrictions and regulations.

Know your Differential

As said before, it is vital that, before creating your business plan, you know how your cannabis business differentiates itself from others. With the industry exploding right now, relying on the hype to open a successful cannabis company is not enough. Whether opening a farm, a dispensary, or an extraction operation, you need to sell a unique and high-quality product or service.

To set yourself apart, look into products and services that meet an unfilled need in the industry. Although this seems complicated, it is not. With the cannabis industry being more diverse each day, there is a massive opening for new vendors to come in and find their niche.

Also, think outside the box. and look into unique or niche products within the industry like the enormous range of CBD oil uses and presentations for medical use.

Identify your Problem and Solution

To create a successful business plan that has something to differentiate you from other cannabis businesses, you need to identify a problem within the cannabis industry and how you, whether you are a grower, a processor, a retailer, or run an ancillary company, solves that specific problem.

Here is an example:

The Problem: Let’s say there is a city with many dispensaries, so there usually are more than three within a few blocks of each other. The problem is that they sell very similar products and customers want more variety.

The solution: to open a boutique dispensary that sells a variety of high-end edibles and topicals. You are selling different, high-quality products. This allows you to have higher prices and a unique brand.

Find problems and solutions within the industry section you belong to, and make sure you show that in your business plan because they are your business’s opportunities.

Create Your Business Model

Each company must have a specific business model. Typically, common small business types in the cannabis industry include:

  • Cannabis producers are the farmers or growing operations that grow and sell the plants to companies.
  • Cannabis processors are the middlemen that take the plants from the producers and prepare them to become recreational or medical products. An example of cannabis processors is extraction companies.
  • Cannabis retailers are the companies that sell the products to consumers like dispensaries.

There are also many ancillary businesses you can enter within the cannabis industry, which include: advertising, delivery, trade shows, and more. Sometimes these ancillary businesses can be more lucrative because they don’t deal with cannabis directly, which means they don’t have to go through extensive licensing processes.

But, how does the latter relate to understanding your business model? Well, it is vital because your business model is, basically, an explanation of how you deliver value to your customers at a reasonable cost. This includes a detailed product or services description, who your target market is, and any required expenses, which you will only know if you know which business in the cannabis industry you are: produces, processor, retailer, or ancillary.

Your business model will allow you to experiment, test and model different ways to structure costs and revenue streams. For example, for cannabis companies just starting in the industry, exploring potential business models can help them determine if their business idea is viable, attract investors and guide their overall management strategy. For established businesses, it can help develop financial forecasts, set milestones, and set baselines for reviewing the business plan.

The key three components of any business model are:

  • What it takes to make something: design, manufacturing, raw materials, labor, and so on.
  • What it takes to sell that thing: distribution, marketing, delivering a service, and processing the sale.
  • How and what the customers pay: payment method, pricing strategy, payment timing, etc.

Having these three steps clear will allow you to know your costs and expenses and to know how much you can charge for your product or service, which is, in summary, what a business model is.

How do you know if your business model is successful? Easy, if it collects more money from customers/investors/sponsors than it costs to make the product, it is successful.

Revisiting and updating your business model is a must because it will allow you to refine and improve any of the three main components mentioned above: maybe you can lower design costs or manufacturing costs, or perhaps you can find more effective ways of marketing.

Define Your Target Market

To define your target market, you need to know your total available market (TAM), your segmented market (SAM), and your share of the market (SOM).

Defining these markets will help you understand the difference between targeting everyone, your ideal clients (those willing to pay for your products or services with your pricing) versus the number of customers you think you can realistically reach in the first years of business.

Having legality, especially within the cannabis industry, will impact your TAM. Once you identify your customer, you can develop your marketing and sales plan for that person.

Create a Buyer Persona

We tell you more about how to define different Buyer personas in our cannabis marketing article, but this should be in your business plan as well. It will tell you, your employees, and your investor who your ideal client is.

Know your Key Customers

This section is significant for selling to other businesses, like a grower. This section should provide details about other cannabis companies that buy your products or services and how they are critical to your success.

Know Your Competition

Have a list of competitors and analyze why they are your competition. Answer what differentiates your cannabis business from other businesses and which branding strategies you will use to stay competitive within that industry section.

Products and Services

List your products and services and your future products and services as your company earns more money, and your market needs to develop.

How Will You Execute

This section is critical because it will tell your investor how you will execute everything you have mapped out in your business plan,

It should include:

  • Your marketing plan.
  • Your sales plan.
  • Strategic partnerships.
  • Your operations plan.
  • Your team information.
  • Your company information.
  • Your financial plan.
  • Your milestones and metrics.

Have a Company Overview

This section should include information about your business’s legal and organizational structure. This includes.

Your mission statement. It would help if you talked about how your goals align with what you do for your customers.

An intellectual property disclaimer. Here it would be best if you listed any patents you have, mentioned any core technology or licensing you have, and avoided any copyright infringement.

A full review of your company’s legal structure. Here you can explain your business structure and who owns what.

A brief history of your business. How it was conceived, and the background for potential employees and investors.

Your Financial Plan

This is key. Including your financial plan in your business plan shows how you track your finances and how you accurately gauge your business’s performance. It should list:

A profit and loss statement. Here, you can explain how your business will profit or incur a loss in a given amount of time by listing all revenue and expenses. It should document your total amount of net profit and loss.

  • Your cash flow statement. Here you should include documentation of how much your cash flow is, month-by-month.
  • Your balance sheet. Here it would be best if you had snapshots of how your company is performing at any given moment, how much money you have in the bank, how much your customers owe you and how much you owe your vendors.
  • Your sales forecast. It would be best to have your projections of what you will sell in a given timeframe.
  • Your Business ratios. Here it would help if you showed comparisons of your business’s financials with numbers.
  • Your personnel plan. This is where you show the costs of your employees.
  • Your use of funds. If you seek investment or a loan, you need to include this because it explains how you use the money.
  • Your exit strategy. It is a must because it shows a brief plan of selling your company if needed.


This section is where you can provide any chart, graph, image, or any other item that did not fit in other parts of your business plan.

It can also expand on any point you want or any section you may have missed. Here, it would be best to give your investors a good closure that shows you are ready to launch or solidify your cannabis business.


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