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Find out what special considerations you must take into account when creating a mission statement and business plan for your cannabis business.
7 min read
The following excerpt is from The Staff of Entrepreneur Media, Inc. and Javier Hasse’s book Start Your Own Cannabis Business. Buy it now from Amazon | Barnes & Noble | iTunes | IndieBound
This article is part of Entrepreneur’s series on How to Start a Cannabis Business. We seek to promote financial inclusion through cannabis. In previous articles, we’ve looked into numerous aspects of getting into the marijuana industry, including questions you should ask yourself before jumping in, where to find funding and factors that could determine your success.
If, after considering all of these elements, you've decided you want to start a cannabis business, you’ll need to come up with a few more things to get your business actually funded and set up.
Your mission
In the early stages of your planning, you’ll want to clearly define your company’s mission. This will help you remain focused and not get diverted by all the ideas that constantly arise during the process of building a business. Come up with a few phrases that unequivocally state what your company does and what it wants to be doing in the future. You can ask yourself questions like these to help parse out your mission:
- Do you want to become the king of edibles?
- Become the number-one producer of cannabis in your state?
- Run the leading cannabis oils company?
- Break ground as the first cannabis-focused human resources agency in your region?
In other words, narrow your focus to set your mission apart and avoid the pitfall of trying to be all things to all cannabis customers.
Related: Is Your Company's Mission Up to Snuff?
Matt Gray, founder and CEO of HERB, the most engaged cannabis community in social media, adds, “People don’t buy what you do, they buy why you do it. Doesn’t matter if you’re a dispensary, a producer, or a product brand, what’s most important to the consumer is to know that you care.” Of course, the way you communicate this is deeply intertwined with who your customer is. You should know who you want to make products for or offer services to.
To illustrate his point, Gray points to HERB’s mission. After seeing a friend go through a traumatic experience that had him on the verge of suicide and recuperate using cannabis, Gray started a platform aimed at educating users on marijuana’s benefits. “From day one, our mission has been to smash the stigma around cannabis and show people the magnificent potential of this plant,” he says.
“Having my why clear has allowed me to build a great company, a strong community, and a magnificent team. Once people know why you’re doing what you’re doing, they’ll be ready to care about what you do and how you do it.”
So before moving on to a more formal business plan, ask yourself why you want to get into the cannabis business—beyond just making money. What do you want to accomplish, and why?
Related: Why Discovering Your 'Why' Is the No. 1 Business Move
Run the resulting statement past people close to you and ask them if it makes sense, if your mission is clear enough, and if it generates any kind of emotion. If your family and friends, people who aren’t necessarily involved in the cannabis industry, can grasp what you want to accomplish, your team will likely be able to do so as well.
Your business plan
Probably the most important element of your business’s initial development is the business plan. One vital reason for creating a business plan derives from the necessity to raise capital: You need something to show potential investors, even if they’re friends and family members.
An ideal business plan should provide an overview of the market and include your business’s vision and mission. Viridian Capital Advisors’ Scott Greiper suggests a few other questions you might want to answer as you craft a plan:
- What’s your go-to-market strategy? Will you pick a direct or indirect chanel?
- Will revenue come from one-time transactions, or will it be recurring?
- What’s the level of price competition in the market, and have you factored that into your business model?
- Can gross/operating margins be maintained in a downward pricing environment?
- What are your ongoing capital requirements relative to your increase or decrease in
- burn?
- Will growth be organic, or is M&A an important component of the overall growth strategy?
Related: 10 Questions to Answer When Writing Your Mission Statement
For investors, the viability of your business model is fundamental, adds Greiper, who’s helped raise more than $500 million for emerging growth companies. “This is a hypercompetitive environment,” Greiper says. “So the metrics you put in your business plan and financial model have to be relevant and current with the facts on the ground, [basically factoring in] a continued decline in wholesale prices and increased and better-funded competition that’s coming in with better management teams.”
Your benefit
A business plan isn’t only intended to show investors the profitability potential of your enterprise, but also to show regulators how your business will benefit the community. To that end, consider the following:
- How many jobs will you create?
- Will you benefit any minorities or marginalized communities?
- Will your store, office, or production facility be located in an economically disadvantaged area?
- Will you help sick people?
- Will you have a positive impact on the opioids epidemic?
Related: 4 Ways Your Company Benefits From Giving Back
A typical business plan will include the following:
- Executive summary. This is a short yet enticing summary of the business. Although it usually appears first, this section is often written last, after you’ve crafted all the other pieces of the plan.
- Product/service description. Here you include specifics about what you’re selling,
- why it’s a viable idea, and what goes into the production.
- Industry analysis. Investors want to know the industry basics. Talk about the big picture of cannabis, and back up your statements with facts and numbers.
- Competitive analysis. Who’s competing in your product/service space? This is where you lay out what you do differently and how you do it better than the other guy.
- Marketing and sales. Here you talk about your plans for getting the word out about your business. How will you promote the product? Where will you advertise? How will you sell it? Do you plan to use traditional or more conceptual types of marketing?
- Management. In this section, you tell readers who’s running the show. Potential financial backers are particularly interested in this information because they want to know to whom they’re entrusting their money. Include all the key people involved with day-to-day operations. If this is a solo venture, include a bio that features your applicable experience.
- Operations. How does that day-to-day work get done? This part of the plan details the “how” of the business.
- Financials. The goal here, with the help of your accountant, is to make realistic projections based on researching similar businesses, then specifying what you think you’ll need in terms of financing.
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