Although the still-burgeoning cannabis industry is going through a bit of a rough patch due to a litany of issues, it is still growing—and expected to continue to grow—at a robust rate. And it remains attractive as a new opportunity for people looking to change fields, as well as those seeking to invest. In either case, due diligence and research are critical for anyone who wants to get involved.
Understanding the Cannabis Industry
The place to begin the research is online. It is important to know what cannabis businesses can and cannot do in their particular state. For example, Colorado is no longer issuing cannabis licenses. The only current option is to buy a license and get it transferred. The application process is fairly straightforward, but working with a lawyer who is well-versed in the local ins and outs of the industry can be a major asset.
Get up to date on all of the existing and emerging industry standards and regulations that relate to the pertinent market or jurisdiction. The more you know really matters here. Trends, technologies, regulatory statutes, and compliance tendencies should all inform how best to enter the sector. The appropriate certifications will be necessary and a background check is normally required. Anyone starting a business in the cannabis industry should be confident that the right investors are on board and the money is in place and properly documented. As with any other company, a thorough and vetted business plan should be adopted, and roles for human resources, finance, and operations should be firmly established. Options for businesses include:
- Dispensaries
- Cultivation facilities
- Extraction facilities
- Laboratories
- Distribution and transportation companies
- Edibles Creation
- Vape hardware production and design
- Dispensary software development
- Infrastructure technology
Entering Cannabis: What Investors Need to Know
Investing in the cannabis industry is a risky endeavor, but it can be done successfully. If the financial risk is understood and can be accommodated, investors can see respectable returns. Due diligence is key, and like anyone else entering the cannabis industry, that begins with research, particularly of the company’s management team.
Getting to know the people who are operating the business, their business model, vision for the company and overall trustworthiness should be assessed. Asking questions of the management team to assess the depth of their grasp of the operation and their business acumen, in general, is essential.
There should be someone on the team with a strong financial background and an overall understanding of how a business should be properly managed, be it cannabis or not. Without standard business and financial knowledge, there is little chance of the company succeeding.
Evaluation and understanding of the local market for cannabis and the state and local regulations should also be part of any investment consideration. Discerning local demand for cannabis—what is selling, and what is not—is vital for success. For a dispensary, the actual location is a huge determinant of success. Consumers might reject the location of the dispensary, the local market could be saturated, and local authorities might be very heavy-handed with compliance and regulatory oversight.
As one of the top cannabis law firms in Colorado, Cantafio & Song understands the complex nature of the cannabis industry and how quickly it can change. As a full-service law firm, we assist clients in all aspects of cannabis, as well as other areas of law such as criminal defense, estate planning, litigation, real estate, and more. If you have needs in any of these areas, contact Cantafio & Song’s legal team today.