The cannabis industry is brand-new, which makes it an exciting opportunity for the enterprising entrepreneur. Instead of fighting tooth and nail against established brands in stable industries, entrepreneurs believe they can find near-immediate success with the right business strategy in the cannabis space.
There’s just one problem: Though the cannabis industry is new, it isn’t easy. There are several challenges facing any canna-business leader, but the largest and most pressing include:
U.S. Cannabis Regulations Are All Over the Place
Few business leaders enjoy the prospect of navigating government regulations. However, the regulations imposed on the cannabis industry are a class unto themselves. In addition to being relatively restrictive, regulations on cannabis dispensaries tend to vary, often quite widely, from state to state and even county to county or city to city. As a result, most canna-businesses find it exceedingly difficult, if not downright impossible, to enter new markets and achieve respectable growth.
The variation is the result of the increasingly outdated federal cannabis laws. The U.S. Federal Government continues to classify cannabis as a Schedule I controlled substance, marking it as both incredibly dangerous and medically inapplicable despite ample research to the contrary. Because the Federal Government has jurisdiction over interstate commerce, cannabis ventures cannot operate over state lines; any that do business in multiple state markets, like a Washington dispensary that opens another location in Oregon, must set up completely new business operations in new states, which is expensive, time-consuming and disadvantageous in many other ways.
Both fortunately and unfortunately, cannabis regulations are bound to change. On one hand, this likely means that launching and running a canna-business is likely to get easier as regulations loosen and spread. However, changing regulations often require restructuring of businesses, which can provide additional challenges for business leaders going forward.
New Cannabis Products Emerge Every Day
For decades, cannabis creatives operated clandestinely to avoid criminal prosecution under old cannabis laws. While plenty of discoveries and inventions occurred during this period of cannabis cultural development, hiding grow operations, extraction equipment and other essential tools is not exactly conducive to explosive innovation. Now that medical and recreational cannabis have been legalized in so many spaces, growers, engineers and other innovators are working overtime to produce unimaginable wonders for cannabis consumers.
This can be a challenge for cannabis entrepreneurs, who must constantly struggle to keep up with shifting product availability and trends. It is incredibly important for cannabis entrepreneurs to remain plugged into cannabis culture, which will help them better predict which new cannabis products will spark consumer demand and which are not worth stocking on constrained dispensary shelves.
The Cannabis Stigma Lingers
Cannabis is becoming more mainstream — but roughly a century of anti-cannabis propaganda and anti-cannabis legislation has been difficult for the drug to shake. Many Americans continue to harbor misinformation about the effects of cannabis, and lawmakers as well as other business leaders tend to disparage or work against entrepreneurs affiliated with cannabis. It is everyone’s responsibility within the cannabis industry to actively work to end the stigma, which means operating with the utmost integrity, regardless of the difficult conditions.
Cannabis Banking Services Remain Limited
Another effect of federal cannabis law is that most banks and lenders are unwilling to work with cannabis businesses for fear of retaliation at the federal level. Most financial institutions receive a surprising amount of federal support for operation; perhaps they engage in interstate commerce, and almost certainly they receive federal insurance. Because the Federal Government deems any cannabis business to be criminal — even if the business is operating within state law — financial institutions that provide services to cannabis businesses could be subject to federal criminal prosecution. At best, they could be fined; at worst, their leaders could end up in jail.
Running a business without financial services is extremely difficult. Many cannabis businesses can process only cash payments, and they must bend over backwards to manage cash in bank accounts. Investments and business loans are also few and far between. Thus, entrepreneurs interested in operating in the cannabis industry need to be financially creative to survive and thrive.
State cannabis industries are tallying sales in the billions of dollars, which is attracting the attention of entrepreneurs everywhere. However, every lucrative business has its challenges — and cannabis likely as more than its fair share.