Entrepreneurship is never easy but the cannabis business has challenges you just don’t see anywhere else.
East Coast cannabis markets are getting ready to expand in a major way. In recent weeks, Massachusetts, New Jersey, Connecticut, Vermont, Florida and even New York have shown signs of progress. This has been a long time coming for East Coast cannabis entrepreneurs.
As founder of New York’s largest cannabis meetup group, High NY, I’ve been working to educate New Yorkers about cannabis since 2014. I’ve done this by soliciting experts from all over the world to come to New York to share their knowledge.
The Cannabis World Congress & Business Exposition (CWCBE) took place in New York City recently. While there, I met with nine-year industry veteran and author Christian Hageseth. He is the founder and CEO of Denver’s Green Man Cannabis, a retail and grow operation well-known for its connoisseur grade craft cannabis, and ONE Cannabis, a cannabis business franchise.
At the CWCBE, I also spoke with Chloe Villano, founder of Denver based Clover Leaf University. Clover Leaf, licensed by the Colorado Department of Higher Education, has conducted vocational training for thousands of people all over the world. Chloe and her team ran a cannabis business crash course for a few hundred attendees at the CWCBE in New York.
Below is some advice Christian and Chloe shared for East Coast cannabis entrepreneurs:
Have significant capital and be patient
“Temper your enthusiasm,” Hageseth said. “I’ve been part of legal cannabis businesses in nine states, shortly after each legalized marijuana. For seven out of nine states, the roll out was significantly delayed and enrollment of medicinal patients was much lower than expected. Massachusetts is a perfect example. They took a while to get to where they are and are gaining speed, but the industry there is still so far from its true potential.”
Villano echoed these sentiments, “always raise more money than you think you need and don’t expect business to come easily. In fact, expect everything to go wrong, because the regulations will change often and your plan will become obsolete.”
Hageseth also advises letting others take the lead.
“There is a difference between pioneers and settlers. Pioneers got arrows and settlers got land,” he said. “I’m much more interested in being a settler in the cannabis industry. You don’t know how regulators or banks are going to react as legalization changes, so it’s beneficial to not be the first to market.”
Seek experienced partners
Partner with people who have industry experience to guide you and provide valuable advice along the way. The cannabis industry is unlike any other, so finding someone who has a deep amount of vetted contacts, as well as experience owning or operating a successful dispensary or grow is a great competitive advantage.
“Having someone who understands your business and is available to help resolve specific challenges is invaluable,” Hageseth said. “I wish I could have paid someone $100,000 and five percent of my revenue to not make all the mistakes I’ve made. I would have saved myself so much trouble and would be millions of dollars ahead.”
He advises to be willing to pay for the right partner or the right advice. For example, there are ways to structure your entity and design your corporate governance that can significantly reduce frictions when it comes to scaling your business, remaining compliant and paying your taxes. An experienced partner can clue you into this as well as other important variables that can greatly impact the bottom line. Villano vehemently cautioned, “avoid bad partnerships! The fastest way for your cannabis business to fail is by taking on the wrong partner.”
Find a lawyer and accountant with cannabis experience
Marijuana is a tough business to navigate. “It’s in your best interest to find an accountant who has been through an IRS audit or two with a marijuana company. If you don’t file your taxes the right way from the start, your business can get very far behind,” Hageseth said.
“Your business will greatly depend on the legislation in your market, so work with a lawyer who is well versed in several cannabis markets and regulatory frameworks in order to best protect your business,” Villano added.
Learn about cannabis
Since the cannabis industry is nascent, many people are coming in from all different industries with several ideas of ways to incorporate something they know really well into an industry they know nothing about. Just because something worked in another industry, doesn’t guarantee it will translate in cannabis. Although it seems straightforward, take time to learn about the cannabis plant, culture and community before entering this industry.
“Those who don’t know history are destined to repeat it,” Villano told me with a smile. And those who don’t know about cannabis are going to struggle as cannabis entrepreneurs.