6 Lessons Learned Transitioning From a Medical to Adult Use MarketLisa RoughJune 14, 2017
For those who are looking to enter the retail cannabis industry as smoothly and seamlessly as possible, here are some hard-earned lessons from states who have made the jump before.
When a state passes a cannabis legalization law, it often lays out a timeline during which the transition is expected to occur. Te timeline is only an estimate, and more often than not, the transition takes significantly longer than initially anticipated. This has been true in most states that have made the transition so far, but it’s also dependent on the structure of the medical marijuana market.
For Colorado, the state already had a robust and highly-regulated medical cannabis market, so it was fairly easy to make the switch to adult use. In Washington, however, the medical marijuana market was vastly unregulated and lawmakers struggled to reconcile the laissez-faire medical market with the strictly controlled new recreational model. Not only did Washington’s transition take seven months longer than Colorado’s, it had to pass a new law for medical marijuana nearly two years after legalization.
To summarize: The only constant is change.
You’ll Need a Lot of Financial Overhead
Starting a business in a burgeoning retail cannabis market requires money–a lot of money, more than you might have expected. The costs range from outfitting your business with proper security measures, paying the licensing fees, hiring employees, and starting a company payroll, and that’s just the tip of the iceberg. And of course, none of this can happen until you’ve secured a location in the proper zoning areas of your city.
The costs will pile up long before you’re making any money, and even once you start making money, you have to remember that cannabis companies can’t write off their business expenses due to a little glitch in the federal tax code known as Section 280E. Investors and business partners are the best way to help offset costs and work together towards making your business successful.
To summarize: You’ll need at least twice as much money as you anticipate.
Let the Regulations Be Your Guide
Before making any big financial investments in your business, it’s wise to wait for the regulations to firm up. Regulations will lay out the roadmap for your business to be successful–from zoning laws to childproof packaging to warning labels to advertising restrictions. They’re the rules that your business will be required to adhere to, and if you jump the gun (purchasing an empty storefront in which to open a retail shop, for instance), you could shoot yourself in the foot before the market has even opened.
Drafting guidelines and regulations will often take months, if not years, and will undergo several revisions before finalizing. To set yourself up for success, wait for the draft regulations to come out before taking any major action.
To summarize: Following the regulations will lead you to success.
Get Involved in the Regulatory Process
The rules and regulations for a new retail cannabis market are open for public testimony and debate. If you have a vested interest in joining the cannabis industry, attend the local public meetings and voice your input. It’s during these meetings that tax regulations, zoning laws, restrictions, and public safety concerns are addressed, so now is the time to speak up on how these changes could affect you and your future business.
To summarize: Your voice could make a big difference in the cannabis market.
Think of the Children
Won’t someone think of the children? Keeping cannabis out of the hands of youngsters will be a continued concern for lawmakers and prohibitionists alike, and ensuring that advertising is not marketed towards children is of the utmost importance during the legalization process.
Once you’ve opened a cannabis business, keeping cannabis out of kids’ hands is an essential part of existing in the industry. This means packaging must be childproof, labels must indicate that cannabis is for adult use only, and you must check identification before every sale. It may drive your customers crazy, but making a habit of always checking ID is the best practice for any cannabis business. Not only will you be protecting minors from accessing cannabis, you’ll also be protecting your business from unwanted fines and closures.
An example of this was Washington’s Lux cannabis shop, which was found to be serving underage customers on more than one occasion. As a result, the store had to pay a fine and close down for 15 days, and a third violation will result in the loss of its retail license.
To summarize: Check IDs every time!
Roll With the Punches
One guarantee about the cannabis industry is that there are no guarantees. The entire industry remains a murky gray area, particularly in regards to federal law. There is no tried-and-true get-rich-quick scheme, and businesses that might seem destined for success can take a hard hit in a matter of days.
While Washington was struggling to draft regulations for mold and pesticide testing, it came to light that several high-profile cultivation and processing companies had produced cannabis and concentrates that contained high levels of banned pesticides. This put a dent in their business plans and forced the companies to scrap thousands of dollars of product while scrambling to update their grow procedures. Most of the businesses have since recovered and now adhere even more carefully to the state regulations.
To summarize: A setback in your business plan is not the end of the world.
Every new entrepreneur and business owner is faced with a common uncertainty when transitioning from a medical to adult-use cannabis market. We are all navigating new, uncharted waters in a legal gray area untouched by the federal government (at least for now). It’s up to the leaders of the emerging cannabis markets to hold each other accountable to the high standards set forth by state governments and prove that not only can a legal cannabis industry function, with the right management, it can thrive and benefit the entire state’s economy.