Clear and detailed business plans are vital tools no matter the industry, but all too often many smaller cannabis operations forego the process of developing a business plan altogether.
Some cannabis operations go about their business planning and strategizing casually, and as a result, many of those companies struggle with basic functions that would have been easy to overcome had only they been laid out from the outset.
Business plans are particularly important in the cannabis industry because of how they affect companies’ abilities to secure appropriate licenses and funding.
Many cannabis operators fail to include a business plan in their business simply because they don’t know how to write one, so the following is an overview of the elements any cannabis business should have in their business plan:
The Executive Summary
This section of your business plan lays out the main points of what follows as a succinct overview.
The Problem / Your Solution
What is the problem your business looks to address? This could be a product that you feel would do well in the market, an under-served market, or any number of other things. Hopefully, you’re in business because you’ve found an underserved need, so what is that need and how are you meeting it?
If you’re unable to answer the problem you’re trying to solve with your business, you’ll need to do some legwork infiguring this part out to come up with a good reason why your business should exist.
The Market Opportunity
Similar to the above problem in the market, this section lays out in greater quantifiable data where you see an opportunity in the cannabis market. Perhaps you’ve discovered that there is a particular hole in the edible cannabis market for exotic flavor combinations or novel product forms, so here you’ll want to back up your assertion that the market can support your solution with hard data.
Your Strategic Execution Plan
You’ve identified with hard data your market opportunity, and now this section is where you lay out in detail how you’ll meet that opportunity. What budget will you need to fulfill your plan? What are your timeframes required for research and development, production, marketing, bringing products to market, etc.? Be sure to include detail.
Answer these five areas:
Here you need to detail your equipment, raw and refined materials, facilities, staff, and distribution needs.
What do you need to produce your product? How many growers, processors, administrative professionals, sales professionals, etc., do you need? What size facility do you need, and where will it be located? What equipment will be necessary to create your products, and how will you distribute it to retailers?
Essentially, this is the section where you describe all of the areas of your operation that will go into maintaining your business as it reaches for the execution of your business plan.
This section is critical. Compliance in the cannabis industry is a tough nut to crack, and you need to detail how you’ll stay on top of compliance matters. There are multiple types of software out there to help with this, such as cannabis industry ERP (enterprise resource planning) software that helps with all areas of organizing your operation that also feature extensive compliance tools.
Who makes up your company at its core? Who are the executives, key personnel, partners, and advisors that will contribute to your success? What are their qualifications and areas of expertise that will empower them to help you succeed? Beyond specific personnel, what are the different roles that you’ll staff to keep the wheels of your operation spinning forward?
The Financial Plan
Business plans are typically used to secure additional funding, so this section is vital. Draw out in detail what your financial needs are, why you’ve arrived at those figures, and how you’ll use additional funding. What are your financial forecasts? Where do you expect to get additional funding in the future?
Be sure to do plenty of research to determine what exact information you need to include here.
The most important thing about your business plan is that it offers a detailed and well thought out explanation of how you are going to execute your plans to achieve your goals. If anything, err on the side of offering too much detail rather than too little.
If the information laid out in this overview seems like a lot, that’s because it is. Drafting a comprehensive business plan can be a tremendous amount of work, but it’s work you need to perform in order to have a plan and succeed. The information in this post lays a foundation to get you started, but be sure to research in greater detail what each section of your business plan needs for it to be most effective.
The tremendous complexity of the cannabis market requires modern technology for businesses to stay ahead. Contact us to find out which of our cannabis accounting solutions is the right fit for you.