Over the past 20+ years, we have helped over 1,000 cannabis entrepreneurs and business owners create business plans to start and grow their cannabis and marijuana dispensaries. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a business plan template step-by-step so you can create your plan today.
Why You Need a Business Plan For Your Cannabis Business
If you’re looking to start a new business or grow your existing dispensaries, you need a well-written business plan. The business plan will help you raise funding, if needed, and plan out the growth of your dispensary in order to improve your chances of success. It is a living document that should be updated annually as your company grows and changes.
Sources of Funding for the Cannabis Industry
With regards to funding, the main sources of funding for the cannabis industry are personal savings and angel investors. Unless and until the federal government makes new laws, many banks typically will not lend money to marijuana businesses.
Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding or, like a bank, they will give you a loan.
Venture capitalists will not fund a cannabis business. They might consider funding a chain, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make a good investment, and an individual location could never achieve such results.
How to Write a Business Plan for a Cannabis Dispensary
Write a business plan that includes the following 10 sections:
Your executive summary provides an introduction to your cannabis business plan, but it is normally the last section you write because it provides a summary of each key section of your business plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of cannabis dispensary you are operating and the status. For example, are you a startup, do you have a business that you would like to grow, or are you operating a chain of dispensaries?
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the cannabis industry. Discuss the type of cannabis retail business you are operating. Detail your direct competitors. Give an overview of your ideal customer base. Provide a snapshot of your marketing strategy. Identify the key members of your team. And offer an overview of your financial plan.
In your company analysis, you will detail the type of cannabis dispensary you are operating.
For example, you might operate one of the following types:
- Recreational Cannabis Dispensary
- Medical Marijuana Dispensary
- Combination (Recreational & Medical Marijuana Dispensary)
In addition to explaining the type of business you operate, this section explains the background of the business. Include answers to questions such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new store openings, etc.
- What is your business model?
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In this section, you need to provide an overview of your marijuana retail business.
While this may seem unnecessary, it serves multiple purposes.
First, researching the industry educates you. It helps you understand the ecosystem in which you are operating.
Secondly, market research can improve your strategy particularly if your research identifies cannabis market trends. For example, if there was a trend towards oils and tinctures, it would be helpful to ensure your plan calls for plenty of such options.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in this section:
- How big is the cannabis industry (in dollars)?
- What is the most profitable niche of the cannabis market?
- Is the target market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth potential over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your cannabis business. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section must detail the potential customers in your target market.
The following are examples of customer segments: college students, sports enthusiasts, soccer moms, techies, teens, baby boomers, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of cannabis dispensary you operate. Clearly, baby boomers would want a different atmosphere, pricing, and product options, and would respond to different marketing promotions than recent college graduates.
Try to break out your target segments in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the target customers you seek to serve. Because most dispensaries primarily serve customers living in the same city or town, such demographic information is easy to find on government websites.
Psychographic profiles explain the wants and needs of your target consumers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
Your competitive analysis should identify the competitors your business faces. Such competitors are other dispensaries within proximity to your location.
For each such competitor, provide an overview of their cannabis business and document their strengths and weaknesses. Unless you once worked at a competitor’s business, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- What cannabis products do they offer?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to stand outside your competitors’ locations and ask them as they leave what they like most and least about them. Likewise, online review sites can give you solid insight into your competition.
The final part of your competitive analysis section is to document your areas of competitive advantage. Some questions you might consider include:
- Will you provide a superior product line?
- Will you provide marijuana products that your competitors don’t offer?
- Will you make it easier or faster for customers to acquire your products?
- Will you provide better customer service?
- Will you offer better pricing?
- What security measures will you take to protect your employees?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion.
In the product section, you should reiterate the type of business that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, which of the following cannabis products will you offer?
Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections, you are presenting the cannabis and marijuana items you offer and their prices.
Place refers to the location of your business. Document your location and mention how the location will impact your success. Is your dispensary located next to a heavily populated office building, or gym, etc.? Discuss how your location might provide a steady stream of customers.
The final part is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Making your dispensary’s storefront extra appealing to attract passing customers
- Advertising in local papers and magazines
- Reaching out to local bloggers and websites
- Local radio advertising
- Event advertising
While the earlier sections explained your goals, this section describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday Short-Term Processes
Include all of the tasks involved in running your dispensary such as serving customers, procuring supplies, keeping the store clean, maintaining regulatory compliance, etc.
These are the milestones you hope to achieve. These could include the dates when you expect to serve your 1,000th customer, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth employee or launch a new location.
To demonstrate your dispensary’s ability to succeed as a business, a strong organizational structure and personnel plan is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally, you and/or your team members have direct experience in the legal cannabis industry. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in dispensaries and/or successfully running retail and small cannabis businesses.
Your financial analysis of your business plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.
An income statement is more commonly called a Profit and Loss statement or P&L. It shows your annual revenue and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you serve 50 customers per day or 200? And will sales grow by 2% or 10% per year? How much revenue do you expect during Year 1, Year 2, etc.? As you can imagine, your sales forecast assumptions will greatly impact the financial forecasts for your marijuana business. As much as possible, conduct research to try to root your assumptions in reality.
While balance sheets include detailed information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $200,000 on building out your dispensary, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if you get a loan for $100,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement
Your cash flow statement will help determine how much money you need to start or grow your business and make sure you never run out of money.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a dispensary:
- Start-up expenses
- Location build-out including design fees, construction, etc.
- Cost of fixtures and display cases
- Cost of initial inventory
- Payroll or salaries paid to staff
- Business insurance
- Cannabis business license
- Taxes and permits
- Legal expenses
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your store design blueprint, location lease, intellectual property documentation, etc.
Cannabis Dispensary Business Plan Summary
Putting together a solid business plan for your cannabis business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the legal cannabis business, your competition, your ideal customers, a marketing strategy, and you will have a plan to present to potential investors. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful cannabis business.
Download Our Dispensary Business Plan PDF
You can download our dispensary business plan PDF here. This is a business plan template you can use in PDF format.
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