So you want to start a cannabis business…
But you’ve quickly found out that, unlike other industries, the roadmap to becoming a cannabis entrepreneur is full of twists and turns. Of course, starting a cannabusiness will have the standard steps like figuring out your business model and crafting a business plan. However, the process will also include extra hoops to jump through for funding and financing, as well as a slew of regulations to know and navigate.
If you’re just now brainstorming how to get your foot into the cannabis industry door, this is the ultimate guide for you. Here, we’ll cover how to start a cannabis business in California step-by-step, as well as educate you on various license types, regulations to be aware of, and consumer trends and stats that’ll light your entrepreneurial fire!
Keep reading to learn how to start a cannabusiness in California and why you should.
The Future Growth of California’s $5.2B Cannabis Market
One of the first steps in starting a cannabusiness in California is determining what type of product you’ll enter the market with or what type of business you’ll begin. What helps guide that decision is looking at the current state of California’s market and sales and the forecast for future growth.
To give you a quick glance at the market today, here are some of the latest product and user stats for the US and California, plus forecasting factors to consider -
- Cannabis sales in the U.S. increased 40% in 2021 to $25 billion, according to a BofA Securities report.
- New Frontier Data calculated the compound annual growth rate (CAGR) of the cannabis industry to be 11% between 2020 and 2030, meaning the industry’s worth could be valued at $57 billion by 2030.
- California accounts for the highest cannabis sales, with Colorado and Michigan following.
- In 2021, MJBizDaily reported sales in California hit $4.4 billion, up nearly 57% from the year prior.
- The same MJBizDaily statistics also reported that the edibles product category showed the most market growth accounting for 22% of overall sales in 2020.
- Flower sales still reign supreme as the top selling product, with preroll sales increasing by almost 50% and now accounting for 11% (a new record-high) of the total US market share.
- As reported by Forbes, edibles are the most popular method of consumption in populous California cities, including San Francisco, Los Angeles, Oakland, and San Diego. The product category is also the most popular method of consumption amongst every age group, excluding Gen-Z.
Now that you have a clear market outlook for starting a cannabusiness in California, let’s review the license types that’ll have you manufacturing faster than most.
License Types to Consider in California
Despite complex industry regulations, experts recommend California as a viable market to enter due to its wide range of licensing types and population of nearly 40 million (which is more than the entire country of Canada). In comparison to other states' legal markets, California offers cannabis entrepreneurs licenses well-suited for varying socio-economic applicants and tailored options for specific product types.
In addition to multiple cultivation license types, California uniquely offers ‘manufacturing’ licenses that allow licensees to produce a variety of cannabis products - even without having their own facility. These licensing types include extractors and processors for cannabis concentrates, and also cover edible and topical production too.
Another important step when you start a cannabis business is to understand these licenses and decide which one works best for your vision or which will be most cost-effective for your bottom line. Here are just a few of California’s manufacturing license types that are ideal for budding cannabis entrepreneurs and what they permit per the Department of Cannabis Control -
Type N: infusion of products
Type N manufacturers can:
- Make cannabis products through infusion
- Package and label cannabis
- Infusion mixes cannabis extract or plant material with other ingredients to make a cannabis product.
Type P: packaging and labeling
Type P manufacturers can only package and label cannabis products.
Type S: manufacturers who work in a shared-use facility
Type S manufacturers operate in shared-use facilities and can:
- Extract cannabis using butter or cooking oils
- Make cannabis products through infusion
- Package and label cannabis
The biggest difference to consider between Type-N and Type-S comes down to accessibility and the initial start-up costs of securing a facility. With Type-S you’ll have the opportunity to find a shared-use or co-manufacturing space that’s already equipped with the cannabis kitchen supplies or infusion equipment you’ll need to succeed.
While with Type-N you’ll be responsible for buying, renting your space, ensuring it’s up to code and meets regulations, and purchasing the equipment and supplies it’ll take to start manufacturing.
How to Start a Cannabis Business in California - Step by Step
So by now, whether you want to learn how to start a pre roll company in California, manufacture edibles, or infuse topicals - you’ll need to know a few simple steps every potential licensee will be tasked with. Including -
- Figuring out your business model type
- Craft a business plan that considers -
- Market and competitors
- How to distribute and sell
- Scope out facilities
- Funding and financing
- Register your business & apply for licensing
- Tax considerations
- Know your regulations
- Branding and marketing
- Hiring a team and maximizing operations
In terms of starting a cannabusiness in California, knowing and adhering to cannabis regulations is essential for the long term success of your business. That’s because while California is one of the easiest markets to get into, it can be one of the toughest to navigate in light of environmental focus and concerns. In fact, everything from sanitary procedures to packaging and labeling, even how you manage waste disposal, is monitored and regulated.
During the startup process for your cannabis business, you’ll need to ensure you’re aware of the unique requirements regarding your license type at the federal-level, state-level, county-level, and local-level to avoid hefty fines or potential violations that could result in the suspension of your license.
Back to the licensing type, this is another advantage of Type-S licensing as the shared-use facility will already be adhering to regulations for your type of manufacturing. This can reduce costs for compliance operations, software, and staff, while helping to prevent profit loss moving forward.
The Final Word - Becoming a Cannabis Entrepreneur
In any industry, surrounding yourself with the right people and team is a solid way to build a successful foundation for short term and long term growth. At My Green Network, we exist to facilitate the cannabis business dreams of aspiring cannabis entrepreneurs - whether they’re in the state, out of the country, in the industry already, or not.
My Green Network is the premier cannabis kitchen and co-manufacturing space designed to streamline the licensing process and facilitate high-quality product development - along with supporting product sales, transportation, and distribution. Schedule a tour of our world-class facility, or learn more about our team, pricing, and services here now.
