Many entrepreneurs are excited to profit from the budding multi-billion-dollar cannabis industry. One way entrepreneurs can avoid the most common struggles in new cannabis businesses is to ask those who have gone ahead of them. These cannabis insiders not only know the challenges, but they have also overcome them. Save time, money, and energy in your own new business by preparing for the most common pitfalls. Read below to find some of the most common cannabis business struggles experienced by (now) successful cannabis entrepreneurs.
Common Cannabis Business Struggles
The biggest challenge facing the American cannabis industry is the difficulty of securing funding or financial backing from large, dependable financial institutions. Most banks avoid working with cannabis companies so they can steer away from involving their companies in business dealings that could be seen to be breaking federal or state laws.
In 2019, Congress introduced the SAFE Banking Act, a new law to protect banks and financial service providers that work with legitimate cannabis businesses. Progress is being made on this front, but it’s slow.
Limiting financial options for cannabis owners hurts both the cannabis industry and the financial industry. Cannabis is a growing industry, projected to grow further as more regulations are lifted. However, with so much trouble associated with the industry, it will be especially difficult for small businesses to get financial backing to start and maintain their businesses.
Competition from Canada
Canada beat the United States in the race to legalize marijuana nationally. In October 2018, Canada made it legal for adults to purchase marijuana for recreational use. On one hand, Canada’s willingness to go first gives Americans a chance to see the effects legalized marijuana has on a country, its economy, and its people. On the other hand, Canadian business owners get a head start on getting in promoting their legal cannabis businesses.
Constantly Changing and Conflicting State and Federal Laws
Operating a cannabis business in the current U.S. climate is a bit like being a cowboy in the Wild West. Business owners are operating in a new frontier, where laws are unclear and often contradictory between federal and state levels. Many of the usual methods for getting a business off the ground are made difficult by the fact that the government are still figuring out what is illegal.
On the other hand, the U.S. government’s inability to finalize its views on legal cannabis has resulted in determined canna-preneurs finding innovative ways around these struggles. Creative people are constantly innovating methods to get around stalled law changes. One example of this is ATM machines that give people vouchers to buy cannabis instead of cash. In fact, PotCoin is a cryptocurrency that’s been developed as a legal way for cannabis companies to provide and accept payment.
Big Brands Buying Up Market Space
Many industries are lucky to have business names and reputations that have been in the business for decades, even centuries, but the names of the players in the cannabis industry change quite often. As small new companies emerge, and people become more accepting of legalized marijuana, larger companies outside of the cannabis industry are becoming more interested in entering the cannabis business as well. These businesses have a lot of capital behind their names, which makes them more likely to buy out smaller businesses and reap a large percentage of profits in the cannabis space. One of the challenges facing small farms that have helped the industry get off to a great start is that they will have difficulty maintaining their hold when big pharma and other well-known companies get the green light to legally enter the cannabis industry.
More Products, More Problems
One only has to look at the vaping scare of 2019 to see how a thriving industry can suddenly be plunged into uncertainty as people begin to adapt to and use new products. Cannabis business owners know that the best course of action is to stick with as few products as possible at the beginning, use carefully sourced ingredients, and only add additional products or variations as the first ones become successful.
As several states embrace selling recreational marijuana and movement is made in the U.S. federal government to change the longstanding prohibition on cannabis sales, 2020 will likely be another incredible year for people starting cannabis businesses in the United States. If you’re thinking of starting a new cannabis business, knowing the most likely struggles you will face can be the difference between failure and success.
Avoid Common Cannabis Business Struggles
Consider attending a CannaCon event in your area to network with other business owners and find out how they have overcome the odds to create long-term success.