10 Top Business Opportunities In The Legal Cannabis Industry

Posted on October 12, 2015

by Julie Weed

Twenty-three states offer medical marijuana legally, and Oregon recently became the third state in America to start selling legal recreational marijuana to adults 21+. The liberalization of cannabis laws is expected to accelerate and a whole new industry with supply chain, retail, packaging and marketing companies feels like it is being conjured out of thin air, offering a new set of risks and opportunities to entrepreneurs and current businesses.

Cheryl Shuman, senior advisor on a $50 million investment fund with Jacob Securities out of Toronto and NYC works with investment in the cannabis sector on a daily basis. “This space has the ability to create tremendous wealth quickly,” said Shuman, “but is one of the more high risk sectors that have been cropped up in recent decades.”

Here are five areas that offer growing opportunities in the legitimate cannabis industry.

1. Creating Infused Products

Marijuana-infused “edibles” like 420 chocolate bars, Cannabis Quenchers, and GoodShip cookies are gaining popularity as much for their convenience, unobtrusiveness, and lack of pungent odor as for their actual taste. For entrepreneurs who like to work directly with marijuana, producing edibles can be less capital and labor-intensive than farming, and is an easier business to start on a small scale and then expand if the product sells well.

Still, packaging regulations, security requirements and other laws around products that contain cannabis add overhead costs that business founders need to take into account. The most successful entrepreneurs will need to create manufacturing facilities that produce consistent high-quality output and then be able to fully replicate those systems in other states, said Patrick Devlin, cofounder of DB3, the largest edibles-seller in Washington state, because cross-border sales are not currently legal.

2. Dispensary and Recreational Store Ownership

Pot shops are blossoming as legalization spreads in the United States. Entrepreneurs who can attract customers, create partnerships with suppliers, keep detailed records, and hire reliable workers will be off to a strong start. Those concerns would be plenty for any store manager to handle, but pot shops bring extra challenges in compliance laws, security concerns, and the inability to deduct typical business expenses from their taxes. John Lord, who owns 11 Livwellmarijuana dispensaries in Colorado says the burden of compliance is too heavy, both in terms of money and time, for some small business to easily survive.

3. Technology & Software

Maximizing crop yields, making business operations more efficient, forecasting/managing inventory and meeting regulatory compliance are among the aspects of the legalized marijuana industry that necessitate a range of technologies specifically designed for the sector, according to Steven Siegel co-founder of BioTrackTHC, a seed-to-sale tracking software. Seed to Sale tracking software in particular is government-mandated and so is a well-recognized opportunity with many entrants, but there are many more niches still to be filled.

4. Banking

Business loans and bank accounts are in short supply for those in cannabusiness because a US bank could lose its federal charter just by working with them. That translates to a great opportunity in financial services designed for growers, processors and sellers for those who can figure out a way to make it work. The risk of course is that any new group of elected government officials could increase enforcement of federal laws or throw up additional roadblocks.

5. Security

The lack of banking services means pot business have lots of cash to keep tabs on so security guards, safes, video equipment and money transport will all be important aspects of the growing industry. Many security requirements in the industry are specified by state regulations, said Megan Stone who works with pot shop owners on store design, so security companies are needed to not only provide equipment, but to deliver a security plan and in some cases ongoing monitoring.

Check in tomorrow for Part 2!