Widespread legalisation and increased media coverage is changing public perception about weed, and as the red light turns green for the legal weed business profiteers are swarming through the purple haze like stoners to a fat joint.
Progressive governments around the world are chomping at the bit for the opportunity to legalise marijuana. Hell why not, with the economy in a ditch worldwide they sure could use another taxable commodity, and everyone is smoking it anyway, right? Weather or not this is a good thing is debatable, but entrepreneurs and investors are all on High Alert.
Every entrepreneur dreams of discovering an untapped market where they could enter with a low initial outlay and have a huge potential for growth. It’s not very often that an industry boom takes place in the current world economy, so it’s no surprise that entrepreneurs and investors are jumping on board and cannabis related businesses being hailed one of the best startup opportunities for 2015.
First off, lets take a look at some facts and figures pertaining to the burgeoning U.S. legal-pot sector. The following information was published in a recent Forbes article:
In 2014, it’s estimated that between $1.6 billion and $1.9 billion of legal pot sold for medical use in the U.S., and another $600 million to $700 million was sold for legal, recreational use.
The Factbook also projects that legal cannabis businesses will do roughly $8 billion in revenue by 2018. So that’s more than $7 billion of upside potential in the near-term marketplace.
The competitive landscape is full of young companies, too. Less than half are even three years old, the Factbook found. Of the rest, 4% of the businesses surveyed reported they started in 2012, 21% launched in 2013, and 30% are a year old or less.
Most businesses report their startup costs were modest. One-third of cannabis wholesalers say they put in less than $50,000. Some 14% spent between $50,000-$100,000, and 24% spent between $100,000-$500,000. The remaining 29% spent $500,000 or more, with just 10% of those reporting they spent over $1 million.
For such a young industry, it’s notable how many of the companies report they are profitable. The Factbook found over half are already operating in the black.
The full breakdown:
Only 3% said they are seeing “significant losses”
15% are “losing some money”
28% report they’re at break even
38% are “modestly profitable”
16% report they are “very profitable”
Profitability is coming quickly, too — 62% of the businesses said they were profitable within 12 months. Only 6% said it took more than 3 years.
One final reason legal cannabis is a desirable sector to enter: customers spend big. While Americans famously spend an average of over $1,500 a year on their pets, a cannabis consumer spends $1,869 on their habit.
These are quite remarkable figures for a sector that investors wouldn’t touch with a 10 foot stem just a couple of years ago. Angel investors and venture capitalists have obviously smelled the green, because they have started jumping in and backing cannabis companies, with quite a few pot startups already raising over $1 million.
For the entrepreneur, the cannabis industry holds many opportunities, from seed to consumable and everything thereabouts:
Cultivator/Farmer: Someone has to grow the weed, and the doors are opening due to the changing legal landscape. Of course, obtaining a licence to grow dope legally won’t be easy, and you can count on there being a tonne of read tape to hinder your efforts, but in some parts of the world it’s entirely possible. However, legalisation will most likely spell harsher regulations and penalties for those that continue to grow without government permission.
Seed Harvester/Retailer: Quality is everything in the weed business, so naturally there’s a strong demand for the highest quality seeds. This spells opportunity for entrepreneurs who know their strains and can procure seeds from top growers. Depending on where you are based there may well be legal loopholes that enable you to sell seeds legally.
Edible Creator: Edible creation is one of the more interesting and potentially lucrative careers in the industry. There’s already a lot of businesses out there creating amazing edibles in the form of; cakes, candies, coffee and teas, drinks and more. Your imagination is the limit, and the more creativity you have the better. Again, tight regulations and stringent content listing specifications need to be observed, so you’d “better call Saul” before going out and investing in a new kitchen.
Concentrates Processor: Concentrates include things like hash and oil products which are in high demand, and can also be very lucrative. These products are noted for their incredibly high concentration, which can have powerful effects and be very valuable to medical cannabis patients. A background in chemistry is helpful, and access to laboratory equipment is be necessary.
Retail Store:This is the ultimate dream for marijuana entrepreneurs - to be able to stock the green gold, and all it’s related derivatives and creations. While the laws in your are probably won’t allow for just anyone to open a retail store, these laws will be under constant review as the industry opens up. Conversely, changing laws can pose a significant risk to retail outlets.
Glass Merchant: Glass merchants have been around for a long time thanks to the loophole in most countries that permit the sale and ownership of unused pot smoking utensils. An ornate bong is a pot head’s pride and joy, so if you’re doing something a little creative and unique then there is a lot of opportunity here - sans the legal risk.
Courier Services: Delivery services will be essential for every dispensary, as many customers with medical conditions won’t be able to physically make it to the shop, and the rest will likely be too paralytic on the latest chronic to drive.
Security Services: Security is a primary concern for cannabis related retailers and storage locations, and is a great area for specialisation if you’re already established in the industry.
Tourism: Around the world there are many popular marijuana related festivals. The Mardigrass in Numbin, Australia comes to mind: It’s a magical time where once a year the police stop arresting people for smoking on the street, and everybody comes together in a smokey haze to bask in their love for ganja. There could also be a lot of opportunity for tours too; think winery tours but for cannabis farms.
Web & Software: The potential for web and software development companies in this industry is huge, and a bunch of companies like Leafly, Viridian Sciences and WeedMaps are already blazing a trail.
- Online platforms for education, sales and communities
- Mobile apps for stoners
- Accounting and product management systems
Consultants: The market boom will open with it many opportunities for consultants who can provide valuable experience and insight, and genuine empirical knowledge will most likely be in short supply and high demand due to the previously illicit status of the market.
- Farming consultants will be in high demand, as a high quality crop is essential to the success of a farm.
- Entrepreneurs will need help getting their businesses off the ground, and to help identify areas for growth and expansion.
- Marketing consultants who understand the culture can assist cannabis startups get their brands off the ground, and create a real identity for businesses in the industry.
It’s still relatively early days, and although there are already some established big players, opportunities abound in the marijuana industry. Don’t be blinded by the northern lights though, it’s still a risky business; legal changes could change the game overnight, and a glut from the early market boom could slow things down considerably.