Once relatively easy to break into, the cannabis industry now demands a leaner and more conservative approach to financial management, along with precise forecasting and a great deal of patience. There are inherent risks, regulatory uncertainties, and financial challenges faced by new market entrants and established operators alike. As the market continues to mature, so will your needs and approach.

Let’s take a look at some best practices for cannabis business start-ups within today’s landscape.

Structure, Build-Out, and Expectations

First, consult with your attorney and CPA regarding the type of business you’ll run in the context of the overall market. Will you be operating a cannabis dispensary or manufacturing entity? Are you a cultivator or a delivery service? Will you be vertically integrated?

While you might have a general idea of the structure for your business, financial and legal guidance on related taxation and liability can help refine your strategy to ensure the most profitable and sustainable operations.

As you map your entry into the cannabis space, you’ll first want to invest in some market analysis. Your market analysis should include research and data on market size, licensing policies of your particular municipality/state, competition, growth potential, and consumer preferences.

For retail, it should define the relevant population of your chosen market and provide insights into buying behavior for that demographic, the median household income, and the type of dispensary population growth that has occurred within a 5-, 10-, and 15-mile radius. For wholesale, consider strains, competition, and market saturation.

In addition to a market analysis, a start-up will need accurate cash flow projections, which should include revenue assumptions and financing, along with your timeline. If possible, benchmark assumptions against others in your particular market.

With the market analysis in hand, you can develop revenue projections. Consider your potential monthly purchaser base and its estimated spend. Of customer spend, what would be a realistic product breakdown? How do your intended SKUs compare with your competitors? 

Finally, build detailed expense assumptions that include everything from furniture and fixtures to staffing, advertising, construction and renovation, professional services, taxes, facility maintenance, insurance, security, IT, and utilities. Keep in mind that the most successful start-ups are taking a cautious and conservative approach to their build-outs and are properly capturing costs to ensure they meet day-to-day business obligations.

Data and KPIs

Like all businesses, cannabis operations need to consistently capture data and maintain good books. Data capture can be conducted through technologies, including your inventory tracking, point of sale, accounting, and accounts payable systems. This process can then be systematized to provide the reports and analytics you need to monitor trends on the fly.

Next, identify Key Performance Indicators, or KPIs, and track their performance along with budget to actual on a post-build-out and ongoing basis. Ask yourself, do we have a realistic forecast that we could continually reassess? Solid preoperational numbers and forecasts are critical both at the point of operation and at set milestones, such as the first six, 18, and 24 months. This helps not only to refine business strategy but also to answer your investors when asked for a realistic breakeven point.

Data is crucial during the preoperational phase because it drives accurate management assumptions. It will also be critical in managing investor expectations. Consider one seemingly simple decision for a retail operator: Do we need a 1,000- or 10,000-square-foot store?

From this, you will need to determine how much of that space would be committed to sales, which may not be tax-deductible, and to inventory storage, which may be tax-deductible. Once you decide this, you will need to determine the number of employees required to run lean yet profitable operations.

Under these circumstances, what would be your estimated build-out costs? How much would you pay for rent? What’s the timing of various cash flows? Only with accurate data could you make the right determinations and measure the success of those decisions over time.

Using your initial data markers, you can then build out scenarios that allow you to visualize various options. For instance, see how results would look assuming a high-, mid-, and low-revenue operation. Likewise, you could model results under a high-salary/low-revenue versus a low-salary/high-revenue projection, as well as model against available benchmarks.

Note that if you have multiple lines of business, some of your data points will correlate. So, a combined dispensary and delivery business, for instance, could enjoy greater efficiencies. As you build out your plan, look closely for potential opportunities.

Another area where data is essential is inventory management and your business strategy around that. Use data to determine your best-selling strains, for instance, or those offering the greatest net margin potential. Keep in mind that, while one strain might be popular with consumers, the benefits to producing it could come at a price. So, evaluate whether it works to your advantage to continue with production or pivot to a less expensive strain.

Nearly one in five middle-aged adults acknowledge consuming cannabis, according to data published in the American Journal of Preventive Medicine.

Investigators affiliated with Columbia University in New York analyzed results from the Health and Retirement Survey — a nationwide survey of older adults.

Researchers reported that 19 percent of adults aged 50 to 64, and six percent of adults over the age of 65 acknowledge having consumed cannabis products within the past 12 months. The findings are consistent with data published in July in the Journal of the American Medical Association, as well as with separate data provided by AARP, finding that rising percentages of middle-aged and older adults are consuming marijuana products.

The study’s authors also reported that 75 percent of respondents favored the use of medical cannabis, a finding that is also consistent with prior surveys, and that many older adults use cannabis therapeutically without consulting directly with their physician.

“It is not surprising that a growing percentage of adults consider cannabis to be a viable option in their later years,” NORML’s Deputy Director Paul Armentano said. “Many middle-aged and older adults struggle with pain, anxiety, restless sleep, and other conditions that cannabis products can mitigate. Many older adults are also well aware of the litany of adverse side-effects associated with available prescription drugs, like opioids or sleep aids, and they see medical cannabis as a practical and potentially safer alternative.”  

Separate survey data published last year in the Journal of Primary Care & Community Health determined that most older adults hold positive perceptions about cannabis, and several recent studies show that marijuana use is frequently associated with quality of life improvements among seniors.  

An abstract of the study, “Epidemiology of cannabis use among middle-aged and older adults in the United States,” appears in the American Journal of Preventive Medicine. Additional information is available from the NORML Fact Sheet, ‘Cannabis Use by Older Populations.’      

Whiskey company cites marijuana in scaling back biz; OH psychedelics grant; Study: Cannabis tied to reduced alcohol liver disease

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/ TOP THINGS TO KNOW

Trump administration Solicitor General D. John Sauer submitted a request for a delayed timeline to file briefs in a marijuana and gun rights case that the Supreme Court is taking up—with the respondent’s lawyers agreeing to the extension.

The Ohio Department of Behavioral Health is supporting a program to educate first responders, police and healthcare professionals about how to deal with adverse psychedelic experiences with a $400,000 grant.

Whiskey company Heritage Distilling is scaling back its operations, citing “consumer shifts toward reduced alcohol consumption and alternative products, including marijuana.”

A new study found that marijuana use is “associated with a reduced risk of [alcohol-associated liver disease], with the greatest risk reduction seen in patients with” so-called “cannabis use disorder.”

• “Cannabis use was linked to lower risks of ALD, liver-related complications and death compared to non-cannabis users.”

NORML activist Chris Goldstein argues in a new Marijuana Moment op-ed that New Jersey gubernatorial candidates in next month’s election “barely seem to be paying attention” to issues of concern for cannabis consumers.

West Virginia officials are refusing to allocate $34 million in medical cannabis revenue that is supposed to support drug treatment, research and law enforcement programs over concerns about federal prohibition.

• “The money in the fund will remain unallocated until federal law changes.”

/ FEDERAL

Rep. Brittany Pettersen (D-CO) inserted remarks into the Congressional Record congratulating an attorney for being named “lawyer of the year” and noting that he “helped create regulations for recreational marijuana.”

/ STATES

Minnesota Gov. Tim Walz (D) signed another cannabis compact with a tribe.

The Kentucky legislature’s Interim Joint Committee on Health Services held a hearing on the rollout of the state’s medical cannabis program.

A Wisconsin senator said he’s optimistic a medical cannabis legalization bill will pass the Senate.

Rhode Island’s former top marijuana regulator announced she is running for attorney general.

Washington, D.C. regulators adopted changes to medical cannabis rules.

The New Mexico Medical Cannabis Advisory Board will meet on Monday.

—
Marijuana Moment is tracking hundreds of cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.
—

/ LOCAL

New York City mayoral candidates weighed in on safe consumption sites for illegal drugs during a debate.

/ INTERNATIONAL

Zurich, Switzerland officials are moving to extend a legal cannabis sales pilot project.

/ SCIENCE & HEALTH

A study highlighted the “potential of [unsaponifiable matter from hemp seed] as a natural anti-obesity therapeutic, offering new avenues for the treatment and prevention of obesity and related metabolic disorders.”

A study found that “MDMA increases feelings of trust in the social world.”

/ BUSINESS

Emerald Intel acquired Cannabiz Media.

IM Cannabis Corp. signed a non-binding indicative term sheet to acquire a 60 percent equity interest in a quantum computing bio data company.

Circle K plans to begin selling hemp-derived THC drinks nationwide in 2026.

Village Farms International, Inc. launched a one-way aroma valve built directly into its cannabis flower packaging.

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