Guide to Starting a Commercial Cannabis Grow Operation
With total sales in Washington State reaching $1 billion since recreational cannabis was legalized in 2014, entrepreneurs from all around the world are considering an investment in American recreational cannabis production. From first-time business owners looking to capitalize on a new market to larger institutions and established organizations establishing a foothold pre-federal legalization, there’s plenty of opportunity for intrepid business ventures within the recreational cannabis market going forward. This is your guide to starting a commercial cannabis grow operation.
Frequently Asked Questions
We have compiled a list of frequently asked questions to better help guide inquiries for starting a commercial cannabis grow operation. We recommend reading the answers to our FAQs before proceeding to read the guide below.
What service does WeatherPort Shelter Systems provide?
Do you provide consulting services if I want to start a commercial cannabis business?
Can you help me with drafting a cultivation operations plan?
Where do I obtain a cannabis cultivation or growers license?
Do you sell cannabis seeds or cannabis plants?
What is the price for a WeatherPort GrowPort?
Can I add my own grow lights and horizontal air flow fans (HAF fans), wet wall system, etc?
Can I invest in WeatherPort Shelter Systems?
As with any new venture, getting started in the cannabis industry requires one thing among all other aspects: ambition. If you’re prepared to commit the majority of your time to the cannabis industry, you’ll need to be well-versed in its history as well as current events, data, and the ever-changing political climate in order to be successful.
Cannabis Industry Education and Background
The cannabis industry is changing fast, meaning information relevant to today’s sales data, legal restrictions, and best practices may become quickly irrelevant tomorrow. Full-time research and development efforts are important to any industry, but the extent to which changes in the cannabis world are occurring requires a closer eye to current news and industry reports.
Creating a Cannabis Business Plan
Creating a cannabis business plan is slightly different from that of a traditional business or initiative. Aside from typical hurdles like financing, competitive research, marketing, operations, and structure of ownership, you’ll need to closely study the state-specific cannabis regulations and ensure your business won’t run afoul of limitations placed on growers by these new laws. We recommend you research cannabis consulting firms in your area, or contact your state’s cannabis governing agency to discuss governing laws. Furthermore, cannabis producers should consider the following:
- Security and traceability
- Employee training and compliance standards
- Removal of waste products
- Transportation and logistics for retail, packaging, and processing
- Testing capabilities and protocols
- Accurate description of grow facility, operations planning, and production process (including equipment, soil, and fertilizers to be used)
Choosing Grow Site and Setting Up a Grow Operation
Choosing to invest in a cannabis production facility over a retail storefront makes getting things off the ground a bit easier – prospective producers are able to utilize more remote, out-of-the-way locations with greater benefits to security, logistics, and future expansions. There are restrictions under current state laws that keep producers from opening grow facilities away from public schools, parks, transit centers, libraries, or arcades that cater to minors.
Outdoor Growing Facilities
In Washington State, outdoor cannabis production facilities must be established in an open expanse enclosed by a physical barrier or a sight obscure wall at least eight feet high. In Colorado, producers are prohibited from growing cannabis outside of a secured, enclosed location – including high fences and semi-permeable roofing.
Fortunately, the climate of the Pacific Northwest lends itself very well to outdoor cannabis production. In fact, some rural areas of Washington and Oregon with agricultural backgrounds have found cannabis to be an easy to maintain, financially lucrative cash crop. Because cannabis roots can expand exponentially, outdoor growers can reap a far greater harvest by allowing their plants to grow to 10 feet tall or higher, uninhibited by artificial lighting or ceilings. Cannabis makes an excellent cover crop, allowing ample space on the surface for smaller crops like tomatoes, carrots, and lettuce to grow with an extra layer of protection above.
If your local climate and state restrictions allow for outdoor cannabis production, you’ll be rewarded with a product that can only be achieved through Mother Nature’s guidance, but as any farmer will tell you, their livelihood lives and dies by her hand. Just as susceptible to pests, inclement weather, and drought as any other cash crop, cannabis is a fickle plant as well as a lucrative one. In such an unpredictable and burgeoning market, it’s crucial that early entrants into the cannabis industry choose caution when determining whether they want to invest in a controlled indoor production facility or a riskier endeavor outdoors.
Indoor Growing Facilities
Indoor cannabis grow facilities must be in an enclosed and secured facility with functional windows, doors, rigid or semi-rigid walls and a roof.
Running a successful commercial cannabis grow operation is an expensive challenge. While growers can maintain a higher level of control over humidity, available light, and pests in an indoor environment, maintaining proper light levels and staying as energy-efficient as possible are top priorities for commercial cannabis production operations.
Space, Basic Infrastructure, and Soil for Cannabis Production
Whether you’re a first-time grower or experienced in the art of growing cannabis, you’ll need one thing above all else: space. You can grow a handful of plants in a 5′ by 10′ grow tent, but those looking to make a splash in the cannabis industry should consider a professional cannabis grow facility to ensure top-quality product and consistency in production.
The most important consideration in evaluating a potential grow space is ensuring proper ventilation for your crops. Cannabis plants require a lot of light, which typically emit a tremendous amount of heat. Without proper ventilation and air exchange, producers risk cooking their crop or limiting yields due to excess humidity, heat, or oxygen. Greenhouse-specific HVAC systems exist for closed greenhouse schemes and help producers program hyper-accurate climate control systems to ensure the facility maintains ideal growth conditions.
As far as potting each individual plant goes, allow for at least a 5 gallon pot for each cannabis plant. Cannabis roots expand very quickly and require a lot of room, therefore, smaller receptacles will result in smaller yields. Grow bags are also widely used in the cannabis production industry, placing them on a permeable table with trays or tarps to collect water runoff.
If you choose any aspect of your cannabis grow operation more carefully than others, let it be the soil. The grow medium is an essential aspect of growing any crop, but the quality of soil can make a tremendous difference in the outcome of the final flower. You’ll also want to carefully monitor the pH levels of your soil, as cannabis plants prefer pH environments of 5.5-6.5.
While some high-end growers are switching to permeable concrete to facilitate natural water recycling, it’s not a bad idea to use wooden pallets or plastic, grated platforms as the floor of your grow tent to help with runoff or collect for recycling.
Lighting and Electrical
Costs of electricity is the number one expense facing producers and often matches or exceeds total lease costs per month during production.
Artificial lighting, dehumidification, ventilation, air conditioning, and irrigation control systems all require immense amounts of electricity, leading some growers to investigate energy-efficiency options like the following:
HPS Grow Lights vs. LED Grow Lights
There’s much debate in the world of artificial lighting for cannabis greenhouses, but studies have shown HPS – or High Pressure Sodium – lights provide a more consistent form of lighting for indoor grow facilities.
According to the Northwest Power and Conservation Council, 20-year projections on electrical use in both Washington and Colorado throughout the indoor cannabis production industry suggest an average annual usage of 185-300 megawatts. That’s equivalent to the annual electrical use of more than 200,000 homes in the United States.
That said, no forward-thinking cannabis entrepreneur should overlook energy-efficiency standards in initial constructions. An estimated 2% of Denver’s annual energy usage went toward cannabis production facilities in 2014; projections for energy usage among states nearing legalization (including California, Nevada, and Maine) are unquestionably unsustainable. An estimated 1% of the energy usage in the United States, equating to $6 billion in annual operating costs, goes toward cannabis grow facilities – legal and otherwise.
We recommend three future-proofed upgrades for cannabis production facilities of any size:
Invest in Solar
Solar energy is becoming increasingly affordable – especially at larger and more significant scales. Colorado, presumably spurred by the initial successes and yet substantial energy costs of its early recreational cannabis industry, has pledged to generate more than 30 percent of its electricity from reusable and renewable sources by 2020.
In cannabis-laden Boulder, Colorado, the city has implemented a licensing solution that requires growers to use energy monitoring devices as well as paying a fee for carbon emissions, adopting renewable energy sources, or purchasing energy credits. And it’s been predicted that the cannabis legalization movement will help spur innovation and more widespread adoption of energy-efficiency solutions in general.
Recycle Water and Collect Rainwater
Already considered a success in achieving water-saving status in the UK brewing industry, some cannabis producers are investing in closed-circuit desalination (CCD), reverse osmosis water systems. At the same time as purifying incoming municipal water sources, these CCD systems can recover as much as 97% of wastewater, therefore reducing water demand and saving in disposal fees.
Smaller producers in rainy climates such as Oregon and Washington are investing in rainwater collection and storage capabilities to save on irrigation costs. Because a single cannabis plant can use as much as 22.7 liters of water per day and many cannabis outdoor growing seasons conflict with periods of low-precipitation, outdoor growers and those who rely on rainwater capture without long-term storage solutions won’t find much benefit in a recyclable water investment.
While it remains an industry on the verge of wider adoption, commercial and large-scale rainwater collection and storage efforts are already in effect around the world. More than 750 buildings in Tokyo, Japan are outfitted for long-term rainwater collection and storage for landscaping uses. Thrifty cannabis producers would do kindly to invest in early rainwater adoption solutions in order to negate irrigation costs and avoid shortages due to droughts or supply demands into the future.
Consider an Energy-Efficient Greenhouse Designed for Cannabis Production
According to Confluence Denver, producers who opt for an energy efficient greenhouse facility pay about half the costs of those who grow in a warehouse. The importance in selecting a functional, sustainable grow facility early in the life of your recreational or medical cannabis business is monumental. Recent investigations show a direct correlation between sustainable building and operations standard and profit margins on large-scale facilities, meaning larger producers and distributors may be in a more strategically beneficial market position should federal legalization occur.
There are already private projects invested in researching the most affordable methods of growing and distributing recreational cannabis in the U.S. An effort to evaluate the cannabis industry’s LED lighting requirements and help improve efficiency estimates the best and most valuable techniques for optimization are not yet public – thanks largely to the “behind closed doors” nature of the industry from a historical perspective. But early reports from first-generation growers in Colorado and Washington suggest that those invested in sustainable energy solutions benefited most from sales in the first fiscal year of legalization, whereas those growing in indoor warehouses made up about one-third of the industry’s first year of legal energy consumption.
Especially due to Colorado’s restrictions on outdoor cannabis cultivation, it’s hard to argue for any indoor grow solution outside of a covered, controlled greenhouse facility.
Security and Compliance for Cannabis Production
In a market estimated to reach between $20-35 billion by 2020, security and compliance with state regulations is critical to success in the recreational cannabis world. Producers need to account for a highly-prized cash crop, but also the cash-only nature of the current, state-level restricted recreational cannabis industry. Because employees are also at risk, investigating comprehensive and sophisticated cannabis security solutions is highly recommended for growers of every size. Some security and compliance firms boast growth rates between 300-400% since legalization in Colorado and Washington.
In Washington, state laws require the following minimum security solutions for all cannabis licensees:
- Comprehensive identification system that includes the authorized person’s’ full legal name and photograph.
- Non-Employee, non-customer visitors must hold and display an identification badge and log their time of arrival, departure, and purpose of visit in a record that’s preserved for a period of three years.
- A security alarm system that covers all points of entry and perimeter windows. While not required, the state advises utilization of motion detectors, pressure switches, duress and panic buttons, and hold-up alarms.
- A complete surveillance system that includes a storage device and internet protocol (IP) compatible. Technical requirements include a minimum resolution of 640 x 470 pixels, 10 frames a second recording rate, and 24-hour continuous operation. Furthermore, the storage device must be secured on-premises using a strong box or locked cabinet to prevent against tampering or theft. All video surveillance footage must be stored for a period of 45 days and accessible to law enforcement or state licensing officials upon request.
- Video surveillance cameras should be positioned to achieve easy and uninhibited view of any person approaching or leaving the premises as well as within view of all POS areas, perimeter entrances/exits, grow facilities, processing rooms, and distribution areas. Furthermore, all cannabis products must be placed in a quarantined storage area for 24 hours prior to transportation to another licensed facility.
- Cannabis producers and licensees must adhere to a strict product tracking system that ranges from seed to sale. State requirements vary between jurisdictions, but it is expected that most recreational markets to expand into the future will follow a similar example as Washington and Colorado.
Comprehensive guide & resource for starting a commercial cannabis grow operation. Learn about costs, energy use, local cannabis laws & more.
So You Want to Start a Cannabis Business: Advice for the Absolute Beginner
Interested in starting a business in the cannabis industry? I can’t blame you—business is booming and there’s the potential to make huge profits as this sector continues to grow exponentially.
Over half of the United States already have legalized cannabis in some form—that’s 29 states plus the District of Columbia. Many states have only legalized cannabis for medical use, but that’s gradually changing as well. Currently, one in five Americans lives in a state where they can use cannabis recreationally, without a doctor’s note.
In 2016, marijuana sales in North America grew by a massive 30 percent, and sales are projected to reach $20.2 billion by 2021 . This is a huge deal, especially considering the industry is still in its infantile stages. There are still many gaps waiting to be filled by those who are forward-thinking and innovative enough to realize this is a once-in-a-generation opportunity.
That said, the path to a successful cannabis business is not a smooth and easy one to navigate—it’s full of confusing laws and regulations, steep taxes, and many other unforeseeable roadblocks and hoops to jump through. That’s why we asked cannabis industry experts (who already have successful and profitable businesses!) for their top advice on starting a “cannabusiness.” Their tips and information will give you a clearer road map and allow you to be more prepared for your exciting journey ahead.
Come up with a unique idea
When starting a business in any industry, having a unique idea that fills an unmet need is crucial to becoming a success.
First, you’ll need to decide which sector of the marijuana industry to go into. Generally, when someone thinks about types of cannabis businesses, dispensaries and grow operations usually come to mind.
Many see huge dispensaries in Colorado, for example, raking in big bucks. But this can actually be the riskiest business area to choose, with the tightest profit margins. As the legal use of marijuana continues to grow across the U.S., the price of weed will continue to go down, leaving those with grow-ops and dispensaries with fewer profits as time goes on. They’re also the ones to be hit hardest with a sea of strict rules and regulations. On top of all of that, banks still refuse to work with businesses that grow or distribute marijuana because it is still illegal under federal law.
This is sure to change eventually, but for now, you will still need to fundraise enough capital without any loan assistance. How much? Many states require proof of at least $1 million in available cash to obtain a dispensary license. You should also keep in mind that you won’t be able to keep your profits safely stored in a bank account. All businesses that directly deal with cannabis are forced to keep their capital in cold hard cash, which is obviously highly inconvenient and dangerous—though some have been getting around this issue using cryptocurrencies like bitcoin to keep their funds more secure.
But the cannabis industry is much more than just grow operations and dispensaries. If you’re a foodie, perhaps look into making a unique edibles line. There are even people opening up “bud and breakfasts”—cannabis-friendly lodging (some even provide marijuana-infused oil massage—sign me up!).
But truly, the least risky kind of cannabis business to start is one that doesn’t directly touch the controversial plant at all. According to the Controlled Substances Act , the bulk of the regulations for businesses in the cannabis industry are only applicable to cannabis growers, processors, and sellers. This is why ancillary marijuana businesses are doing so well—they aren’t burdened with all the red tape and high taxes. From hydroponics and cultivation products to professional training and education, consultancies, media companies, the plethora of new technologies—the list is endless, and so are the opportunities.
If you’re technical and a savvy inventor, you could design a product that helps marijuana user process or ingest their medicine—think about all the fancy vape pens that have been coming out, or the rosin presses that easily extract solvent-free oil from bud or trim.
Mike Bologna, CEO of Green Lion Partners , a Denver-based business strategy firm focused on early-stage development amongst firms in the cannabis industry, explains how essential a viable business idea is for aspiring cannabis entrepreneurs:
“When considering starting a business in the cannabis industry, entrepreneurs must first ensure their concept is legally viable and offers a unique solution for the space.
Too frequently, a concept is exciting but cannot be supported within the legal framework or is simply a recycled concept that is reliant upon ‘first mover’ advantage in their jurisdiction.
For long-term scalable success, a company must be able to withstand the dynamic regulations and business factors in this rapidly changing space.”
Marijuana Business Daily put out a useful chart showing the profitability of each type of cannabis business— take a look here .
Understand your consumer base
Once you have a winning idea, it’s vital to know who is going to be interested in your products or services and to deeply understand their particular wants and needs.
Bethany Gomez is director of research for Brightfield Group , a cannabis-focused market research firm providing accurate and comprehensive consumer, brand, and market insights in the industry. Here’s what she has to say on the matter:
“When starting a cannabis business, two things are crucial: understanding the unique challenges of this industry and understanding your consumer base and the unmet need you are filling for them.
The cannabis industry is unlike any industry you have ever worked in, and the regulatory, supply chain, banking, taxation, advertising, and stigma aspects of the business eat your profits and draw your attention away from core aspects of your business.
The legal cannabis space is becoming crowded and targeted consumer segmentation is increasingly important, so it’s key to understand who your core consumers are and what they want from their products.”
So get out there and do research on how you can ensure your future customers are happy and satisfied with what you offer them. Really get to know and understand them. Build a relationship with them. Do this, and you will develop a loyal consumer base.
Krista Whitley, CEO of Altitude Products , a Las Vegas-based conglomerate of cannabis companies such as Social Media Unicorn, a canna-brand marketing and sales agency, and the Vegas Weekend Box, a monthly variety box of Las Vegas’ top cannabis products, agrees that a good relationship with your consumers is essential:
“Success in the cannabis industry is uniquely tied to the connection and brand that leadership has with the local cannabis community.
It doesn’t matter if you’re starting your cannabis business in Washington, Colorado, or Maine; you should start by building authentic relationships with your local cannabis community.”
Know the rules (and follow them!)
Even if you have a brilliant business plan, plenty of funding, and excited consumers that want what you’re offering, if you don’t play by the rules, you’re going to get shut down, get hefty fines, and could even go to jail. Let’s try to avoid that, yes?
The laws, rules, and regulations for opening a cannabis business are incredibly confusing and complex. For example, even setting up a means of accepting payments can be tricky (so make sure you read this article on accepting payments as a cannabis business to learn more about your options). It’s recommended to hire an experienced attorney to aid you in navigating this process to make sure your business is legit.
“Both medical and adult-use businesses require, in most states, a license to operate, which is generally valid in just one state. Thus, your plan needs to comply with state law. The application process will give you a roadmap and likely where you can operate,” explains Norman Olson, director of marketing and Business Affairs at Hightech Extracts , an engineering company developing systems for the manufacturing of extract-based products. “Funding and differentiating your service or brand will definitely help. Pick any consultant you engage only after thorough reference and background checks. Smoking a joint does not make you a cannabis expert!”
If you are irresponsible with your new cannabusiness, not only can this cause huge problems for you, but also for the cannabis industry as a whole. When businesses are performing reckless practices, it hurts the reputation of this new industry that still has many negative stigmas against it from the wider public.
Arnaud Dumas de Rauly, chief strategy officer for The Blinc Group, the first business incubator for brands specializing in vaporizer and cannabis consumption technologies, advises new cannabis-related businesses to understand the space and pay close attention to industry best practices:
“The cannabis industry is new and not yet fully regulated, making it very important for people entering the space to get in touch with their local institutions and industry groups and follow their guidance wisely.
The vaping industry was in a similar position a few years ago, and it’s now facing huge regulatory challenges, some specifically caused by entrepreneurs that didn’t take the time to do things right when first setting up their businesses, such as not acquiring licenses, using bad branding , labeling, and sales channels, and marketing to children .
For the cannabis industry to grow properly, it’ll need to avoid giving extra ammunition to regulatory agencies and opposition groups that seek to destroy it.”
Raise enough capital
With any startup, investment capital is crucial to getting your business plan off the ground. Some investors don’t want to put their money into cannabis businesses since it’s still illegal under federal law. And, as stated earlier, forget about asking the bank to fund your marijuana business. Focus on finding some great private investors. While some are still wary, there are many investors out there excited about how fast the marijuana industry is exploding with growth, and they want in on the action. Look here and here for starters.
Dr. Andrew Kerklaan, president and founder of Dr. Kerklaan Therapeutics , a robust line of doctor-designed, lab-tested, patient-approved cannabis products that provide pain relief, sleep aid, PMS relief, and skin health, agrees:
“The days of bootstrapping a start-up in the cannabis industry are quickly coming to an end, if not already over.
My advice is to raise smart money with investors who can bring experience and expertise from other industries to the table. Raise enough capital to quickly be able to compete.”
Work hard and have fun!
It’s a very exciting time to get involved in the cannabis industry. There are boundless opportunities to collaborate with a huge variety of businesses.
Hopefully, now you have more of a solid idea of what it takes to start a business in the marijuana industry. Those willing to work hard and play by the rules have the potential to be extremely successful. Follow these guidelines and you will be well on your way to having a profitable business in the cannabis industry. Good luck!
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The cannabis industry is huge and continues to grow. If you’re interested in starting a cannabis business, here’s how to start and what to keep in mind.