CANNABIS BUSINESS PLAN

Whether you are starting up a company for the first time or you are a serial entrepreneur,
someone in your company will inevitably pop the question: “Should we write a business plan?”
At this point, many might grumble and opt for the group to pick straws to determine who is
going to write it. Simply put, a business plan is no easy undertaking. It requires a considerable
amount of time spent researching your industry, scouting the competition, identifying your
market, setting realistic milestones, establishing key value proposition, structuring company
management, forming financial projections… the list could go on forever.

For better or worse, a business plan is absolutely essential. Not only does it improve your
company’s internal operations by setting tangible goals for your team, it also validates your
company from the perspective of investors, real estate companies, and the other business
relationships key to your company’s success.

Do you think any of these parties enter into long-term business relationships with just anyone?
Not a chance. They want to know that you are not just acting on gut feelings and are going to
simply wing it. Much like qualifying someone for a romantic relationship, they seek a company
that takes itself seriously and has its ducks in a row. The easiest way for them to assess this
professionalism is by asking for a business plan.

Even as cannabis inches closer each year to the end of prohibition, the “reefer madness” stigma
and stoner stereotype still remain for many people — and some of these people could be key to
the success of your cannabusiness. This is why demonstrating your professionalism and
overcoming stereotypes that work against you is more important than ever in this industry. And it
all starts with a business plan.

Executive Summary

The legalization of recreational marijuana in numerous states has created a market and a great
investment opportunity. Once federal law is liberalized to allow wider use of cannabis, which is
the direction current developments have been leading to, this is going to be a sunrise industry
with huge growth potentials. This section will describe the overview of your company, and what
you’re trying to accomplish. For those investors who aren’t familiar with the cannabis industry, it
might be important to include polls showing the growing demand for legalization of cannabis.

Objectives

This business plan reflects a desire to mine the wider legalization of recreational marijuana for
the launch and growth of a cannabis-based business. The goal is to participate in and profit from
activities in the various sectors of the industry—biotechnology, cultivation and retail and
consulting services.
The plan will be carried out in two phases. Phase I focuses on the particular states that have
legalized marijuana for medical purposes.  Under Phase II, the venture will be spread nationwide
as legally applicable.

In the description, explain your mission (day-to-day objective) and vision (long term objective)
for the company. Also, describe how these objectives will be accomplished, such as “leveraging
X platform,” “supported by X”, etc. This section could also include a potential list of strategic
partners and affiliates that would help you achieve these objectives.

The Team

From an investor’s standpoint, seeing positive resumes of the proposed partners makes their
investment decision easier to make. They want to know that the partners have good work ethic
and are prepared to dedicate the long hours necessary in the early growth phase of a company.
Partners should also have a healthy diversity of backgrounds to ensure that each partner brings
specialized skills and experience to the table.

This section will also be used to showcase why your team is the team has the capacity to win in
your respective business venture. Clearly articulate how your backgrounds will allow your
company to thrive.

Market Size and Development

Including research about the general marijuana market size against your company’s proposed
market sector gives readers an idea of your company’s potential growth. This research draws
some lines in the sand for which market segments your company plans to invest most of its
energy. These market segments would include marijuana retailers, growers, infused products,
testing labs, ancillary goods, and ancillary services.

Additionally, it gives you an opportunity to clearly define the kinds of customers you will serve
(including age, gender, median income, location, etc…) Unless you have a comprehensive team
and plan already created, it is wise not to try to capture the entire market in the beginning phases
of your company, as you will be spread too thin and lack any direction.

Here is a sample of recent macro trends and insights into the marijuana industry as a whole:

Investment firm Viridian Capital & Research recently published its outlook for the cannabis
industry in 2015, including a look at some 75 companies that participate in the various sectors of
the industry. Viridian noted that marijuana-related firms raised $80.4 million in capital during
2014, with the three largest segments being consulting services ($20.1 million), ancillary
cultivation and retail ($18.9 million) and biotechnology ($12.3 million).

Viridian also maintains an equal-weighted total return cannabis index that posted a gain in 2014
of 38.4%, primarily on the basis of a 939% return in the first quarter of last year. That is when
sales of marijuana first became legal in Colorado. Sales began in Washington in June. Consulting
services posted the highest return, 170%, followed by biotech (nearly 85%), infused products
(57%) and cultivation and retail (33%).

The same investment firm noted that the estimated $10-billion sale of marijuana in 2015 is far
too low. In effect, the industry could yield more.

Competition

No matter how unique your company is, there will also be another business competing in your
chosen market vertical. It really does not matter who does it first; what matters is who does it the
best. If you cannot identify any competitors, then your search has simply not been thorough
enough.

Depending on the type of cannabis company you are trying to build, this will drive the type of
competitive analysis that you build. The competition section is a great place to showcase the
research that you’ve done on other companies operating in the industry and also allows you to
convey why your company is different and worth investing in. For example, if you are building a
technology related cannabis company, you will want to show all the features of your competitors
and how your company’s features are different and better. This will also tie into your financial
section where you will need to clearly convey that the additional features that you want to build
will correlate to how much money you are seeking to raise.

A savvy investor will know right away if you’ve done your due-diligence on your company with
regards to how well you researched your competition and why your company can do it better. In
sum, don’t pretend that your competitors don’t exist. Acknowledge them. You may even be able
to build a strategic relationship with them someday that could provide enormous value to both
parties.

Brand Differentiation and Value Proposition

In terms of Value Proposition and Brand Differentiation (which may directly tie to your
competition), below is a list of things to consider:

– Longer lasting
– Rarer
– Easier to use
– Safer to use
– More efficient
– Designed by someone cool or endorsed by a celebrity
– Greener/more ethical
– Approved by a respected organization

Company qualities (aka value propositions) like these are important to define as best you can
early in your process. They will eventually inform how to brand your company to the public.
Through the customer discovery process, you are sure to discover other needs and desires of your
potential customers that you could not have anticipated. This is fine. As long as you treat your
initial value propositions as hypotheses to be tested in the field, you will be able to respond to
your customers’ true needs with agility.

Nevertheless, creating value propositions like these in the beginning will help guide your
company and prove to anyone that you have some sense of direction early in your growth.

In terms of how your company interacts uniquely with its customers, explain how your cannabis
products/services will endeavor to build relationships with customers and respond to complaints
quickly and calmly. Delivery will be faster and hassle-free at all times. Offer online ordering
where competitors don’t. Consider leveraging a digital “platform” much like Uber or Airbnb to
connect consumers with your company and with each other.

Marketing Plan

A strategy that will be followed, even in combination with other tactics, is to reemphasize and
even improve on what makes a business successful. A solid marketing plan will clearly show
how you plan to approach the marketplace and acquire customers. You may also want to
consider what the competitors are doing and how their strategies are lacking or how they can be
improved.

Building a sustainable and repeatable path to the customers is one of the hardest aspects of a
company so please make sure to pay special attention to this section as it can make (or break)
your overall business plan.

Financial Plan

The financial plan is one of the most important parts of your overall business plan.  If you are
seeking outside investment, either from an angel investor, bank, or institutional venture capital
firm, you will need to clearly show where their money is going.  For example, if you are trying to
raise $100,000 – where will that money go? Will it be marketing? Headcount? Research and
Development?

This section may also tie in other aspects of your business plan.  For example, in your marketing
plan, you may have Google Adwords as a strategy and found that your CAC (customer
acquisition cost) is around $2.50 per new customer.  The more research and well-thought
financial analysis you have, the more reputable and reliable you will come across.  Make sure to
thoroughly research every dollar that will be spent.

Conclusion

At the end of the day, a well-written business plan not only gives your internal team more
direction, but it also acts as your company’s resume for when third parties decide whether or not
to do business with you. In other words, it can make or break you.

If you have doubts about your writing abilities, rest assured there are plenty of professionals out
there who can help. There are even some good freelance business writers who bid their services
online. Before using anyone to help, it’s always wise to have them sign an NDA to keep your
business idea confidential. Keep in mind though, that there are many qualified professionals out
there who will not, under any circumstance, sign NDA’s since doing so would open them up to
unnecessary legal liability. As long as you feel comfortable with who you’re working with, there
shouldn’t be any problems.  Hopefully we have provided you with the necessary tools to create a
brilliant business plan that will thrive in the growing cannabis industry.