Post date: 10/25/2022

cannabis and money on hands

It’s never been a better time to be in the cannabis industry – as more and more states adopt legalized cannabis, entrepreneurs are seeing green everywhere. As the cannabis industry enters the mainstream and becomes more regulated, it’s important to meet the additional challenges that come with operating a cannabis business. 


With preparation and the right tools, you can easily position your cannabis business for success and avoid rookie business mistakes. If you’re looking to get started in the cannabis business, read on to learn the five basics you’ll need to know before opening your doors. 

1. Decide On A Cannabis Business Type

Every business choice you make depends on the kind of cannabis business you want to start, from licensing and location to taxes and target audience. Each business model has different requirements, so before anything else, decide what kind of product or service you’ll offer, and the market you’ll serve. Common cannabis businesses include: 


  • Medical and/or recreational retail dispensaries
  • Cannabis cultivation (indoor and outdoor) 
  • Manufacturing (products, edibles, etc.) 
  • Logistics (transportation and distribution) 
  • Cannabis testing facilities
  • Ancillary cannabis services (accounting, packaging and labeling, security, marketing) 


As of 2022, cannabis is legal or decriminalized in 37 states, three territories, and the District of Columbia. However, it is still classified as a Schedule I controlled substance under federal law. As such, licensing laws vary from state to state, so make sure to review your state regulations thoroughly. 

2. Define Your Cannabis Target Market

After deciding on your cannabis business type, define your target clientele.  A loyal client base is critical to long-term business success in any industry. By identifying your target market, you can position your business to attract their attention, meet their needs, and differentiate yourself from local competitors.   

To define your target audience, decide: 

  • Who does your business serve in your local market?
  • What services and/or products does your business offer? 
  • Does your business solve a specific problem? 
  • Where will your business be located?
  • How does your business differ from your competitors? 
  • Why should customers choose your business? 

By mapping out your business model and target customer beforehand, you’ll have a realistic idea of your business path to success. 

Cannabis US state

3. Cannabis Licensing, Permits, and Tax Registration

The application process for cannabis licensing can be lengthy, complex, and expensive, often requiring the assistance of experts. Because of the conflicting state/federal legality of cannabis, every state has its own regulation laws and licensing requirements. As you prepare your cannabis business plan budget, make sure to review licensing requirements in your state. 


Additionally, state and local governments may have specific rules for registration and permits, so make sure your business is compliant under all regulations. For example, cultivators may require specific permits that dispensaries don’t, and vice versa. Cannabis logistics companies may require transportation licenses, while edible manufacturers need food safety licensing. Each cannabis-specific licensing requirement comes in addition to the licenses, permits, and registrations required of other businesses, so make sure you’re prepared for the paperwork.


Likewise, tax registrations vary by state, so before getting started, review your state’s tax requirements to ensure compliance and prevent any unwelcome surprises at tax time. Regardless of your state, you should apply for an employer identification number (EIN,) which is also called a business tax ID number. This number will make it easier to secure funding and banking options, as well as make payroll and income taxes more streamlined during tax season.

4. Funding and Financing Cannabis Businesses

Startup costs are a reality for any type of business owner – but for a cannabis business owner, those costs are likely to be higher than other industries. High rent from nervous landlords, steep taxes, minimal write-offs for operational expenses, licensing and insurance costs present financial hurdles before a cannabis business ever opens. In many states, cannabis licensing application fees can cost thousands of dollars and are non-refundable – even if your application is denied. 


Many cannabis licensing applicants fail to meet the startup capital requirements needed to ensure smooth operations from the get-go. For many small and medium-sized (SMB) businesses, this might require outside funding from lenders or investors. But as a historically underbanked industry, financing options for cannabis businesses are limited. Big banks are subject to federal banking laws, and while cannabis may be legal by state, it’s illegal federally. The FDIC cannot back any bank that lends money to a business that violates federal law, which technically, all state-compliant legal cannabis companies do. That means most big banks won’t do business with cannabis entrepreneurs, making traditional loans rare. 


Despite the obstacles, it’s not impossible to fund your cannabis business. Cannabis-specific funding companies, venture capitalists, and angel investors fulfill some of the financial needs of the industry, but not all. Which is why your business needs an alternative lender whose online marketplace offers cannabis FinTech solutions, like Paybotic.

cannabis payment terminal


5. Choose The Right Cannabis Payment Platform

Paybotic offers a full suite of cannabis FinTech solutions to get your business ready to grow. From merchant cash advance to cannabis payment processing and Smart Safe end-to-end cash storage and banking, you’ll find all the tools you need for success. As a pioneer in cannabis FinTech, we understand the unique needs of your industry and have designed a comprehensive collection of products to serve you. 


Our cannabis tools are suited for cannabis businesses of any size and are scalable as your business evolves over time. With reliable products, transparent practices, competitive prices, and a team of friendly, in-house experts, Paybotic delivers all-in-one solutions for your complex, ever-changing industry. Not only do we know the ropes – we’ll help you learn them, too. 


Apply today to make sure when you open your doors, you’ve got Paybotic on your side. 


Just getting started? Learn more about how Paybotic’s Merchant Cash Advance program can help you turn a dream into a reality! 

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