• Michigan’s Cannabis Industry is continuing to expand
  • Industry newcomers need to understand is the importance of education
  • There are several barriers to entry that must be considered before entering the Cannabis Industry

In the past two decades, Gallop polls of United States citizens reveal an astounding shift in attitudes towards marijuana. The illicit plant has more than doubled in popularity since surveying citizens in 2000, with 64% now voicing support for legalization. Unilateral majority support from Republicans, Democrats, Libertarians, and other 3rd party voters now stands as the most adamant approval rating since 1969, when polling on the subject began.

Cannabis is increasingly holding sway over political arenas.  Massive state legalization is gaining traction and continues to wage battle with Federal oversight. Yet in spite of the overall controversy, the now almost 8 Billion dollar legal industry in America is attracting business development on a massive scale. The growth and hiring rates of the cannabis industry are dwarfing that of many traditional American industries.

Michigan’s Place in the Cannabis Industry

Michigan is one of the latest to the social development scene.  Governor Snyder signed laws in 2016 that initiated legal Cannabis business license applications. These applications were made available on Dec 15th 2017 and can be found online at the Licensing and Regulatory Affairs (LARA) website.

As cities across the state clamor for either legalization or banishment, it is reasonable to consider the proposition of creating your own medical marijuana business.  There is a massive amount of detail and legislation existing concerning the onset of regulated cannabis in Michigan. This large amount of information may be overwhelming to an industry newcomer.

Let us examine the means by which you may begin the journey of discovery with the most effective approach possible. All information, including the three bills which comprise the Medical Facilities Licensing Act, can be found at the Michigan LARA website. These documents serve as valuable resources on how to proceed through the various hurdles existing within the cannabis industry.

Where to Start

The most important place to start is to determine what type of cannabusiness peeks your interest. There is an abundance of information throughout the internet, which can help you identify your interests.  Additionally, interviews with established professionals in the cannabis industry can provide further insight.

Starting with a background on the industry as a whole may allow for better understanding. For example, if you enjoy cooking, then you may be interested in the production of cannabis-infused edible treats. Creativity will help you to distinguish yourself from the competition.  Furthermore, a business plan based on sound financials will help with avoiding many pitfalls. It is also important to understand that while many experts in the industry exist, everyone is still engaged in the active process of learning and adapting as social and regulatory environments shift.

Barriers to Entry

Businesses seeking state-provided marijuana licenses must prove they have sizeable capital to effectively keep their businesses from going under, and at least 25% of this amount must be cash or easily liquidated. While this sum varies depending on the license sought, licensees could need as much as $500,000 in total capitalization.  Each license type will require the following:

  • Grower class A (500 plants) — $150,000
  • Grower class B (1,000 plants) — $300,000
  • Grower class C (1,500 plants) — $500,000
  • Processor — $300,000
  • Provisioning center — $300,000
  • Secure Transporter — $200,000
  • Safety compliance facility — $200,000

Each of these numbers reflects total capitalization required, so liquidity will be a measure of 25% of the required sum for each respective license. However, multiple license holders such as vertically integrated cultivators, processors, and retailers (holding one of each license) will need the total sum of all licenses desired. For a fully integrated cultivator this would mean as much as $1.1 Million total, and as much as $275,000 in liquid assets on hand.

The asset components are only one of the major considerations for creating a licensed cannabis business.  Collectively these elements can be quite intimidating.  Experience in the business world, or a suitable investor who possesses familiarity with highly regulated environments may prove invaluable while progressing into the space.

Additionally, larger companies with an interest in guiding new cannabis entrepreneurs may offer educational resources and tools for acquisition of necessary industry staple knowledge. Databases like Leafly offer insight into current cannabis strain names and trends, as well as providing articles on the evolving cannabis sectors in America. Other notable company resources may include Marijuana Business Magazine, Cannabusiness Times, and even the long-standing High Times. These industry powerhouses provide constant updates on emerging market opportunities and trends allowing cannabis professionals to rapidly develop and adapt their product offerings.

What to Expect

Getting involved in the cannabis sector involves a primary focus on education, and that can take some time. Without a proper working knowledge of what has happened in the past and what is expected for the future, it can be quite difficult for business owners to succeed. Contrary to popular belief, it is much more complicated than simply growing a plant and selling it.

Even in mature and highly functional markets like Washington, Colorado, and California, large imbalances between supply and demand have led to a buyer’s market. The influx of parties seeking to cultivate has created an abundance of product and therefore significantly lower prices compared to past years.  The future of Michigan’s cultivation market could see a similar fate.

Price changes force the capitalization of cannabis to accelerate rapidly and will present further obstacles for small businesses. Without the ability to utilize significant economies of scale, small players in the cannabis space may soon find their costs weighing down their profit margins beyond sustainability.

What then does this data mean for the developing industry? Like most markets, the trend will be towards the larger companies holding sizeable market share. Therefore, only the most innovative small players may retain any significant growth. This by no means should be seen as a stagnation for the industry, but rather a sign of change and maturation indicating the beginning of a new era.

It is easy to make an arbitrary list and indicate the basic elements one may need to begin tackling the cannabis markets. The true task, however, is to convey the need for self-education from credible sources in the industry. To become a true player in this emerging space will require intelligence, partnerships, and an unwavering appetite to continually self-educate and evolve. This is the start-up culture personified and the triumphant may emerge as future captains of this evolving industry.