More than One Way to Skin a Cat

By |2018-08-28T14:24:28+00:00January 23rd, 2018|Federal Marijuana Legislation|

As the cannabis market continues to mature, more and more ancillary services are becoming available in most locations, offering everything from product extraction equipment to packaging, printers, and papers. These ancillary functions of the cannabis industry have multiple advantages over traditional plant-touching facilities, starting with the simple fact that they have no need to touch cannabis at all. Without the need to function as a hands-on business in the industry, the need for state or city licensing is avoided, saving thousands of dollars and many hours of licensing requirements. For many selling a good or service, a simple office or warehouse space is all that is needed to get started, therefore, the overall costs to enter the market may drop compared to other cannabis touching businesses such as cultivation, retail or others.

When considering profitability, many companies may find that trying to take a cannabis-handling company across state borders requires developing whole new infrastructure and having employees in the new state. Cannabis product cannot cross state lines, therefore expansion for most traditional business in this market can be quite limited. This is not so with ancillary companies though, as there are no specific restrictions which would keep their business bound to one state or another. It may also be noted that many ancillary service and tech companies do not limit themselves to only serving the cannabis markets, but if applicable, will sell goods to whatever markets may derive value from them. According to Marijuana Business Daily (MJBiz Daily) only 51% of service firms and 37% of tech/product companies surveyed were exclusively focused on cannabis. It can be easily seen why many companies may choose to work around the industry in such manner, as their profits are not solely dependent on the somewhat volatile marijuana market in the U.S.

For investors, the ability to invest in the cannabis market through ancillary services provides them with a safe way to profit without the risk of working with the plant itself. For those truly wishing to capitalize on cannabis, but possessing a low risk tolerance, the ancillary markets offer the opportunity of a lifetime. The fight for legal cannabis will continue to grow and creating products/services to supply the needs for cannabis companies will also continue to increase.

While the industry must have operators manufacturing, processing and distributing the plant, the advantages of operating in the ancillary services industry are growing. It may soon be that investors will become more and more comfortable with the plant itself, but even then there will always be a need for the ancillary functions that keep our cannabis markets thriving.


About the Author:

Jessica Pendleton