A dispensary business plan is perhaps the most important document a dispensary owner needs to create before setting up shop.
In fact, some locations require business owners to submit a comprehensive dispensary business plan before they can acquire a license.
But what should be included in a dispensary business plan, and why? In this article we touch on the top 10 things to include in a dispensary business plan.
Why do I need a dispensary business plan?
Studies show that a business plan can double your chances of attracting investment and growing your business. This document will be helpful when applying for licenses and permits from authorities, pitching to potential investors and partners, managing budgets, and establishing a timeline for launch.
Aside from being good for business, some states require you to submit a business plan before you can even apply for a license.
That's right, most places you must submit a business plan to the licensing bureau for approval to get a license to open a cannabis dispensary in North America. The states’ licensing bureaus are looking for specific elements in the business plan, which must be present in your business plan for you to qualify for a license or permit to open a dispensary in a specific area.
While all states might require details like location, information about the product and the team, some requirements are state-specific. So you need to do your research and find out what your state licensing commission prioritizes before writing your business plan.
Other reasons a business plan is paramount? Investment.
To stimulate investor interest in your business idea, you need to be able to present a good, compliant business plan. In the investor community, this is considered the bare minimum an entrepreneur should do to get their idea considered. It is not enough, however, to tick all the boxes. You need a business plan that will make investors sit up and call you rather than one of your competitors.
Going into the cannabis industry could be considered risky at such an early stage in the industry's life cycle. With the absence of nationwide federal regulation of the industry, each state is beating its own path through the legalization process, which translates to increased risk for investors. That increased risk, along with the wave of cannabis businesses opening up, means that your business plan needs to help investors answer the question, “Why you in particular?”
To ease this process for you, we have created a list of the ten most important elements to include in your business plan to give yourself the best chance of attracting investors, getting a license, and succeeding in the long run.
What should you include in a dispensary business plan?
Within a dispensary business plan, there are 10 key factors you need to be sure you include: Market need, branding, target market, location, execution strategy, products and ops, finances, the team, marketing, and compliance. In this article, we will touch on each one of these topics in more depth.
What 10 things should you include in your dispensary business plan?
- Market need and opportunity
- Brand identity
- Target market analysis
- Details around location
- Execution plan
- Product and operations
- Financial information
- The team
- Marketing and sales plans
- Compliance and security
1 - Market need and opportunity.
Great businesses succeed because of their customers. This principal is the same when it comes to opening a dispensary.
The first thing any business owner should do is market research, and identifying the market need in the space.
That is not as simple as saying there is no cannabis dispensary in the area because - what if there is no need for one in the first place?
To establish a compelling argument for the need for your business in a particular area, it will help to do some research. Find out how the market in your area is accessing the product. What is wrong with that method? How would your business be a solution to that problem that you have identified? That is how you establish a need for your specific business and validate the opportunity you have identified to potential investors.
2 - Brand identity.
One of the essential elements to include in a cannabis business plan is your unique brand identity. This is important for both your potential investors and your license application process.
Brand identity refers to how the organization sees itself as a brand. For instance, what is your company's long-term vision? What are your values? What do you stand for? This information will help your potential investors understand you better and align themselves with your vision.
Furthermore, thoroughly articulating your brand identity will also help distinguish you from other license applicants at the licensing bureaus, which is vital because uniqueness and innovation are considered when awarding licenses.
Finally, having a strong brand identity will help you succeed in the long run by creating loyal customers, building a like-minded team, and leaving a memorable splash in the market.
3 - Target market.
Another essential feature of a good business plan is the target market. While the details of this are typically covered in a separate marketing plan, it is important enough to merit its own mention in the overall business plan. This is because identifying your target market early will help with many of the processes involved in setting up a cannabis dispensary.
Deciding whom you are targeting as a customer base will inform decisions to do with the product itself as well as branding, location, and the effective marketing strategies available to your dispensary. Furthermore, properly identifying and articulating your target market can help when applying for a license, as any ambiguity around your target market could be misunderstood as an intention to market to minors, which will get your application for a license turned down.
4 - Location
Expanding on your cannabis dispensary location is more important for a cannabis dispensary than for most businesses. In most states, cannabis dispensaries are required to have a location before they apply for a license. This is partly due to the various zoning laws restricting where one can open up a cannabis dispensary.
States limit the number of cannabis dispensaries allowed to open in their cities and municipalities. Furthermore, in many states cannabis dispensaries are not allowed to be set up close to schools, hospitals, or youth centers.
This is the reason why you need to include your intended location in your business plan, and you need to make sure that your area's zoning laws approve this location.
Aside from the geographic considerations, you might also incorporate information on dispensary location scouting, the rental marketing for cannabis stores, and shoplifting specs.
Expanding on this more, you might consider pitching the name of a cannabis consultant or realtor who you can have in your court during the challenging process of finding a location that works for these guidelines.
5 - Execution plan.
Before approving an applicant for a cannabis retail license, most licensing commissions need to know that the applicant’s business model is feasible and that the applicant is capable of executing the plan once they get a license. As mentioned above, states limit the number of licenses they can give out and, as a result, the feasibility of the idea matters.
To establish feasibility, you will be required to submit a detailed execution plan. This includes your go-to-market strategy, launch budget, and your strategy to recruit employees. Other features like the dispensary technology you plan to use and your community outreach programs can also be included in this section of the business plan.
6 - Product and operations.
Another critical element of your business plan is your product description. This section appeals to investors and the licensing commission, as well as potential partners in the team. Describe the products you wish to sell in this section. This is important because not all products are allowed to be sold in all states. If applicable, explain the process of making that product along with the associated costs. Another important feature to add here is the paraphernalia required to consume your products and the benefits to your customers.
In addition to the above, you should also indicate where you plan to source your flower and the logistics involved in getting it to the store. All this information will increase your credibility to potential investors and cement the feasibility of your idea to the licensing commission in your area.
7 - Financial information.
The financial section of a business plan is a significant element that investors consider before investing. That is because this section usually includes the projected revenues and profits of the business over time, the dividend sharing policy of the business, and details of other investors already on board. All this information is important for potential investors.
In addition to investors, the licensing bureau will also be interested in your financial information. This is because starting and operating a cannabis business is expensive, and you will need to demonstrate a capacity to raise capital before being granted a license. So make sure you indicate what your plans for raising capital are and who are your existing investors.
Need financial tips, we created two helpful resources you might consider investigating for this part in the journey.
1 - The cost of opening a dispensary in 2022
2 - How to finance your dispensary
8 - The team.
Your team is one of the biggest determinants of whether or not your business will succeed. The right team can help you identify opportunities, save time and resources, and meet your business goals. It can be a significant selling point for investors. That is why you need to include a section on the core team members, their credentials, and what they bring to the enterprise.
It is also crucial that you indicate the organizational structure and the business hierarchy so readers can understand what the decision-making process is in the team.
A dispensary should have some key members on the team, and acting as consultants. For more information on organizational structure check out our article on the 8 people you need on your dispensary team.
9 - Marketing and sales plans.
No business can survive today without a marketing plan. The cannabis industry is no different. It would help if you had a section in your business plan that covers how you intend to reach your target customers. Illustrate the consumer's journey from the first contact with the brand to becoming a qualified lead and eventually a brand customer.
In this section, you should identify your main marketing avenues based on where your target market can be found. This section should also include information on your competitors as well as your competitive advantages. Finally, indicate your key milestones and how you intend to measure the success of your marketing and sales performances.
Want more information on this? We created an entire knowledge hub on dispensary marketing.
10 - Compliance and security.
To get approved for a cannabis license, you need to demonstrate an understanding of and ability to comply with the regulations governing dispensaries in your area. Compliance is crucial for cannabis businesses, as failure to comply could mean losing your license and losing your backing.
Highlight the standard operating procedures for running a cannabis business in your area and how you plan to ensure ongoing compliance with them. You should also indicate how you plan to secure your premises and inventory. What inventory management system will you use? What security equipment do you plan to put in place? You might need some help from a licensed security company to secure your business and to eliminate any liability from negligence.
Want to know how working dispensaries stay compliant? Check out our article on how to prepare your dispensary to be compliant before the 420 boom. (Totally relevant all year round)
Did this article help you understand how to open a dispensary? Great! If you are ready to open your dispensary be sure to check out how we can help you manage your people with one easy to use platform!
