As cannabis legalization continues to spread across the country—New Jersey and New York adult-use legalization, in particular—opportunities for entrepreneurs continue to grow with it. A question I get asked all the time is some version of “is it too late to get into the industry?” Simple answer: Not at all. After probing a bit, I hear something like, “haven’t those big companies already taken over the market?” Another simple answer: No they haven’t, and they won’t ever. But, let’s take a closer look at the market realities.
“Mature” is a Relative Term
The big companies do often make the news, and they indeed will continue to grow and give investors (full disclosure, including myself) returns for years to come. To those who contend that the industry is NOT new at this point and give examples of California and Colorado markets, I counter with “we’re barely scratching the surface of what the industry can be and will be.” We in America are so used to mature markets for mature industries, it’s easy to forget what a brand-new industry looks like.
Let’s look at the “mature” market of Colorado—my home base. After nine years of adult-use cannabis, new businesses are still starting every day in the expected lines of business. Plus, we are in the midst of setting up three entirely new business types in the state right now—all perfect for less-capitalized new entrants—those being: home delivery, consumption lounges, and entertainment buses designed for passenger consumption.
One Size Does Not Fill All
New York and New Jersey are enormous markets. Yes, the big players will get in them, and they will get bigger. Yet, there are so many parts of the market that they’ll never touch — but you can and should.
For one, cannabis culture and its biggest fans are drawn to boutique brands that they can identify with. Consumers do their research and want to spend their money at places that make them feel good—whether that’s from friendly staff that build relationships or an about-us webpage that tells a brand story with veteran/women/minority ownership highlighted. Articles abound that list businesses with these kinds of accolades as well. With the density of Northeast markets, opportunity abounds for boutique brands from small operators carving out stellar products with brand loyalty.
Deep Pockets — But Not Your Own Pockets
Let’s talk money. Yes, you will in all likelihood need seven figures to get going in cannabis. No, you personally don’t need to have seven figures to your name to get going in cannabis.
In fact, many of my clients who do have seven figures of personal funding opt to bring on investors, and you can, too. With solid business planning and financial modeling, ample opportunities exist to fund your cannabis business.
Carving Your Own Niche
Once you have your necessary starting capital, it is important to know that more money does not necessarily equal more business in cannabis. More business comes from knowing, targeting, and serving your own market which can be entirely different from strategies of the big players.
Just think of restaurants — the big chains vs the local, favorite spots. The big chains with deep pockets are not eliminating less wealthy entrepreneurs from also having restaurants. In fact, having an absentee owner is one of the biggest reasons restaurants fail. And, average, mass-produced food keeps the foodies from darkening the door of the big chains. In much the same way that a great restaurateur provides a memorable dining experience or a kind shopkeeper remembers your name when you come in and treats you in a way that makes you feel special, cannabis is about relationships and quality. This applies to the ultimate consumer, sure, but this applies to business relationships up the supply chain as well.
Boutique cannabis cultivators will always produce product that outcompetes large commercial cultivation companies in areas like visual appeal and taste. Remember that consumers want different things. A college kid may not care how beautiful the flower looks, and be very price conscious, so that large commercial cultivation will cater to that crowd. Cannabis consumers who have more price tolerance may pay a huge premium, though, for something only a small cultivation is able to produce.
Similarly, cannabis product manufacturers serve a variety of market spaces, and there’s room for more. An open secret in cannabis is white labeling. There are small entrepreneurs who pay a large company to put their name on the same product. Those products sit side-by-side at a dispensary, often at quite different price points. The entrepreneur doing this can make a great company by leveraging relationships with owners, managers, and budtenders, and through branding focused on their target market.
I cover dispensaries throughout this article, but to emphasize one particular point, some consumers will avoid a dispensary because it is a big company. Your very existence in the same town as a large, well-known company will drive customers to you.
Early Stakes vs Tested Waters
Big players are not pushing smaller competitors out of the market in cannabis — not in developed markets, and certainly not in new ones. With that settled, let’s turn to when to enter a market.
Getting in early means getting dedicated customers and building long-term business relationships. It is not without its drawbacks and volatility, though. A new adult-use market has rapid early growth, as evidenced by the lines that invariably form on each new state’s opening day. This instant demand, though, can result in vexing supply chain woes and needs to be managed closely. In addition, regulatory changes and early-phase scrutiny create a need for hyper vigilance for compliance.
On the flip side, entering a new market later does, indeed, mean more stability. It also means you’ll be playing catch-up. We like to say in the industry that dispensaries are “sticky”, meaning that customers tend to continue to go to the dispensary they have grown to trust, even when cheaper and closer options pop up. Resticking them to you can certainly be done, but it requires having and executing a clear marketing strategy, providing great products, and offering a stellar customer experience. Up the supply chain, you’ll need to spend time building relationships and explaining the advantages of your product. Offering higher-quality and better-value options is something everyone wants.
The Final Take
Ultimately, my answer to “when should I start?” is…as soon as you can. Working in the cannabis industry is rewarding— both personally and financially—surrounded with good people to work with and knowing you’re helping people feel better or just plain happy.
It’s also a lot of work, though, and your competitors — big players, or not — will start early. So, pick a time in your life that you can pour yourself into it. That time doesn’t have to be right now, your spot in the industry will be waiting for you, but every day you’re not in it, you’re missing out.
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