Growing cannabis for a living is one route that more and more people are beginning to take. and this is not surprising. For an industry that as of 2017 had hit $10 billion in sales in the United States alone and is estimated to be worth $52 billion worldwide, with the average cost of a single ounce going for $300, it is not at all puzzling that anyone would want to consider taking up cannabis farming full time.
Whether you want to build a startup, grow outdoor or begin with a small scale indoor grow, the Cannabis market is open to all. However, in order to determine whether the cannabis industry is the right one for you, you must understand the scope of what being a full time farmer entails beyond the surface level. Below are some significant steps that will introduce you to the industry.
The Rules and Regulations
Before you dive into the depths of growing cannabis for a living, you’ll need to understand the legal aspects. If you’re considering making cannabis your main source of livelihood, you must understand the legal factors that influence both you and your consumers. Whether you want to sell cannabis for medical or recreational purposes, cannabis remains one of the most controversial plants to sell and many laws have been implemented in order to regulate usage.
Long before you begin the process of registering your business, you will need to understand the licenses, documentation and regulatory policies required to grow or sell cannabis. It is important to know that regulatory policies and requirements for obtaining a license differs from every country or state. This process might be daunting and you may even need to contact a legal professional in this field.
The Market Structure
Before you go into any market, you must understand the fundamental factors driving its growth. Getting a good grasp on the structure of the Cannabis market will give you an insight into the general forces driving production and growth. Some major factors that determine the consumption rate, which you’ll need to pay attention to includes region, usage and product type.
When it comes down to usage, both recreational and medical cannabis consumers are on the rise. For medical cannabis, an estimated 70.3% of market share was reported in 2018. If you are growing cannabis for the production of medical marijuana, you should know that mental disorder, chronic pain, and cancer are some top categories driving market sales.
Recreational cannabis is also skyrocketing in demand, as it continues to gain massive legalization, the compound annual growth rate for 2019 to 2025 is at an estimated 36.4%.
The regional impact must also be understood as it is of great influence on consumer growth. For example, many states in countries like Canada, United States, Columbia, and Uruguay make up to more than 20% of cannabis users. The production rate in these countries will be very different from other regions.
Consumption rates also differ when production types are considered. Between oils, buds, and tinctures, oils are expected to account for an estimated 20% of compound annual growth rate which is the highest CAGR expectancy amongst all three. On the other hand, the value of buds also reached a whopping $7.3 billion last year. Finding the right region and product type is essential to understand the perks and downsides that follows.
Cannabis Farming is Highly Profitable
Getting your facts right on the profitability of the cannabis market will help you navigate the market. This highly competitive market if properly harnessed can potentially birth massive profits. But the downside is that the market is still in its infancy. Despite this, statistics have shown impressive spikes in the value of the cannabis market.
At the end of the day, it all boils down to scalability: the more the plants you grow, the higher the profits you are likely to make. For beginner cannabis growers, familiarizing with the market could take quite some time before profit is realized. Keep in mind that factors such as regional differences and product type will affect your income.
Cannabis Farming is Expensive
Whether you’re starting out on a small or large scale, it is generally expensive to grow cannabis full time. You’re getting into a business that requires a truckload of equipment, space and time. Growing indoors is not an escape from these expenses because you’ll be billed for annual payment. For example, in California, starting a medium-sized indoor grow will cost you nearly $80,000 on average.
Refusing to comply with the law will mean that you join the black market and grow your plant illegally. Making such a choice will affect your income in every way. Apart from the expenses that come with licensing, the general components you will need to cultivate healthy plants can be costly.
The Growth Process is Demanding
Think of cannabis like any other plant; getting the plant seeds and the necessary plant tools will not grow a fruitful plant all by itself. There will be seasons for planting and seasons for harvesting. In between that time period, you must have put in quite the work in getting nutrients, fighting pests amongst many other farming practices required.
This is the exact process that cannabis farming requires but with a lot more delicacy. There are many things that will affect and determine the length and intensity of your growth process.
In general, the overall grow time could take between 4 and 6 months. Understand though, that this will differ depending on the strain, the size (ounce, gram, pounds) and grow medium. After grow time comes drying and curing. This could take anywhere between a few weeks or a couple of months. Sealing your buds after this will also require delicacy as exposure to air could reduce the potency levels.
The Market Is Saturated
No matter where you decide to go into business and how good your product is, one thing you will have to deal with at some point is a simple fact that the cannabis market is saturated. Like any other billion-dollar market, it is filled with newcomers and longtime businesses. Each of these companies wants a slice of the lucrative and ever-expanding market. To compete in such a competitive field, you will need to have something that differentiates your business and your product from others.
Whether you go for a unique approach, low cost, or selling a high-quality premium product, something that makes you stand out is an absolute must. It is not enough to simply have a good product if you get lost in a sea of other businesses and nobody ever sees you!
Consider The Costs Of a Grow Carefully
Something important to understand when you consider a grow operation is the way your product gets to the end consumer. You also need to consider the steps you have to go through that affect your bottom line. Like any other crop, selling in bulk is where the money is, and to grow a larger yield will take more of everything. Consider that a larger yield will mean more space, more water, more lights, more fertilizer, more electricity, more workers and more time. Factoring in these initial costs is very important.
Another thing to consider is that it can be up to half a year or more until you see any profit at all. It would be a tragedy if you had a decent operation but didn’t plan ahead. You could end up in a position where you couldn’t afford to pay your workers or keep the electricity on halfway through the grow, something I have seen happen before. It’s very important to ensure that you can safely pay all of your bills for the duration of the grow before you even start.
A Major Risk: ‘Bankless’ Business
One thing that many businesses don’t realize until it comes up is that due to Federal regulations, many (and even most) banks can and will refuse to work with a business that is in the cannabis industry. This doesn’t mean that you can’t do business, just that you will not be able to keep your cash inside a bank. This was a large problem in the past, but thanks to cryptocurrency there are a variety of options that you can utilize to get around this risk.
Examining Alternative Business Models
Cannabis growing operations and dispensaries are a large part of the industry, but they are far from the only ones. Some entrepreneurs with experience in the food industry have released customized edibles that are sold to end-users. Others have even gone as far as opening cannabis-themed lodging that offers specifically themed amenities to its clientele.
Ancillary cannabis businesses are doing very well as a whole for a simple reason. The reason is that they are not burdened with the same high level of taxes, regulations, fees and other red tapes as cannabis grow operation or dispensary. The reason for this is that most of the regulations are only applicable to sellers, growers, and processors. These taxes and regulations contribute to the sometimes very thin margins for a cannabis grow operation, so it gives yet another reason to look into ancillary businesses.
Ancillary Cannabis Businesses
As previously stated, there are many other businesses in the cannabis field besides growers and dispensaries. When considering Ancillary services, it might seem that they make up only a small part of the market, but a look at the data shows that there is a massive amount of growth in that field.
In 2017, while there were 2500-3500 cannabis cultivators and 1600-2000 extractors and manufacturers, there were over 13000 Ancillary services and the number is only growing. Being regulated and taxed less harshly is one of the major pluses for this market, but there are others that deserve a look as well.
Firstly, let’s describe what exactly is meant by Ancillary cannabis businesses. These are businesses that are involved with the cannabis industry while not explicitly growing or distributing it. This would include companies that package and market cannabis products, consultancy firms. Labs that test the quality and content of cannabis and sellers of extraction and distillation equipment, just to name a few.
Each of these businesses is very necessary in the cannabis field, due in many cases to the previously mentioned regulations. As an example, if you were to open a testing lab, then as long as you market yourself well, you would always have clients since there are always going to be growers that need their product yield tested for potency.
The packaging is a business that, while not glamorous, is necessary and will only get bigger as more and more companies get into the market. Each company will want a distinct logo and packaging solution, so being the company that handles many clients can be lucrative if you do good work.
Security Services are a very important part of the cannabis industry. There are costs involved in setting up a security company of course, but since many companies are only able to deal with cash, it can be a lucrative field to go into.
Another big area is Media and Events. Cannabis themed magazines and websites are always growing in number, and along with that is the increase in events themed around the field. These events all need planners, coordinators, graphic designers, etc. and many companies make a good living working solely in the cannabis field.
Another good ancillary business is that of cultivation products and services. The world of tech cannabis often cross paths because many farmers want to be on the cutting edge of their trade, and using the very best growth mediums, fertilizers and lights can all maximize yields, so there will always be a market for a company that provides products that work at a good price.
The cannabis industry is not going to slow down anytime soon, by carefully considering your options and looking closely at the area in which you want to enter, you can make a great success of your upcoming business in the cannabis industry.
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