(Originally published on Entrepreneur.com on 9/5/17)
On August 1, 2017, Senator Cory Booker (D-NJ) introduced The Marijuana Justice Act, an unprecedented bill that, if passed, would legalize marijuana nationwide. Although most regard the bill as “unpassable”, current cannabis industry entrepreneurs should have at least been prompted to consider the possibility of operating a cannabusiness within a more mainstream ecosystem. Or, perhaps the recent surge of mainstream media buzz around the business of marijuana has piqued an interest in the industry.
Whatever the motivation, smart entrepreneurs should consider these three must-dos to prepare a cannabis business venture for federal legalization:
1. Think like a brand.
As the industry grows in credibility and legitimacy, a number of recent lawsuits by larger corporations over the issue of trademark infringement have surfaced. If you have already selected a business name that is a spin-off of a mainstream brand, rebrand with a new name as soon as possible to avoid the hassle and legal fees.
Choosing a company name with overt ties to marijuana can lead to both positive and negative outcomes. The industry is still in its nascent stages but the sheer number of companies incorporating “canna” or “marijuana” in their brand names is already overwhelming. This has led to significant battles over name recognition in SEO and social media channels. As most businesses are operating regionally or state-to-state, companies with similar names can coexist, but will likely create confusion for those seeking to build global brands.
Budding entrepreneurs can avoid this confusion by choosing a name with little connection to the plant. Furthermore, many industry thought leaders believe more oblique monikers will give brands the opportunity to extend the reach of the plant beyond the stereotypical references.
Business owners who include quintessential cannabis references in company names can protect themselves by creating effective “digital box-out” game plans. Savvy founders can protect their digital real estate by writing out and then securing all the chosen names and possible iterations for a business. This ensures that no competitors can build traffic streams within their organic digital spaces. Consumers searching your company’s name in either Google or social media will find your brand, and only your brand. This significantly lowers the risk of search competition, allowing newcomers to build global cannabis brands without any digital interference.
2. Plan the future of your business.
I often work with cannabis clients, both new and those who have been in business for years, who do not have a business plan. As an entrepreneur, it is often difficult to allocate the time, resources and discipline required to finalize a business plan, particularly if the business has picked up revenue and day-to-day operations quickly. However, in order for small businesses to survive the mainstream transition of cannabis, it is imperative to think bigger. Scaling your business strategically will require a legitimate business plan. Fortunately, there are many resources to help in the early stages, including searchable how-to articles with references and digital tool recommendations that make the process bearable and shareable. While these resources serve as a guide for the foundation of the plan, owners must use their best judgment to tweak the details supporting the nuances of their respective cannabis businesses. From all-cash accounting to cadences for harvest, cannapreneurs should account for as many of the unique market pressures as they can in their business plans.
This advanced consideration allows executives to mitigate against potential risks while navigating a larger, mainstream market. If operations prevent you from slowing down enough to tackle the business plan, hire a consultant or consulting company to assist with the strategic planning and business writing. Whatever you do, don’t skip this crucial step.
Owner who have a business plan in place should conduct a thorough review, and make adjustments with a new lens. Federal legalization offers current cannabis businesses the opportunity for national expansion and growth. However, it will also mean giant mainstream corporations with deep pockets will enter and invest in the industry as well. Astute entrepreneurs will immediately reassess the market, their strategic alliances and perhaps even financing to remain competitive.
3. Reassess the market, your alliances and your financing.
Though it is expanding rapidly, the marijuana market is still relatively small. Most credible projections forecast the potential of the entire industry to be nearly $20 billion by 2021. By comparison, Target Corporation had over $70 billion in revenue in 2016.
With the possibility of federal legalization, wanna-be marijuana moguls will need to re-evaluate the market to include much larger mainstream brands as competitive benchmarks. So, the owner of a personal care brand developing infused cannabis products will want to analyze brands under mainstream, personal care purchase consideration like Burt’s Bees or Dove. From packaging to pricing, it’s important to review full brand offerings to determine if any adjustments to your strategy are necessary to achieve expected points of parity from the target consumer’s perspective.
Once you understand the landscape of players, now is also an ideal time to formally establish strategic alliances. Within the cannabis industry, today’s perceived competitors can in fact be future business partners, as strong cooperatives and collaborations will increase long-term viability and stability to better compete against mammoth-sized mainstream competitors. Further, there is more bargaining power if you establish partnerships before a crisis or failure to launch requires you to seek out support.
Finally, if you are bootstrapping your business, you should also reconsider your financing options even if your P&L is strong. Consider how a regional business could scale with an additional $1 million to $5 million in financing. As legal marijuana emerges as the new wealth generating industry, take advantage of increasing investor interest and always have a pitch on deck!
Whether federal legalization happens in twelve months or a few years, it is clear that early entrants to the cannabis market have a rare window of opportunity to establish themselves as global leaders in the market. Cannabis entrepreneurs should use this head start to strengthen digital brand awareness, create an informed plan of action and establish industry benchmarks that align with mainstream branded experiences.
(Originally published on Entrepreneur.com on 9/5/17)