Tips for Entrepreneurs to be Successful in the Cannabis Market
Cannabis industry, just like the California Gold Rush, is growing with stratospheric growth projections. The market was worth USD 10.18 billion in the year 2018, but is anticipated to reach USD 73.6 billion by the end of 2027. This has made various Entrepreneurs and CEOs excited to create their own business ventures and leave a remarkable legacy.
However, it is not yet a safe game to step into this business industry. Especially, since the industry faced a significant downturn last year; resulting in major loss for cannabis industry investors and CEOs who have been involved in this domain.
Taking the same into consideration, we are writing this article focusing entirely on the successful tips for Cannabis entrepreneurs.
Before we begin, let’s take a look at the current state of the cannabis market and what issues businesses suffered from in the last year.
Why Legal Cannabis Businesses Struggled in 2019?
1. Inconvenience due to laws and regulations
Since marjiuana and other such products were entwined with illegal activities, various rules and regulations were introduced in Canada, US, and other parts of the globe. It was made imperative for the companies to follow these regulations in their successful cannabis business strategy.
However, many existing companies failed to meet these laws and regulations, and revamp their business and revenue model accordingly. Because of this, they suffered from temporary or permanent closures.
2. Minimal support from investors
Due to the history of marijuna and other products, cannabis industry investors feared getting defamed by remaining a part of this domain. So, they hesitated to support Entrepreneurs and existing companies who wished to make their recreational business grow. This made the CEOs suffer in terms of raising funds for their business and forced them to shift to another business idea later on.
What’s worse, the rules of legalization of marijunana made by the US prevented cannabis cultivators and associated companies from filing for bankruptcy.
3. Competition from Liquor and illegal market
As per the Statistics Canada, around 75% of canadian users have been turning towards the black market for accessing marijuana. Also, it has been found that cannabis legalization can make an adverse impact on the alcohol industry. Medical marijuana is predicted to reduce the monthly alcohol sales by 15%. Something because of which the liquor companies have been giving a cut-throat competition to the cannabis companies and preventing them from flourishing further.
4. Lower profits
Last but not the least, the Cannabis startups and established businesses struggled with making money. It has been recorded that the 6 largest companies in this industry lost a total amount of USD 25 billion in 2019 and the Marijuana Index fell over 78% in the past one year.
And the three prime reasons behind which are –
- Since the industry is still evolving, there’s no such cannabis business plan to go with. So, various companies experienced aggressive selling of products for a limited period, but couldn’t scale up their business later. Meaning, they found it tough to make a perfect balance between investment and earning to plan for the future.
- In 2019, around 40 countries legalized medical cannabis while various revealed to be planning for the same in the next 12 months. However, they introduced various stern regulations and heavy taxes. This again made it tough for Entrepreneurs to make their cannabis business grow, without cutting upon the human resources.
In fact, it was recorded that some of the cannabis companies such as MedMen, CannTrust, and Hexo laid off 190, 180, and 200 employees respectively to become publicly traded.
- Last but not least, the illegal market does not follow any kind of standard and are still considered as first priority by users in need of recreational marijuana. This is again one of the challenges faced by companies in the cannabis industry.
Now, as you have a clearer picture of the legal marijuana market size and growth, let’s look into how to prepare, survive, and flourish your business this year.
What is the successful cannabis business strategy to follow in 2020?
1. Look for better Business Models
Currently, Cannabis startups are running a blog or Youtube channel to generate revenue, in addition to delivering products. However, it is required for them to look for new cannabis business models for getting better results. For example, you can merge with any of the top cannabinoid pharmaceutical companies or collaborate with biotech organizations targeting the same audience.
So, look ahead to such partnerships for better business opportunities in 2020.
2. Get an investor by your side
The two reasons why investors are failing to support cannabis business even after legalization of marijuana are-
- They consider it an illegal activity.
- They are less patient to wait for a longer period to see significant ROI.
But, the situation is expected to change in 2020 with the revelation that On-demand or educational cannabis applications will be one of the apps that tech investors will fund.
So, when it comes to answering what cannabis entrepreneurs must know in 2020 for successful business, having an in-depth knowledge and a revenue-centric business plan for receiving higher ROI to convince investors tops the list.
3. Follow Government regulations and compliances
There’s no denying that the set of regulations and compliances imposed by the governments is one of the reasons behind lower growth rate of different types of cannabis businesses. However, it is advised not to get disheartened with these laws and regulations. Rather, prepare their business processes and make everyone in the team familiar with these regulations to ensure better outputs.
4. Plan for taxes and other hidden cost factors
Another major reason why CEOs failed to take their cannabis business to newer heights is lack of planning against the taxes and hidden cost factors. So, it is important for one to have a clear understanding of where and how to invest money into any process to get better outcomes.
In context to this, it is advisable to Entrepreneurs to integrate latest technologies and techniques to optimize their processes in an effective and efficient manner.
5. Handle competition from liquor and illegal market smartly
Illegal cannabis sales and liquor markets are ever-present threat to the industry. One can’t control and prevent users from the growth of these markets. However, anyone looking ahead to start or scale their marijuana delivery app business in 2020 can enjoy higher user attention via the following strategies:-
- Loyalty Programs
When you offer some additional incentives or benefits to your customers, they tend to remain clinged to your brand and return back more often. So, it is advised to introduce various loyalty programs to relish better cannabis app industry opportunities in 2020.
- Embrace Originality
When looking into what cannabis entrepreneurs must know in 2020, it has been found that delivering something original can make your business rise over illegal ones. So, it is again recommended to cannabis CEOs to create and deliver personalized products/services that aren’t available in the illegal market.
- Spread Awareness
Last but not least, spreading words about your product/services and the probable benefits is also one of the successful tips for cannabis entrepreneurs to consider in 2020.
When talking about making your target audience aware of the potential benefits of your cannabis business, one way you can opt for is to launch your own app via connecting a reputed mobile application development agency.
6. Focus on operating performance
Believe it or not, operating performance is also one of the effective ways to outshine the competition in the Cannabis market. So, it is again advisable for Entrepreneurs to pay attention to the cannabis supply chain model and other related concepts while planning their entry to this industry.
7. Be quick
Lastly, not remaining sitting on the fence is also one of the successful tips for Cannabis entrepreneurs.
With the growing awareness of medical marijuana usage and legalization in Canada and other countries, a sudden rise in the competition is experienced. In such a scenario, it is imperative for an Entrepreneur to consult with the experts and step into the market at the earliest to get a bigger share of the market revenue.
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