The three most important things in starting your cannabis dispensary are the legal paperwork, a detailed business plan, and money.
Unfortunately, the hardest thing to get is the money to start your business. Even though cannabis dispensaries are a hot investment item these days, the hardest part is finding those people who are willing to invest in your project.
When you go out for funding you will find three kinds of investors
- Passive investors are those who are happy to hand you money and receive a monthly or quarterly report on your progress and financials. They don’t want to be involved in your business, they only want your company to succeed so they make money off of their investment.
- Sharks are quite the opposite. They swim around in a sea of entrepreneurs looking for the best deals and the most inexperienced entrepreneurs. Sharks will act as though they plan to invest big money in your company but when it comes to doing the deal they demand an unreasonably large ownership share in your company for an unreasonably small amount of money. Their goal is to starve you out. They want you to be vulnerable, working on a tight budget, and potentially failing so that they can step in and take over your operation.
- The value-added investor has contacts in the industry, can provide a vital service such as legal or accounting advice, and is a team player who recognizes that a win for your company is also a win for your investors.
The best places to find startup funding
Not all startup financing comes from investors. In fact, if you are starting a cannabis business you might find it difficult to convince many potential investors that a cannabis dispensary is a legitimate business that won’t be suddenly be closed down if an ultra-conservative Attorney General takes over in Washington, D.C. and cracks down on states that have legalized the sale of medical and recreational marijuana. In reality, it probably won’t happen but the risk that it might happen will definitely discourage some investors. After all, there is still a legal stigma on cannabis — just try to open a bank account or get a loan for a cannabis dispensary.
- Attorneys are usually good sources of potential investors. It doesn’t matter if the attorney specializes in cannabis law if you are just looking for an accredited investor who wants to invest money in your business. Most attorneys have clients who are looking to do business deals, and the attorneys are happy to handle those deals.
- Cannabis attorneys normally are in touch with growers, manufacturers, and distributors. These business owners are always looking for ways to expand their own customer bases and a dispensary is yet another place where they can sell their products. A deal might include carrying their products on consignment, which means you won’t have to pay for inventory until you sell it. Furthermore, they are usually looking for places to invest their cash, so joint ventures and partnerships are likely to appeal to them.
- Accounting firms are also good places to look for investors, joint ventures, and partnerships for the same reason attorneys are good sources. People look to their accountants and attorneys for business and financial advice. Also, attorneys and accountants are usually investors, themselves.
Make a list of any attorneys, accountants, insurance brokers, and stockbrokers or investment advisers with whom you, your friends, and your family have business relationships. Don’t forget your dentist and doctor, because they love to brag about their investments. Just remember that you aren’t necessarily looking for cash. You are looking for opportunity that might lead to cash.
Another type of opportunity might come via a real estate broker who handles commercial space. There are always people who start a retail store and then find out they hate it or their ability to spend the time to operate the business is diminished by an illness or family crisis. These business owners or commercial landlords might represent good partnership or joint venture opportunities.
Startup networking events and showcases are common ways entrepreneurs hunt for investors, but these are full of entrepreneurs chasing only a few investors. They will help you stay in tune with the local entrepreneurial scene, but don’t spend a lot of money to attend. You are more likely to find opportunity at a cannibus business seminar or local government event like a planning commission meeting.
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