A recent cannabis report predicts that legal sales will reach $30 billion (with a capital “B”) by the year 2025.
If you’re a savvy entrepreneur and you know what your niche is, who your client is, and what the competitive advantages of your location are, tremendous ROI can be had.
Let’s take a closer look at the trajectory of the cannabis cultivation industry and how to capitalize on the green rush…
SHIFTING ATTITUDES TOWARDS MARIJUANA
Remember those “This is your brain on drugs” commercials?
We’ve come a long way since then, and the majority of Americans aren’t scared of marijuana anymore. It appears that pot is on its way to becoming mainstream.
The stigma that it used to have as a “gateway drug” is fading as people learn about the apparent benefits of medicinal uses and gain a realistic knowledge of the plant as a whole.
This shift in acceptance has opened the doors for progressive legislation and ample financial opportunities.
EXPONENTIALLY INCREASING DEMAND
It’s inevitable that the entire U.S. will be fully legal, and this means that the demand will increase exponentially.
Despite marijuana still technically being illegal under federal law as a Schedule 1 narcotic, a total of 35 states and the District of Columbia have legalized it for medical use, and as of November 2020, fifteen of those allow recreational use.
In 2019, the legal cannabis industry created 340,000 jobs and was worth an estimated $13.6 billion.
By 2025, these figures are projected to double, and that’s even if full federal legalization does not happen. If weed does become federally legalized in that time, it would create an estimated $1.63 million jobs and generate $52.9 billion.
These figures are pulled from a recent study conducted by New Frontier Data, which ran over 100 pages, business owners, governments, target investors, academics and researchers.
A RECESSION-PROOF BUSINESS
Just like with alcohol, there’s a never-ending demand for cannabis products regardless of the state of the economy.
Even during the Great Depression, sales of vices like alcohol and cigarettes didn’t fall, and now marijuana has joined the recession-proof club.
During the Covid-induced recession the legal cannabis industry powered on, but economists weren’t surprised. Industry experts find that cannabis consumers are just as committed to buying pot as they are to essentials like toothpaste and toilet paper.
According to Beau Whitney, a economist who’s worked with multiple cannabis firms, “sin businesses,” like alcohol, tobacco and cannabis, hold up better than traditional businesses.
“Consumers budget for cannabis. And they will budget and spend consistently, even when they peel back payments on other things, like that latte or going to the movies,” Whitney said.
Cannabis is a reward that consumers give themselves, and everyone could use a pick-me-up during a recession.
THE CULTIVATION LANDSCAPE IS BECOMING MORE SCALABLE AND PROFITABLE
As the future of cannabis cultivation shifts from an illegal black/grey market to a legal market, grow ops are now able to move outdoors and into greenhouses.
Back in the day, growers had to hide their businesses in warehouses, shipping containers, and even in the trees to avoid detection. Now that cannabis is legal, obtaining a license means your business is much more secure and affords the opportunity to make more long term decisions. Suddenly, making large investments in property, buildings, equipment, and operating costs makes more sense.
It goes without saying that sunlight is cheaper than energy-sucking indoor lights. Similarly, buying or leasing land in the countryside is much more affordable than buildings in the city. Altogether, this allows for the cost of production to come way, way down.
At the same time, there’s a huge increase in the demand for more affordable strains of weed for a growing consumer base.
The future of cannabis cultivation is more than just about fancy designer flower, it’s also about providing raw THC for basic input products for making edibles, topicals and other weed products for the masses.
Additionally, states with more affordable real estate, like Texas or the midwest, that approve recreational use, will continue to pull down the cost of production once cannabis is federally legal. This trend will create scenarios of great profit for those who take advantage by increasing efficiency horizontally, niching down to more specific product markets, and vertically integrating.
A SIMPLE FORMULA FOR A GREAT ROI
The cannabis cultivation industry is expensive to break into, but if you have a big bank account, disciplined business intelligence and a strong attention to detail, you can make a killing.
What makes cannabis cultivation more profitable than manufacturing, distribution or retail?
Cultivation operations have one of the best ROIs because once you build the facility and get the right people in place, it’s relatively easy to automate, compared to a more labor-intensive business.
The formula to a successful cultivation business is simple: smart location + smart facility + smart grower = massive ROI.
With cultivation, the value doesn’t come from human labor, it comes from having a highly-skilled lead grower and the right location to help your plants grow. If you have the right piece of property and a highly efficient greenhouse with the ideal climate and the right lighting, you’re going to have the foundation for a scalable, profitable business in the cannabis cultivation industry.
HOW TO INVEST IN THE FUTURE OF CANNABIS CULTIVATION
With great ROI and insane growth projections, here are some steps you can take to invest in the future of cannabis cultivation:
- Starting a business from scratch: This is what most entrepreneurs do, and it certainly has the most long-term benefits for profitability, scalability and vertical integration. However, it also comes with the greatest financial risks.
- Buy an existing cannabis business: One of the most efficient routes to profitability is to buy an existing cannabis cultivation business. Purchasing the right property and obtaining a Conditional Use Permit (CUP) are the first major milestones of any cannabis project. If you can find a business that has already reached this stage, it can be a home run.
- Buy a business with the intention to flip it: Buying and flipping a distressed business can be a profitable investment opportunity. In a few short years, you can build a vertically integrated cannabis business and resell it for an incredible ROI.
- Become a hands-off investor in an existing operation: Find an already operational cultivation business, inject some cash, sit back and relax. Make sure to look into details like market potential, company culture, regulatory compliance and other relevant factors before pulling the trigger.
- Become a cannabis real estate developer: Finding and entitling properly zoned cultivation real estate is one of the single biggest hurdles that new cannabis businesses face. If you can curate and provide cannabis properties to these entrepreneurs, you can make a killing.
YOUR NEXT STEPS
Are you ready to take action and invest in the exploding cannabis cultivation industry?
As this recession-proof industry evolves, it’s only becoming more profitable and more scalable.
The only downside is the minefield of legislative hurdles and regulations you’ll have to navigate.
Starting a cannabis cultivation business isn’t the same as opening a gym or barber shop, and you’ll be faced with a lot of unexpected challenges.
At BeGreenLegal, we specialize in helping entrepreneurs build a profitable cannabis business, from creating a work plan, finding property, and acquiring and maintaining licenses.
Through our initial discovery process, our experts will help you become better prepared with:
- Property suitability assessment
- Application and licensing process
- Competitive analysis
- Opportunity analysis
- Financial expectations
- Funding options
The future of cannabis cultivation is bright.
Are you ready to take action? Let’s get started.