Are you ready to drop a few million and start a cannabis cultivation business?
Cultivation businesses aren’t cheap, but they can be one of the best investments for your ROI if you do it right.
What does “right” look like?
- Right location
- Right facility
- Right grower
Cultivation is highly scalable and it can be a major money machine.
Be careful, though, scaling comes with risks. All of the sudden seemingly small issues in a small space can become HUGE issues in a large facility.
At BeGreenLegal, our team of experts knows all about investing in marijuana cultivation. We’ve helped entrepreneurs across the country make the best cannabis investment possible.
In this article, we break down why cultivation businesses can be so profitable, and also why they’re so easy to mess up.
Here’s how to get a killer ROI on your cannabis cultivation business:
WHY CULTIVATION BUSINESSES REQUIRE BIG INVESTMENTS
Let’s make this very clear…
It takes a lot of money initially to get all of the land and equipment, and you might have to spend several millions of dollars upfront.
There’s a lot at stake when it comes to finding the right property and developing the facilities, but once you actually build it out and get the right people in place, it becomes like an assembly line (and a highly profitable one at that).
CLEARLY DEFINED GOALS = BEST CHANCE FOR AN EXCELLENT RETURN
Investing in cannabis always pans out better when you have a clear understanding of what you’re getting yourself into.
Like any business, starting a cultivation business takes skill, perseverance and expertise.
Your vision should define what your business will look like in each stage of development, from property purchase and permit approval to becoming a major cash cow.
Every winning business plan should cover the following key details:
- The mission of your company
- Leadership team bios
- Well-defined strategy
- Specific advantages related to your operation
- Real estate details (location is king for any cultivation businesses)
- Size and type of opportunity for your operation
- Timeline of licensing
- Financial projections
- Amount of funds needed
- Use of funds
- Offer (including terms)
If you plan to flip your business at some point down the road, it should also include an exit strategy.
Creating a winning plan will make it easy to demonstrate to government regulators and potential partners that you’ll succeed.
RULE #1 OF CANNABIS CULTIVATION: LOCATION IS KING
When it comes to cultivation, location is king, and if you pick a great property you’ll be set up for success.
The real value of a cultivation business doesn’t come from human labor, it comes from the right location to help your plants grow (there’s a reason why California has some of the best weed in the world).
Some states are easier to thrive in than others.
Marijuana cultivation is legal in the following states:
- California
- Michigan
- Colorado
- Washington
- Florida
Out of the bunch, Florida is the most challenging when it comes to legislative hurdles.
California, on the other hand, is an all-around goldmine of prime cultivation real estate, ideal outdoor growing seasons, and regulations that allow for scalable, vertically-integrated businesses.
Cannabis cultivation started indoors back in the day when it was illegal, but now outdoor and greenhouse grows are the new wave, and that’s because they tend to have a better ROI.
The bottom line is, growing out of a basement in Oakland is much more expensive than growing out of a greenhouse in the San Joaquin Valley where land costs only 75 cents/sq/ft. This allows for the overhead to come way down and the profit margins to go way up.
WHAT HAPPENS IF YOU SELECT THE WRONG PROPERTY?
Identifying real estate in the right city or county can be the difference between the best cannabis investment and a disastrous one.
Cultivation businesses are typically restricted to agricultural and industrial land use zones, but pesky neighbors might still protest your project.
This is exactly what happened to Green Pro Enterprises in El Monte, California. Residents drove over 20 miles from adjacent counties to protest at their hearing. Fortunately, BeGreenLegal was able to successfully argue their case and acquire a Conditional Use Permit (CUP). A CUP is the first major milestone of any cannabis business, and from there on out its relatively smooth sailing.
But pesky neighbors are just one of many obstacles you may face…
“Green zones” aren’t always as straightforward as you might think, and just because a property is green-zoned doesn’t mean it’ll get approved.
And you should always read the fine print when it comes to property taxes. For cannabis businesses, property taxes can range anywhere from 2 to 8 percent, and on a $1.2 million piece of land, this difference can add up pretty quickly.
Once you find a piece of property, chances are you’ll have to make significant improvements, and renovation can run into the tens of thousands of dollars.
Unfortunately, most real estate agents and other “experts” aren’t always the most knowledgeable about cannabis regulations, which is why assembling a team of real cannabis experts is essential.
At BeGreenLegal, we make investing in marijuana cultivation and finding the right property easy.
We start by determining your needs and capabilities and setting targets that accommodate for facility size, team members, production goals, funding, and revenue before we even start viewing properties.
When it’s time to start inspecting prospective sites, we survey with precise GPS instruments and analyze every nook and cranny of the property, including:
- Bodies of water
- Access roads
- Topography
- Property corners
- Parking lots
- Walkways
- Trees
Our property suitability assessment takes into account how you plan to leverage each element of the property, and uses that information to help you produce a detailed facilities plan.
RULE #2 OF CANNABIS CULTIVATION: STREAMLINED FACILITY
An efficiently designed facility is the second key to investing in marijuana cultivation.
A facilities plan is a detailed design of your property and the facilities on your site.
It communicates your vision to regulators and investors and explains your plan to stay in compliance and turn a profit.
With that said, one of the most common mistakes that entrepreneurs make is to rush the building design process. This can lead to an inefficient facility that destroys your ROI.
For example, poorly positioned grow lights can shrink your production from 1.5 pounds per plant to just 1. Over time, that adds up to a crippling loss, and it’s the perfect way to fail.
At BeGreenLegal, we help you create a detailed facilities plan, get licensed, and ensure that your property, building and equipment are fully aligned.
Our planning process identifies:
- How to set up your property to reduce cost
- How to utilize your land to maximize output
- What land constraints may inhibit your project
- Zoning restriction that may surround your property
Local and state agencies, like the Bureau of Cannabis Control, require you to provide basic designs that prove you’ll adhere to their regulations, but we can also help you create more elaborate 3D renderings to impress investors and optimize workflow.
RULE #3 OF CANNABIS CULTIVATION: MASTER GROWER
You can have the perfect piece of property and a well-designed facility, but it can all go to waste if you don’t have a master cannabis grower to head your operations.
Aside from that, if you can keep your cost per unit down, you’re going to make way more than your competition in higher-priced locations.
In order to make execution easier for your master grower, it’s important to have thorough standard operating procedures (SOPs) in place.
Operational SOPs outline how each employee is supposed to do their job on a daily basis.
Airtight SOPs make employee training a breeze. Plus, they help you adhere to government codes and turn a higher profit by boosting the efficiency of your operations.
ARE YOU READY TO MAKE THE BEST CANNABIS INVESTMENT AND MAXIMIZE YOUR ROI?
At BeGreenLegal, we’ll help you make the best cannabis investment possible.
We’re fully equipped to guide cultivation businesses through every step of the process, from licensing to execution.
Investing in cannabis can be incredibly profitable, but it can also be risky in the wrong hands.
Schedule a consultation with one of our expert cannabis consultants today for key insights about:
- Financial expectations
- Funding options
- Real estate purchase/lease
- Marketing & go-to-market strategy
- Build-out
- Operations
- Licensing processes
- Compliance
- Business plan
- Facility plan development
- Recommendations for your situation
We’ll answer all your specific questions and get you on the fast track to investing in marijuana cultivation.
By the end of the consultation, you’ll have a clear sense of how to move forward.
