Cannabis Cultivation Business Plan

Cannabis Cultivation Business Plan Template

Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their cannabis businesses. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a cannabis cultivation business plan template step-by-step so you can create your plan today.

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What is a Cannabis Cultivation Business Plan?

A business plan provides a snapshot of your cannabis cultivation business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for Your Cannabis Cultivation Business

If you’re looking to start a cannabis cultivation business, or grow your existing cannabis cultivation business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your cannabis cultivation business in order to improve your chances of success. Your cannabis cultivation business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Cannabis Producers

With regards to funding, the main sources of funding for a cannabis cultivation business are personal savings, credit cards, and angel investors. Personal savings is the most common form of funding for a cannabis cultivation business. Because cannabis remains illegal on a Federal level, banks will not fund a cannabis cultivation business.

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How To Write a Business Plan For a Cannabis Cultivation Business

If you want to start a cannabis cultivation business or expand your current one, you need a business plan. A detailed cannabis cultivation business plan should include 10 sections as follows:

1. Executive Summary
2. Company Overview
3. Industry Analysis
4. Customer Analysis
5. Competitive Analysis
6. Marketing Plan
7. Operations Plan
8. Management Team
9. Financial Plan
10. Appendix

 

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of cannabis cultivation business you are operating and its status. For example, are you a startup, do you have a cannabis cultivation business that you would like to grow, or are you operating cannabis businesses in multiple markets?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the cannabis industry. Discuss the type of cannabis cultivation business you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.

 

Company Analysis

In your company analysis, you will detail the type of cannabis cultivation business you are operating.

For example, you might operate one of the following types of cannabis cultivation businesses:

• Outdoor grow: this type of business grows and harvests cannabis in a traditional field, outdoors.
• Greenhouse: this type of business is one that grows and harvests cannabis inside a building. Greenhouse operations have controlled environments, and can therefore operate year-round.
• Hydroponic grow: this type of business uses hydroponics to grow cannabis. These operations are also typically indoors, but rely on water as the medium instead of soil.

In addition to explaining the type of cannabis cultivation business you will operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of plants you grow in a 12-month period, rare strains you grow, number of distribution contracts, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

 

Industry Analysis

In your industry analysis, you need to provide an overview of the cannabis cultivation industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the cannabis cultivation industry educates you. It helps you understand the competitive market in which you are operating.

Secondly, market research can improve your strategy, particularly if your research identifies the cannabis market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your cannabis cultivation business plan:

• How big is the cannabis cultivation industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What industry trends would affect your business?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your cannabis cultivation business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

 

Customer Analysis

The customer analysis section must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: cannabis manufacturers, dispensaries, and seed banks.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of cannabis cultivation business you operate. Clearly, cannabis dispensaries would respond to different marketing promotions than seed banks, for example.

Try to break out your target market into segments in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most cannabis cultivation businesses primarily serve customers living in their same city or town, such demographic information is easy to find on government websites.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.

 

 

Competitive Analysis

Your competitive analysis should identify the direct and indirect competitors your business faces.

Direct competitors are other cannabis cultivators.

Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes alternate pharmaceutical products, or individuals who choose to grow their own cannabis.

With regards to direct competition, you want to describe the other cannabis cultivation facilities with which you compete. Most likely, your direct competitors will be cultivation businesses located very close to your location.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• How many strains do they offer?
• Do they distribute to a particular type of dispensary (medical and recreational cannabis)?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of this section is to document your areas of competitive advantage including your unique selling proposition. For example:

• Will you provide a wider range of strains?
• Will you have an organic operation?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you can establish a competitive edge that will outperform your competition and document them in this section of your plan.

 

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a cannabis business plan, your marketing plan should include the following:

Product: In the product section, you should reiterate the type of cannabis cultivation company that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to cured cannabis, will your cultivation business offer seeds?

Price: Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.

Place: Place refers to the location of your cannabis cultivation company. Document your location and mention how the location will impact your success. For example, will you sell your flower directly to dispensaries? Or will you sell to manufacturers who will then process your cannabis into consumer products? In this section, document each method by which you will sell your products.

Promotions: The final part of your cannabis cultivation marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

• Advertising in local papers and magazines
• Reaching out to local websites
• Signs and billboards
• Flyers
• Social media marketing
• Local radio advertising

 

Finish Your Business Plan Today!

If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your plan and financial model in hours.

 

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your cannabis cultivation business, including procuring seeds; feeding and watering the plants; harvesting and curing; and meeting with prospective distributors/retailers.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to sign a distribution contract with your 25th retailer, or when you hope to reach $X in revenue. It could also be when you expect to open a cannabis cultivation facility in a new location.

 

Management Team

To demonstrate your cannabis cultivation business’ ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company and how they fit into the organizational structure.

Ideally you and/or your team members have direct experience in managing cultivation businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in farming, or successfully running small businesses.

 

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement: an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your operating costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you have one harvest per year, or several? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets: Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your cannabis cultivation facility, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement: Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a cannabis cultivation business:

• Garden, greenhouse, or hydroponic facility development
• Cost of soil amendments and other supplies
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

 

Appendix

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your cultivation plan or an overview of all the strains you grow.
 

Free Business Plan Template for Cannabis Cultivators

You can access our business plan pdf download here.

 

Cannabis Cultivation Business Plan Summary

Putting together a business plan for your cannabis cultivation business will improve your company’s chances of success. The process of developing your plan will help you better understand the cannabis cultivation market, your competition, and your customers. You will also gain a marketing plan to better attract and serve customers, an operations plan to focus your efforts, and financial projections that give you goals to strive for and keep your company focused.

Growthink’s Ultimate Business Plan Template allows you to quickly and easily complete your Cannabis Cultivation Business Plan.

 

Additional Resources for Cannabis Product Manufacturers

• How to Start a Cannabis Cultivation Business
• Colorado Seed-To-Sale Cultivation License and Marijuana Laws
• Cannabis Business Degree – Associate of Applied Science
• California Department of Cannabis Control – How To Apply For a License
• Colorado MED Regulated Marijuana Business License Application

 

 

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