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The Marijuana & CBD & Shrooms industry

Marijuana, CBD, and even Shrooms are all industries that are growing significantly thanks to recent regulatory changes. As the substances move ever closer to national legalization, many businesses are starting to tap into markets that have long been on the periphery. Understanding how these industries have grown is not only a matter of understanding how the overall desire for these products has continued to manifest in newly open markets, but also looking at the raw numbers that show the directions in which all of these industries seem to be heading. These are all very much growth industries, but the forces that move them all may be different from those you’d think.

Annual Capital Investment Per Year

The growth of these industries is perhaps best seen through the amount of money that’s being invested in them on a yearly basis. These are not cottage industries that are being funded through maxed-out credit cards or small loans; instead, these industries are growing by leaps and bounds because of venture capitalists.

The growth of capital investment has been nothing short of astonishing over the last five years. 2017 saw just shy of two billion dollars invested in the industry, a number that would more than triple to 7.5 billion by 2018. High, steady levels of growth have seen investments balloon to 21.3 billion dollars invested thus far in 2021, setting major expectations for future growth.

Public Opinion on Legalization

A huge part of the industry’s growth can likely be tied to the changes in public opinions regarding legalization over the last several years. In fact, opposition to legalization has gone from being a majority viewpoint (52%) to a minority viewpoint (32%) in just over a decade. As you might expect, this change in opinion has greatly driven expectations of further legalization and made all three of these industries much safer bets in terms of investment.

What’s surprising, though, is how many Americans are not only against keeping these substances illegal but how many are in favor of widespread legalization. Nine out of ten Americans, for example, believe that marijuana should be legalized for at least medical use, while nearly seventy percent consider legalization across the board to be in their own best interests.

Edible Sales

Edibles are perhaps the single biggest growth sector in any of these industries, far outstripping the sales of marijuana in any other form and greatly outstripping all sales of shrooms. Many consumers seem to view edibles as a more palatable way to deal with substances that have long had a taboo against them as well as an easier way of dipping their toes into the related waters – even, as long-time users know, if edibles themselves can be a very potent way to ingest a substance.

Edibles sales have grown by about sixty percent, which outperforms the overall market which grew at about fifty-seven percent. Many point towards the increased visibility of the importance of respiratory health as the culprit here, but it’s hard to deny that this market segment is experiencing a huge surge.

Benefits to Legalization

Legalization has, as one might expect, played a huge role in the industry over the past several years. It’s not only those who invest in these products who have seen significant returns, though – it’s often the states that legalize the products that see the greatest returns on their investments. Not only has decriminalization freed up significant law enforcement assets, but it has allowed states to reap massive tax rewards.

The case study that’s most important here is likely Colorado. An early pioneer in legalization. The state has brought in nearly one and a half-billion dollars in tax revenue just from legalized marijuana sales since legalization became official in 2014. While many companies may still be hesitant to add these products to their own production lines, states seem more than happy to work with new manufacturers in order to capture these revenues.

Buyer Satisfaction

Buyer satisfaction remains one of the key metrics in these industries. Simply put, the companies that offer the best experiences tend to be the ones that offer the most long-term success. Customers seem to enjoy not only getting the best possible products but also getting an experience that will make them feel like they’ve been personally taken care of – something that only companies with an incredible focus on customer service can provide.

As you can imagine, these are also industries that live and die by word of mouth at this point. Negative reviews tend to be more common simply because people are more likely to post negativity than positivity, but those who can create bespoke experiences generally benefit from more positive reviews. This tends to create a cycle where good experiences lead to more success, which in turn makes these companies eager to create even better experiences for their customers.

The Marijuana & CBD & Shrooms industry is projected to grow immensely

Given that these industries are expected to grow significantly, it makes sense that many would want to get in on the action. Doing so is not only a matter of understanding what makes the industries attractive, but understanding how to make a business work. That, along with understanding the problems inherent in these industries, can help even a relatively new business owner to succeed.

How to start a Marijuana & CBD & Shrooms business

Starting a business that sells these products is easy, but being successful is an entirely different story. There are many businesses trying to establish themselves at this point, with every new state that moves towards legalization attracting hordes of would-be entrepreneurs to its borders long before their legalization laws come into effect. If you want to start your business, though, it’s vital that you understand both how to treat your company like a real business and how to stay on the right sides of the law as a business owner.

Understand your legal obligations

While all of these businesses may now be legal, that doesn’t mean that they aren’t heavily regulated. In fact, running a business that offers all three products means that you’re going to need a thorough understanding of local laws surrounding not only the products themselves, but your liabilities as a business. This means that it’s vital that you work with an attorney who is familiar with the established laws as well as any business laws that might end up having an impact on your ability to successfully run a business. That guidance will be invaluable as you begin the process of proving your business’ legitimacy.

Market and sell your products

One of the most important things you’ll have to do is learn how to market and sell your product. Though the early days of legalization largely feel like any business can succeed, you’ll eventually need to learn how to reach out to customers and let them know who you are and what you do. This means running successful marketing campaigns online and ensuring that you have the ability to sell your products. You’ll need to learn how to take inventory, properly store your products, and comply with any relevant laws in terms of to whom you can sell the substances.

How to gain a competitive advantage

Gaining a competitive advantage is largely a matter of knowing how to run a business. As discussed above, the most successful businesses are those that have the best customer service. You’ll want to become an expert in the substances you sell, but also a person who is friendly enough that they’re happy to guide first-time customers. Ensuring everyone who works for you is likewise knowledgeable and customer-focused is much, as is pricing your goods in a way that going to your competitors won’t offer customers a significant economic incentive. In short, you need to be the place not just where people can buy what they need, but where people want to shop.

Key challenges facing Marijuana & CBD & Shrooms businesses

While the marijuana, CBD, and shrooms industries are all seeing tremendous growth, that doesn’t mean that there aren’t challenges. In fact, there are not only very significant barriers to entry into all of these industries, but there are also some very serious barriers to long-term operation in all three. It’s vital that anyone who wants to work in any of these industries both understands the challenges as they currently exist and that they understand the kind of work that must be done in order to overcome them.

Banking

One of the biggest issues in these industries right now is banking. Because these substances are still illegal on a federal level, any contact with money that comes from the sale or distribution of these substances can put a bank at serious risk. As such, many dispensaries and growers find themselves unable to use typical banking services, a major problem in a world that’s increasingly reliant on debit, credit, and electronic transactions. Some small banks and credit unions will, however, work with many of these businesses and there are definitely bills before the Congress that may soon relieve at least some of this pressure.

Insurance

All of these businesses are considered high risk for the same reasons that banks are often unwilling to work with these businesses. The lack of federal legalization puts insurance companies in a tough spot, and they tend to pass that back along to the distributors and sellers. For a business owner, this means that it’s either very difficult to find affordable insurance or that it’s entirely impossible to do so. While it’s generally not a good idea to operate entirely without insurance, it must be understood that finding a good policy will take more work than one might expect.

Payment processing

Again, the lack of federal legalization makes most of these businesses cash-only by necessity. Many major payment processors either cannot or will not have anything to do with these industries because of complex federal regulations, with even those that are willing to take the risk charging far heftier fees than they would to almost any other sort of business. For now, it’s best to remember that the vast majority of your transactions will have to be done in cash and that there will almost certainly have to be a significant upcharge for any other types of transactions if you can offer them at all.

Access to capital

It’s also incredibly tough to get access to normal types of capital. While venture capitalists seem very eager to invest in many of these industries, the same can’t be said for many other types of investors. Banks are almost certainly not going to be able to give out loans, nor are many other types of lenders. This means that it’s far more likely for a business trying to get off the ground to have to give up equity or to pay far higher rates just to get access to the kinds of money that almost any other business could get by filling out a bit of paperwork.

Marijuana & CBD & Shrooms is a huge business opportunity if it’s approached correctly

Success in these industries requires drive, patience, and a fair bit of understanding. With that said, there is an incredible amount of money to be made here for those who are willing to do their homework. While it’s true that you can’t just jump into the industry and expect success, the general absence of extremely large companies does give individuals and small companies a much better shot at making a name for themselves. If you’re willing to put in the work, you may be able to take advantage of the business opportunity of a lifetime.

Summary

The Marijuana, CBD, and Shrooms industry is in its infancy, but a growing wave of legalization makes them all incredibly attractive to entrepreneurs and investors alike. This is a basic primer that will give you the information you need to understand what the industries look like today and what it takes to succeed in them.