To visit previous articles in this series:
- The Greenrush Bonanza, Part 1
- The Greenrush Bonanza, Part 2
- The Greenrush Bonanza, Part 3
- The Greenrush Bonanza, Part 4
A virtual parade of Porsches and Ferraris rained down upon Sunset Boulevard as I walked to my favorite coffee shop in West Hollywood for a meeting with an aspiring cannabis business. At times past in my career (such as during the dot com in the 1990s), I had to knock on plenty of doors to monetize my skills and experience.
Things are different now.
The greenrush, combined with a relatively small number of people who do what I do for a living, has resulted in plenty of knocks at my door. Each of these parties is interested in one thing: Launching a cannabis business in what promises to be a very rewarding industry segment. Especially for the organizations and cannapreneurs that have what it takes to survive in such a volatile—yet promising—market.
The label “greenrush” aptly applies to the current nascent cannabis industry, centered mostly on the West Coast and in Denver (but let’s not discount East Coast newcomers Maine and Massachusetts). One of the most consistent themes I hear echoed by colleagues here in Los Angeles is that, while more cannabis businesses will fail during the next decade of legalization than will make it, those that forge sustainable, realistic business plans—and that have the human and financial resources necessary to consistently execute on them—stand to make a great deal of money.
We’re not in Kansas anymore, Toto. There is zero hyperbole in the perception that America currently resides on the precipice of what will relatively soon be a trillion dollar industry. Now that California and its 40 million inhabitants (who form the sixth largest economic GDP in the world) are down with legal adult use herb, the dominoes are truly beginning to fall.
This perfect storm has resulted in a logical feeling of panic among prospective investors who fear they will be left behind if they don’t soon become established in the industry.
One of the most pressing issues for a new cannabis business—be it a small-budget solopreneur project or a multi-million dollar corporate effort—is the deadlines set by jurisdictions for submission of permit and license applications. It is these deadlines that are putting prospective cannabis businesses in a panic.
As they should. The clock is ticking.
My clients often solicit my opinion of the emerging cannabis industry. While simple terms simply don’t suffice in describing what is a very fractioned, disruptive, and even frenetic emerging industry, I often throw out the term “confusing.”
Cannabis Business 101
Let’s take Los Angeles, for example. From the perspective of jurisdictional oversight, it’s both a city and a county (the only such occurrence in the United States, tell me the locals). This means two different jurisdictional bodies with which a cannabis business must contend.
There’s also the need to comply with regulations set forth by the State of California. Currently, however, regulations for adult use cannabis businesses in the Golden State are in only draft stage. And the guidance given by the state? Get permitted at the local and county levels to even think about obtaining a license at the State level later this year. However, merely meeting municipal or county regulatory requirements is no guarantee that the State will, in accordance, also grant a cannabis business permit.
With some jurisdictions in Southern California, such as Costa Mesa, charging about $50,000 to simply submit an application, the idea of investing a couple hundred thousand dollars to then be told by the State that one had to shut down their business understandably hampers the enthusiasm of many small businesses and solopreneurs.
Should your cannabis business invest hundreds of thousands of dollars into a venture that could, technically, be denied at the State level? This scenario would obviously crush the dreams of the creative humans behind such projects—and is more proof of the high-risk environment that is the emerging cannabis industry.
The rapidly emerging cannabis industry is not, quite honestly, for the faint of heart or risk averse. Only those who very carefully and strategically develop compelling business plans will survive.
This creates a stressful environment for entrepreneurs and the professional ancillary services upon which they depend, including attorneys, consultants, and compliance documentation professionals like me.
For those interested in navigating these shark-infested waters—rife with shady investors and fast-talking wannabes with little real experience—there’s a few basic considerations to be tackled prior to involving someone like myself.
First, a cannabis business must have an address (as does any registered business; these aren’t new rules). Like other industry segments, the address must be in the right place. Many jurisdictions that allow cannabis businesses do so in a very restrictive manner. For example, if pot businesses are allowed only in Zone X, and Zone X is three percent of the land in a jurisdiction, options are obviously limited for entrepreneurs (although tapped-in real estate agents and investors sometimes make a mint).
Second, there’s the consideration of setbacks. Setbacks are minimum distances allowed between a cannabis business and places like schools, official school bus stops, churches, and even retirement homes. While there is often commonality among jurisdictions in their regulatory codes and guidance for cannabis businesses, in the end, each jurisdiction sets its own rules.
In Northern California’s Humboldt County, where I developed more than 100 permit applications for cannabis farmers last year, setbacks were typically 600 feet. Jurisdictions in Southern California, however, most commonly require 1000 or more feet between a cannabis business and something like a school.
Thus, the first consideration before engaging with professionals like me is knowing the exact location of the proposed businesses and learning the zoning and setbacks. For the most part, only if these requirements have been met can a business move forward with seeking a permit or license to legally operate in that particular jurisdiction.
However, it gets more confusing than this (one of the reasons I work with seasoned attorneys who help my clients navigate these regulatory challenges). Some jurisdictions allow exceptions or make available waivers for these requirements. Under the correct circumstances, some cannabis businesses that, on the surface, do not comply with jurisdictional oversight are afforded a hall pass, so to speak.
A Few Hints
My Greenrush Bonanza series will continue to evaluate and analyze the emerging cannabis industry and the topic of compliance documentation, with an obvious focus on legal states like California, Oregon, Washington, and Colorado. Let’s also not forget the new adult use states that came online last November: Nevada, Maine, and Massachusetts. Yes, now the East Coast is also getting in on the adult use cannabis economy.
Many are unaware of California’s big business moratorium that is part of the Adult Use of Marijuana Act (AUMA; also known as Proposition 64, the official name of the ballot initiative) passed in the state last November. It prevents big corporations from entering the market for adult use cannabis for five years (until January 1, 2023). The idea is to give small and midsize businesses that wish to leave the black market and join the ranks of legal businesses a fair chance, before the behemoth companies step in.
The combination of pending deadlines for permit applications and only five years until there’s an open door for large corporate players (like big tobacco, pharmaceuticals, and petrochemical companies) has created an environment in which entrepreneurs and investment groups are in a literal rush to get established. They are, intelligently, feeling the pressure to become fully legal (at least at the local and state levels) and carve out a slice of the emerging market before it’s too late.
A Friendly Warning
I recently moved to Los Angeles to focus on helping prospective cannabis businesses become established in this exciting emerging industry. This is a time when it’s critical to get into the game to get a good seat.
Experienced industry professionals and consultants have an opportunity to help Southern California form what is virtually guaranteed to be the most promising industry segment to emerge in the U.S. economy since Microsoft, IBM, and Apple duked it out in the dot com wars of the ’90s.
I respect the cannabis plant. It has blessed me and many of my friends and colleagues in countless ways. When used with good intent and in moderation, cannabis is virtually magical.
However, a mere intense adoration for cannabis sativa in no way guarantees survival in this emerging industry. And, unfortunately, being “nice” simply does not always lead to success (as is seemingly the perception of many beautiful hippie souls in this industry who believe that good karma alone will carry them through).
Those who appreciate this magic herb and its medicinal molecules enough to dedicate their careers to it must also bring to the party a slew of business skills and critical thinking ability (or work with business partners/employees with possess these skills).
Do You Smell the Money?
People are currently smelling the money. In a tired economy that has been battered by the antiquated and bombastic boom and bust approach of Wall St., the United States (and, arguably, the world) needs legal cannabis and hemp to put hard working people back to work. The cannabis industry is an incredible opportunity to improve tax revenues in municipalities and counties throughout the nation, many of which are on the verge of bankruptcy or financially ill suited to best serve their residents (California City, a couple of hours east of Los Angeles, is one such example).
Sheer profit lust also won’t help a business succeed during this genesis of the legal adult use cannabis industry. It is a delicate and well balanced mix of business prowess, reverence for and understanding of the plant (learn the chemistry of cannabis here and all about terpenes here), and involvement of the right business partners and professional services that will separate successful from mediocre cannabis businesses.
Those who aren’t vigilant and don’t keep their eyes on the ball are, sadly, destined to fail.
Stay tuned for more observations on the exciting journey of entrepreneurs and small to mid-sized businesses that are entering the emerging legal adult use cannabis market.
— Gooey Rabinski
All text and photos, unless otherwise noted, Copyright © 2003-2017 Gooey Rabinski. All Rights Reserved.
Gooey Rabinski is a technical writer, photographer, and compliance documentation specialist for cannabis businesses who has contributed feature articles to magazines and media outlets such as High Times, CannaBiz Journal, MERRY JANE, Emerald Magazine, Grow Magazine, Herb.co, The Kind, Skunk, Cannabis Culture, Whaxy, Heads, Weed World, Green Flower Media, Cannabis Health Journal, Green Thumb, and Treating Yourself.
He is the author of Understanding Medical Marijuana, available on Amazon Kindle.