Canada’s legal cannabis industry is a booming business. Estimates show that national consumer spending could amount to billions of dollars annually in just a few years.
Naturally, those with an entrepreneurial spirit have been intrigued since the first whiffs of legalization. And as the next wave of the industry approaches with the legalization of edibles, extracts and topical treatments in October, even more opportunity is on the horizon.
But as MNP’s Peter Guo knows through his years of advising cannabis entrepreneurs, getting into the weed business is “not for the faint of heart.”
He leads MNP’s cannabis industry team for B.C. and works with entrepreneurs in the cannabis field to provide professional consulting, tax and assurance services.
He says there are many things entrepreneurs should be aware of before getting into the cannabis business.
Agility is one important consideration. Clarity and execution of business strategy are also critical.
Be adaptable
“The ability to pivot is critical,” says Rob McIntyre, CEO and CFO of Salvation Botanicals Ltd., a science-based cannabis technology company that does analytical testing of cannabis products.
“Constant change is the only constant. The regulations that are there today are not what they will be tomorrow, next week, next month or next year,” he says.
Case in point: when McIntyre started in cannabis, the product needed to be stored in a concrete vault within a cage. The day after McIntyre ordered vault doors, the regulations changed. “You need to be able to deal with the change… pivot and go a different direction.”
Define your business
For cannabis entrepreneur Brandon Wright, the process of defining his business has been years in the making.
Wright is the CEO of Dynaleo Inc., which will be a processor and manufacturer of cannabis gummies.
“The industry is a brand new landscape of entirely different end-to-end services and products.” It’s important to ask yourself who you want to be in that supply chain and understand how that business will interact with the rest of the industry, he says.
For Wright, getting into the business of manufacturing cannabis gummies was a relatively simple decision. He and his team had looked at various alternatives, including retail, growing and extracting, but ultimately, he wanted to become a supplier.
“We didn’t want to be the sugar farmers. We wanted to be the guy who manufactures Coca-Cola for Coca-Cola,” he says.
Find a space
To become a manufacturer, a lot of space is required — tens of thousands square feet of it.
Securing permissions from local authorities to acquire that area is a crucial step in the process as federal licensing requires an applicant have area secured before launching a cannabis business.
Since municipalities set their own zoning, there can be variances of how much space can be dedicated to specific organizations even within the shortest of distances. What is allowed in Vancouver, B.C., might not be allowed across the bridge in Richmond.
“Permission is often very hard to come by,” says Wright, adding that approval wait times can be months long.
That’s why Dynaleo chose to locate their factory (a whopping 30,000 sq. ft of space) in Edmonton, in an area that was already zoned for cannabis.
“That was a no-brainer. It meant cutting off an entire piece of risk, waiting and uncertainty,” he says.
The waiting game
One of the most time-consuming parts of federal licensing is presenting a spotless criminal record check.
Key investors must also be listed on the report and they need to be security cleared by Health Canada who works with the RCMP and other national security agencies. “It takes a long time. Sometimes more than a year,” says Guo.
A major concern during the licensing wait is the amount of time and capital needed to continue to build a start-up, while getting through the process.
“It’s very much a waiting game,” says Wright. “You have to spend a lot of money up front just so you can wait in line for a very long time… it’s a difficult pill to swallow.”
That’s where a group such as MNP can play a pivotal role in helping to ensure the business plan, execution, financing and entire process is smooth. They can help figure out a ways to integrate, reduce or recoup costs spent during the licensing phase, so you can get up and running.
“A lot of times your best approach is hiring an independent third party to help you,” says Guo.
“There are no half measures here,” Wright continues. “The barriers to entry are quite high and you have to be willing to climb quite a mountain and stick with it if you want to make your way in.”
MNP is one of Canada’s largest chartered accountancy, tax and business advisory firms with years of knowledge and experience working with businesses in all areas of the country’s growing cannabis industry. Find out more at mnp.ca.