5 Promising Ancillary Cannabis Business Opportunities for Entrepreneurs, Investors
Looking to get involved in the marijuana industry but don’t want to take on the sizable risks of actually handling the drug?
Good news: Some of the biggest opportunities in the medical and recreational cannabis markets involve the ancillary side of the industry – for both investors and entrepreneurs as well as professionals who currently run dispensaries or cultivation operations. This includes everything from human resources and professional services to equipment, education, advertising and virtually anything else a dispensary, edibles company or grow site needs to operate.
The potential for rapid growth is huge. Several new medical marijuana markets are coming online (Arizona, Connecticut, Massachusetts, etc.), while the legalization of cannabis in Colorado and Washington State will create a whole new industry. At the same time, there are only a handful of national cannabis-focused companies today. Ancillary businesses in MMJ states such as Colorado and California are just now starting to move into other states , so there’s still a vast untapped market and plenty of room for competition.
“There’s so much opportunity in every single aspect of this industry,” said Troy Dayton, CEO of the ArcView Group, which links investors with promising cannabis businesses. “Right now it’s about taking any business sector out there and looking at how it applies to cannabis.”
Indeed, professionals in marketing, staffing, real estate – you name it – can transition into this business.
Opinions differ on which segments will grow the quickest and which offer the most potential, and it can vary greatly by market. But here are five of the more promising ancillary opportunities from a national perspective:
#1. Cultivation/Hydroponics
Companies that provide growing equipment and supplies – be it lights and fertilizers or climate control systems and advanced all-in-one grow rooms – will be among the biggest beneficiaries of the marijuana boom. This is one of the few business segments that can tap into every state with medical marijuana and recreational cannabis laws – including those that don’t allow dispensaries or commercial cultivation – because individual caregivers and home-growers need hydroponics supplies. Also, the cultivation business is very insular and regional. So there are ample opportunities for national cultivation companies to emerge.
#2. Consulting
Professionals who have worked closely with the MMJ industry in an existing medical cannabis state are in high demand, particularly in fledgling markets such as Massachusetts. Starting a dispensary or grow site is typically very complex, given the varying rules and regulations and many pitfalls involved. Entrepreneurs are seeking people who have been there before and can provide guidance about how to go about the process, opening up the door for consulting companies. “This allows those with real experience in the industry to participate in a larger segment of the market than they would be able to running a dispensary or even a small number of dispensaries,” said Kris Krane of Arizona-based 4Front Advisors, one of several consultancies that is expanding. State and local governments are also seeking consultants to help them craft regulations.
#3. Security
Every businesses that deals directly with marijuana needs some type of security system or plan to prevent robbery and theft. Several states with dispensary programs even have strict rules covering everything from cameras to alarm systems. And you can bet security will be a big part of new regulations on the recreational cannabis industry in Colorado and Washington. The industry requires specialized security solutions, and companies that fill that niche should have plenty of business for years to come.
#4. Legal
Navigating state and local regulations is one of the biggest challenges dispensaries, edibles companies and cultivation sites face. Not only is it difficult to wade through these complex laws on your own, the risks involved are enormous. Legal guidance is a must, and law firms are often the first businesses to crop up in a new MMJ market. In some cases, attorneys that handle criminal marijuana cases expand to the business side of cannabis. In others, legal firms focused on business law move into marijuana. There’s also the possibility of expanding into consulting.
#5. Financial
Anyone who can figure out a way to provide legal, realistic financial solutions has a bright future in this industry. Banks and credit card companies pretty much shut out the industry at the urging of the federal government, forcing dispensaries to seek out other services that can help them handle customer transactions. Some companies are trying novel approaches – such as cashless ATMs – but the industry needs help on many fronts in this area. The big caveat: Unless you have a ground-breaking idea, this is more of a longer-term opportunity, and it might not truly emerge until the federal government eases up on MMJ.
