#DailyCannabis Exclusive

Cannabis Business – Not for the Faint of Heart;

But with Determination, Business People will Thrive

In the cannabis/hemp industry’s latest evolutionary phase, if you’re a clever businessman with a record of successful startups who’s eyeing to move into this profitable though tricky market but lack specific skills, don’t stumble in blindly but also don’t give up – you’re in luck.

Narrow-focused service companies – MSOs – that provide a range of crucial cannabis-specific business, financial, real estate, marketing, accounting, legal, insurance, grower and other services that have calculated the potential profits have expanded into the cannabis/hemp space to help small businesses reach new highs.

I witnessed at the Real Cannabis Entrepreneur Conference on October 21-22 at the Doubletree Hotel adjacent to Newark International Airport that those companies are not robber barons jumping on the bandwagon of extra sales and profits driven by a new product but rather their expertise and services are genuinely needed because of the web of regulatory complications and lack of legal uniformity that could trip up even seasoned businessmen.

If you’re considering getting into the cannabis/hemp market for the fun of dabbling in a former illegal substance then you’re setting yourself up for failure. It’s a wild west out there and you need to be prepared. Nonetheless, despite the complications, the legal and business environment bodes well for savvy business people an industry which is characterized by enthusiasts as maturing.

West Coast states are quite mature while New York and New Jersey have just begun to get involved in the market, pointed out exhibitor Ken Tays, co-founder of Green Leaf Marketers, www.greenleafmarketers.com. “From a maturity level, we’re still very much in a growth phase. New states should look at old states to see what worked and what didn’t and then incorporate their best practices,” Tays pointed out.

While there are good opportunities in many market segments from leaf touching to dispensaries and ancillary businesses, Tays advises newcomers to study markets that aren’t saturated, where they’ll find their niche. He said prospective entrepreneurs must know what the saturation level of new licensees is today and what it is expected to be in the future.

Tays, who worked as a bank regulator for 12 years and then in financial services, understands the demands of the laws and regulations on cannabis small business owners. His company, which deals in marketing, mailings, etc., has established a compliance program for the benefit of his clients. Its framework has been designed for each state where they send mail, which is also reviewed by lawyers before dispatching circulars and parcels.

“In this business, safe, effective and legal are the cornerstones for success,” he said.

Angelo J. Amato, vice-president, retail banking, Financial Resources Federal Credit Union, https://myfinancialresources.org/, that specializes in the cannabis industry, concurs that this blossoming industry is still in its infancy, “but as it becomes more legal, we will see it grow and that’s a positive trend. We’re seeing more people accepting the industry and seeing the potential that it can have for the future.”

Amato agrees with the opinion of other exhibitors that cannabis and hemp products should be regarded as high-end products that should be marketed in boutique dispensaries and that’s his credit union’s mission. “We want to make sure that we’re helping and guiding the new business people, seeing that they’re starting out right with preliminary licenses, conditional ones or annual ones. We want to guide them through the entire process,” he said.

With cannabis banking new in the Garden State, Amato’s financial institution is striving to be the first with all of the answers to newcomers’ questions. “Right now they may understand cannabis, but we want them to understand the business of cannabis,” he added.

Insurance brokers are also part of the excitement and Rud Niles, president of East Coast Cannabis Insurance, www.EastCoastCannabisInsurance.com, sees growth by the increasing calls for quotes and letters of intent. Proof of the industry’s growth is also the booming number of ancillary, support companies that have emerged. “I also like that the stigma of being a marijuana user is going away. They’re no longer users but rather consumers,” he said.

But perhaps more so in this industry than others, entrepreneurs are getting bogged down in startup bureaucracy. “Very often they’ve gotten their license and spaces and they’re talking about building it out when local hiccups slow them down. The business people are ready but they’re not opening up their doors as quickly as they’d like.”

A myriad of challenges exist for the beginners. Tyler A. Reedman, financial advisor with HFM Investment Advisors LLC, www.HFMadvisors.com, listed two of them: capital and aligning yourself with trusted partners that are cannabis friendly, a term that was echoed by other exhibitors. Legal hurdles are massive and confusing, he added.

Nonetheless, the relaxation of regulations in New Jersey has spurred the opening of new companies. “As a result, we’re adding mature services such as 401k to legitimize their business so they can take care of their employees,” Reedman said, noting that any company that has employees or even not can open a 401k.

“It’s about retaining employees, reducing turnover and minimizing taxes. We’re seeing many people that are ready to become involved in this business. They know the hurdles and there are many of them but they’re ready to take the leap of faith,” Reedman said.

Industry advocate, Harry Carpenter, partner and co-practice leader, CitrinCooperman, www.citrincooperman.com, is very passionate about the cannabis industry as he recounts his reasons for having been involved in to for the past six years. “The reason this industry is catapulting is because it’s not just a business. There’s a passion behind this business. Maybe you see this as a plant that provides medicine, or you have someone in your family who is addicted to opioids, or you don’t like the opioid epidemic in this country, or you don’t understand why we don’t have looser laws in this country for cannabis, or maybe you or someone in your family has been incarcerated for small amounts or cannabis,” he detailed.

Carpenter continued by saying that this industry has been long time in coming to its current legal status in the United States even though it is safer than alcohol and cigarettes while providing a lot of jobs and opportunities, tax dollars for states and municipalities, medicine to people, as well as opportunities for women and minority entrepreneurs.

He expanded the list of challenges presented previously with the following points: competition, securing a location, municipality and zoning restrictions, planning board approvals, winning a license, capital and not being taken advantage of by the sharks.

Despite the seemingly tedious tasks, Carpenter is optimistic about future. “This business is a community of people. This is a $10 billion industry that will be $80 billion in 2030,” he said.

The mushrooming presence of ancillary companies was also touted by Teresa Kearney, vice-president of sales at Panacea Payroll, www.PanaceaPayroll.com.

“This tells me that the cannabis business is finally beginning to be a valid business. It is fun but it has to be run like a business. You have to pay attention to details and little things that go into running any business but more so because the IRS and states are keeping their eyes out for you,” Kearney said.

Everyone has someone is some business that could be called upon for help, but when it comes to finding a location for your dispensary, Imani Johnson of Berkshire Hathaway, www.foxroach.com, advises not to consult your uncle. “I’m in charge of locating properties so I go through zoning regulations and ordinances to locate properties where people are able to operate their cannabis business,” she said.

Her task is to help clients overcome the ton of local challenges in a very difficult process. When it comes to cannabis property, she notes that the usual automated real estate process is still done manually.

“The biggest challenge is finding the space and that’s where I come into play. Licenses and applications are straight forward but finding the property is difficult because of local ordinances, maps zoning and the uncertainty of the current owner or manager,” Johnson said.

I’ve seen food applications for cannabis at previous expos but at this one I encountered a vendor who produces cooking spices and flavors under the label “Green Panther” and has personally experienced its anti-inflammatory benefits. Jasmine “Chef Jazz” Moore, www.houseofpanther.com, is a graduate of the Baltimore International Culinary College, author of “More than a Cannabis Cookbook,” and a Crohn’s survivor. Chef Jazz’ kitchen aids are applicable in foodservice as well as retail.

Accordingly, she observes, “I want to align cannabis and food for health and happiness. I focus on the anti-inflammatory benefits, not the psycho-active ones. I just want to be healthy without the slew of medications that people take.”

Consequently, her motto is “Educate, Entertain, Empower.”

Another proponent of the high-end boutique charisma of cannabis products is Mary Sonntag of MaryBud Chocolates. A chocolatier by avocation and vocation, Sonntag refreshed her skills before marketing her confections. She also reviewed the market prices for top-shelf Belgian chocolate and added a markup for cannabis infusion.

“I developed a luxury brand of confections that appeals to older chocolate aficionados who want to spend a little more money and have fun,” Sonntag explained. “I want to take cannabis out of the shadows.”

She’s not afraid that her high prices – or those of other infused products – will scare away consumers because that image can only benefit the burgeoning industry. “Why shouldn’t there be space for a high-end product that people aren’t afraid of? After all, there’s room for a Rolls Royce,” Sonntag insisted.

In searching for a payroll company, Panacea’s Kearney recommends entrepreneurs check first if the firm is cannabis friendly – a challenge in itself is. A good payroll company needs to work with all MSOs for the success of the newfound business.

“For example, there’s very little that a cannabis business can write off on their taxes. Consequently, you want a payroll company that knows the ins and outs of that whole system so they advise about all write offs possible.  If definitely benefits business owners to have all of those pieces in place such as attorneys, accountants, payroll, real estate and others,” Kearney said.

Afterwards, she cautioned, will be too late. “Playing catch up later is not a good idea and it interferes with successfully operating the business,” she added.

All of these MSOs came full circle to Rutgers Law School, go.rutgers.edu/CLBCert, announcement of a six-month Certificate in Cannabis Law and Business that will launch in January 2023. This non-credit program brings together expert faculty from across Rutgers Law School, Rutgers School of Business – Camden, Rutgers School of Environmental and Biological Sciences, and Rutgers School of Communication and Information, alongside industry experts and guest speakers. It will provide business owners with a thorough grounding in the rules and regulations of New Jersey’s cannabis industry as they pertain to every aspect of running a business, ensuring that people entering the market have the information they need to run legally compliant businesses.

This is the first program that Rutgers Law School has developed to support participants who are not J.D. students or legal professionals. The curriculum has been developed specifically for New Jersey’s legal cannabis industry, making it highly specific to the needs of the local community.

Rutgers Law School Co-Deans Kimberly Mutcherson and Rose Cuison-Villazor said, “This new certificate is exactly the kind of work that we want to be doing as New Jersey’s state law school. Now that the state legislature has legalized the cannabis industry here, we want to ensure that we can provide crucial information to the citizens of N.J. who want to enter this business, especially those from communities that traditionally bore the brunt of punitive outcomes before legalization.”

The full six-month certificate costs $2,695. Individual modules can also be purchased for between $600 and $850. A limited number of scholarships will be available for people who have received, or who will be applying for, Social Equity business licenses through New Jersey’s Cannabis Regulatory Commission. Applications for these scholarships will open in October. Additional partnerships with community organizations will also be announced.

One more issue that attracted resounding support from the attendees that I spoke with was a future establishment of a cannabis-hemp trade organization from cultivator to boutique dispensary along with the MSOs. This type of an institution would look after the needs of the industry, train and educate the participants, assist with developing standards, and protect their interests in Washington, D.C., and states’ capitals.