Is the Cannabis Industry Worth Investing In?

Is the Cannabis Industry Worth Investing In?

Cannabis is an industry that has been relevant for many years but had a generalized focus on medicine. Today, it has been more and more accepted for recreational use. That said, there are two components of the plant that have very different effects on humans - THC (tetrahydrocannabinol) and CBD (cannabidiol). These two components make up two different aspects of the cannabis industry - from recreational drug usage to holistic benefits used for medical applications. That said, the CBD industry is the one taking the world by storm.

Why CBD?

CBD can now be found in everything from mascara to sparkling beverages. The benefits are, in fact, endless, which has made this ingredient a very popular one. This increasing popularity has made the cannabis industry one that continues to grow - and grow exponentially.

 Some of the benefits include:

·         Pain relief

·         Helps to reduce anxiety and depression

·         Can alleviate cancer-related symptoms

·         Antioxidant properties that are anti-aging

·         May reduce acne

 Should You Invest?

In 2017, the worldwide cannabis industry grew by 37% while sales from the cannabis industry in the U.S. rose to $10 billion in 2018 alone. Needless to say, the industry is growing and there has never been a better time to invest. That said, every state has different laws with regard to the production and distribution of CBD. While it is legal in a state like California, it is not in New York. Before looking into investing, the first step is determining your state’s stance on cannabis and whether your business plan includes crossing state lines – because chances are, it cannot.

In addition to legality, investing in the cannabis industry is not one that can be done overnight. Once you have made the decision to start your CBD business, be ready for a long process. For one, in order to obtain a license to produce and/or distribute CBD, most states have a minimum residency requirement. For instance, it is two years for Colorado. This means you cannot pack your bags and move to a new state hoping to launch that business right away. If you already live in a state where it is legal, you have conquered half the battle.

That being said, you have to do some research about the industry in your state. Keep in mind that in most states where it is legal, the licenses are distributed on a lottery basis so they are very valuable (and might be limited). Also, some states have different licenses for different industry segments – i.e., growers, distributors, retailers, etc. Another interesting tidbit (or complication) to consider is that because cannabis is federally illegal, the money generated from the sale of cannabis cannot be deposited into a federal bank. In some states, there are chartered banks and credit unions that are able to help these businesses. A full-proof business plan will require you to be prepared to deal with all these intricacies.

All things considered, the possibilities are endless and the types of products in the cannabis industry keep diversifying. No matter your interest as an entrepreneur, you can find a creative way to enter the industry in a means that is most relevant to you and your skills. From food and beverage to cosmetic or medical, you are not pigeonholed to any one area. That said, an understanding of agriculture (since you are dealing with a plant) absolutely helps as well as being aware of supply and demand in your area and the price per pound to produce your product. Once you have your license and are ready to begin building your business, construct a team of trusting and experienced employees who have some knowledge of the industry and main ingredient.

Whether you are starting or buying a business, you have options. Contact your local Transworld Business Advisors office to chat with a knowledgeable business broker. They are equipped to answer questions and guide you toward your next big investment.