The cannabis market is one of the fastest growing markets in Israel and around the world, with more and more countries permitting legal use of cannabis for recreational and medical purposes. If you decide to enter the field of medical cannabis, the first step you need to make is obtaining a permit to establish a business from the Ministry of Health in one of the following areas:
- Cannabis farm (nursery) – a body responsible for the cultivation, genetics and cultivation of cannabis varieties and their supply to the farm.
- Cannabis Farm – A body responsible for growing cannabis plants.
- Manufacturing Plant – A body responsible for processing cannabis parts for cannabis products.
- Trading House – a body responsible for storing and distributing cannabis products to pharmacies and exporting abroad.
- Pharmacy – a body responsible for distributing cannabis products.
Once you have received the appropriate approval, the next step in which Targo can assist you is to prepare a business plan for the financial planning of the venture. As mentioned, the cannabis industry is growing rapidly. With the rise of new cannabis companies, it is important to differentiate your business from competitors, whether you are starting a farm, a manufacturing plant or a pharmacy, and presenting a business plan with realistic, above-average market profits for potential investors.
The business plan consists of the following sections:
Need \ Problem
Describe the problem you identified and how your cannabis company, whether you are a grower, processor or retailer, solves the problem. For example, imagine a city with plenty of stores selling cannabis products. The problem is that they sell very similar products, and customers in the area are looking for variety.
How do you solve the problem? If the problem is diversification of cannabis products, your solution could be a new product. Alternatively, if the problem is a shortage of supply (as can be assumed in a young market where medical cannabis is in advanced legalization), the solution is to establish a high-yielding annual farm.
TAM – Market Research
Total Addressable Market Research (TAM) is the maximum market size that your company can reach. For example, the TAM of cannabis farms is the total annual output that can be produced from the farm (in grams), twice the selling price of a gram. Alternatively, a consumer-recognized pharmacy TAM is equal to the total cannabis consumer geographical proximity to a branch, twice the sales price of cannabis grams, twice the average consumer-purchased quantity.
The TAM definition is very important to the entrepreneur as well as to the investor, as it shows the maximum potential of the venture.
The cannabis industry has a defined value chain in which each link in the chain provides the product to the next link. For example, multi-farms sell the produce to grow farms, which sell to manufacturing plants, to commercials, pharmacies, and finally to the final consumer.
It is important to define who is the target audience to whom we direct marketing efforts and segment them geographically, demographically (if this is an end consumer), relevant marketing channels, etc.
What differentiates your cannabis company from others? Will you offer a wider range of products? Growth area with strategic advantage? Unique knowledge of growing that allows to produce a higher quality plant?
Because many entrepreneurs are now entering the cannabis field, it is important to base the business on some competitive advantage rather than being “one of the herd”, since the lack of competitive advantage will make it difficult to raise funds from investors as well as profitable business activity in a saturated market.
How much cannabis is the business expected to sell and at what price? What are the growth costs and what is the gross profit per gram? What is the manpower required to run a farm / business? The Financial Plan is designed to answer these and many other financial questions. At the end of the day, the entrepreneur must understand how much money he expects to make from the business and how much capital he needs to raise before moving to profitability.
The above chapters are the main chapters that need to be detailed in the business plan but there are other issues that need to be addressed such as distribution, security, essential conditions for meeting license conditions, business location, staff and more. It is important to use a professional body to write the business plan and make realistic predictions.