• David Rozanski, JD, MBA

Introduction to Drafting a Canna-Business Plan – Part 1

Updated: Feb 11, 2019

Question: What is the number one determinant of winners and losers in the cannabis industry (or any industry)? Answer: A carefully drafted business plan.

Do you have a business plan? If you’re considering entering the cannabis industry in any capacity, drafting a business plan is a prerequisite for success in your new venture. Whether you plan to start a licensed cannabis facility or launch an ancillary business, a business plan will help you create a road map for success.

The act of creating a business plan forces any entrepreneur to think through every high-level aspect of their business idea. In many cases, having a business plan is mandatory for one reason or another. Investors, state licensing agencies, and even family members who are willing to loan you startup capital will all likely want to see that you have a sagacious plan for success.

The risks associated with not having a business plan are plentiful and large in magnitude. Starting a business without a concrete plan is much like taking a trip to an unfamiliar location without GPS. You’re traveling blindly and likely have no idea where pitfalls exist. As helpful as a business plan is with keeping an enterprise on track, it’s even more useful for exposing risks or issues before they have a chance to cripple your business. In the ultra-regulated industry of cannabis, the importance of avoiding risk cannot be overstated.

For these and many other reasons, new entrants to the cannabis industry need to understand the basics of developing a business plan.

Executive Summary

A well-written executive summary provides the reader with a high-level snapshot of the business plan in one or two pages. In many cases, the executive summary can make or break a business plan because it will tell the reader whether or not reading the rest of the business plan is worthwhile. Many institutional investors, who receive a plethora of business plans and pitch decks on a daily basis, will stop reading a business plan if the executive summary fails to capture their attention.

There are two schools of thought comprised of whether to write an executive summary first or last. Starting with the executive summary can act like an outline for the drafter of a business plan. It forces you to think through the material you want to organize, and it will communicate the rest of your plan. As a last step, writing your business plan becomes easier because you wind up simply summarizing each section in a paragraph or less. Generally, best practice is writing a rough draft of your executive summary in the beginning and revising it at the end.

Remember that a good executive summary concisely describes the rest of your business plan with high-level details. A great executive summary captures the reader’s attention from start to finish and makes them want to read the rest of the business plan. Be careful not to get bogged down in the details for this section. Focus on only the most important elements that will incentivize your audience to continue reading.

Company Narrative

The section following your executive summary (and potentially your first section, if you’re saving the executive summary for last) is your opportunity to discuss your business in-depth. What is your vision for this new business? Why are you passionate about the cannabis industry? What problems are you trying to solve? How is your company going to fill a market need? These are just some of the questions that should be answered in this section.

The best way to organize this section is by telling a narrative. Story-telling is one of the most powerful forms of communication. By taking an opportunity to describe the history of your company or business idea in a chronological or logical way, you keep your audience engaged. The cannabis industry contains a very eclectic group of people, which means every person has their own story about how they entered the industry. Sharing a personal account helps readers buy-in to more than just your business. More than any other section, it’s important to craft a meaningful narrative here, because it shows that you are passionate about this business and helps connect many dots for the reader.

Describing your goals, providing your mission statement and company values, and explaining your value proposition are all vital in this section. Although specific details related to your strategy should be included later in the business plan, a good overview of your company’s goals in relation to the market opportunity sets the stage well. Don’t be afraid to utilize more colorful and evocative language in this section. There will be ample opportunity to provide financial figures and market data in other sections, so this is the perfect place to tell your story.

Human Capital

The purpose of this section is to introduce key members of your team and provide an overview of how your company will be structured. Sometimes, this section is titled “Organizational Structure” or “Management Team,” but regardless, the purpose is to describe your company’s human capital and related structure. Biographical information about yourself and the executive team is appropriate to share here. Any credentials, especially advanced degrees and previous roles of note are important pieces that the reader will want to know.

It is vital to show off your team’s strengths in this segment of the business plan. A solid reputation is important for any aspect of the cannabis industry, so make sure to highlight elements of good character. This is especially true if this business plan is being used for licensing purposes.

In addition to giving the reader an idea of who your team is, explaining why each member of the executive team adds value in their respective role tells your audience that you’ve carefully selected key members. Based on how you set up your organization (LLC, Corporation, Partnership, etc.), your organizational structure may be simple or complicated. For more complex corporate entities, it can be helpful to create a visual aid, such as an organizational chart.

In addition to sharing information about your existing team, the human capital portion will benefit from an explanation of your staffing plan. Are you planning to hire a staffing company, or do you have an HR manager who will lead recruitment efforts? How many employees do you plan to hire in your first year? If you’re applying for a cannabis facility license, many jurisdictions have required information related to hiring plans that you will want to ensure are met before submission.

Related Articles: Part 2 | Part 3

Do you need help planning out your business idea and/or drafting a business plan?

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