Introduction to Drafting a Canna-Business Plan – Part 2
Updated: Feb 11, 2019
Continuing from Part 1, discover what else you should include in your business plan to ensure your audience has all of the crucial elements to understand your business.
In Part 1, we discussed the following sections of a business plan: executive summary, company narrative, and human capital. In this second article of the three-part series, we discuss sections regarding market opportunity, your product or service offering, and sales & marketing efforts.
Anyone paying attention knows that an immense amount of opportunity exists in the cannabis industry. Yet, the specific level and type of opportunity depends heavily on a number of factors, including regional demographics, trends in the market, competitive landscape, and market maturity. These are factors that need to be explored in-depth within this section. Your examination of the market should include current and future states, because no market in the cannabis industry is static.
The content of this section will require a moderate degree of research to accurately describe the market opportunity for your business. A fair amount of market data for the cannabis industry exists from free media sources, but a masterful overview of the market will likely necessitate the purchase of a market research report from a reputable data analytics company. There are many companies that provide market data for the cannabis industry, and reports generally range between $250 – $600, depending on the scope of the report. Although these reports can be costly, bear in mind that demonstrating intimate knowledge of your market will have a larger impact than simply including random statistics from across the country.
This portion will also benefit from SWOT analysis, which stands for Strengths, Weaknesses, Opportunities, and Threats. This exercise involves creating a matrix, where you identify these elements of your business in comparison to the market and your competitors. Regardless of how you choose to analyze your particular market, it is important that you show your reader that you’ve carefully studied your market to figure out your niche and the related value proposition identified earlier in the business plan.
You won’t get into specifics related to your own marketing and pricing structure until the next couple sections. Instead, you will want to focus on in-depth analysis of the external factors affecting your business. What is your target geography and how much revenue realistically exists in this market? If you’re an ancillary business, how many competitors offer your same services? These are questions that should be answered. Ensure your reader knows that you know your market.
Product or Service Offering
After exploring your market, you will want to explain what types of products or services you plan to offer in that market. At this point, you’ve set the stage for existing opportunities, but now, you need to explain the tangible or intangible offering that will allow your business to capitalize on said opportunities.
If you’re a cannabis grower, what strains do you plan to grow? As a retailer, what types of products do you plan to sell? Ancillary service providers should explain the exact nature of their services and pricing schemes. Make sure you explore your product (or service) life cycle in this section if you’re producing anything. This tells the reader that you understand how your offerings will exist in the market(s) you’ve identified in the previous section.
Vertically-integrated cannabis businesses will want to spend more time describing their end-to-end supply chain in relation to products sold to the end consumer. If you’re not vertically-integrated, you should explain how you plan to source products as a retailer. Do you have existing vendors who are licensed? Or, if you’re on the production side, who will you sell to and how will you source inputs? Ancillary services should also think through these questions and how best to answer them within the context of offering an intangible item.
Pricing should be discussed at length here, because it reflects your market research from earlier. Whether you’re selling a product or service, you need to know what your prices will be in comparison to the market rate. This is how you begin to describe your market positioning, or how you wish the market to perceive your brand. Is your business model based on volume? If so, your pricing should be below the market average. Are you offering a premium service or product? Your profit margins should reflect this model. Based on your pricing scheme, how you market and sell your products or services will vary greatly.
Sales & Marketing
Strategy is the primary driver for all elements of your business, but it is the lifeblood of sales and marketing. In this segment of your business plan, you will want to narrow in on all of the specific elements that comprise your strategy. Think of this section as tying together everything you’ve written up to this point or your strategic plan and how it will be executed. How you decide to market your business and sell your products and services heavily determines success or failure.
Branding is a huge part of your sales and marketing plan. Successful branding can mean the difference between exponential growth and adoption by your consumer targets versus stagnant sales and little recognition in your market. Choosing a logo, company name, value proposition, and brand statement are crucial elements in designing your brand. You want your customers to have a positive perspective of your brand and share their own success stories with their network. The creation of your brand is as important as having safeguards to protect your brand reputation. Your brand should attract new customers and have a solid reputation in the industry. Confusing or poorly maintained brands fade quickly into obscurity, which is why planning at this stage is key.
How are you planning to position your brand? You answered part one of this question through your pricing, but this is where you want to explain exactly how your pricing and brand line up to accomplish your market positioning. Also, consider which market segments you are actively targeting. Do they line up with how you plan to position your brand in the existing market? This section is also where you will want to explain your sales goals and how you plan to achieve them. If you’re a grower or processor, who is going to sell your products? Will you have a team, or are you planning to start small with one sales manager and a car? Ensure that your plan has metrics or KPIs (Key Performance Indicators) so your reader knows how you plan to measure success. All parts of your strategy (and business plan) should be aligned.
Your marketing initiatives and advertising efforts should be customized to your target market. If your company deals with ancillary products or services, you should be investing in trade shows and networking opportunities. Cannabis facilities need to be cautious about advertising, as state laws and municipal ordinances can vary greatly in the form and type of content allowed in advertisements. While keeping compliance in mind, you still need to get the word out about your business. How do you plan to accomplish that?
Digital marketing should be central in your plan. Having an attractive website as well as social media accounts helps potential customers discover you. In terms of social media, the cannabis industry primarily exists on Instagram, but you still need to know your target market’s social media preferences. As a cannabis facility, you need to strongly consider purchasing subscriptions to services such as Weedmaps and Leafly, where cannabis consumers generally go to find new retailers and brands. Also consider potential promotions for new customers or particular demographics such as veterans or senior citizens. How might you attract new customers with these promotions and do they affect your pricing at all? Don’t be afraid to revise other sections of your business plan if you discover elements of your strategy have changed. It is always easier to change plans prior to executing them. Keep this in mind, especially as you’re describing your strategy in this section.
Please be sure to check back soon for Part 3 of this three-part series of articles!
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