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The cannabis market is anticipated to continue its expansion as legalization efforts spread throughout the country. This incredible growth has attracted many to enter this complex industry without full knowledge of the challenges cannabis businesses face. From licensing and compliance to protecting your business and keeping your inventory secure, cannabis companies face important common concerns when operating in the legal cannabis market.
Complying with Legal Regulations
Because nationwide legalization remains out of reach, the cannabis industry exists with a patchwork of local and state cannabis laws. Whether you are operating in a single state or across multiple markets, it is important to understand the regulations that will impact your business. Failure to do so can result in fines, costly product recalls, and loss of license.
The first step for many cannabis businesses, especially those handling cannabis plants or products directly, is licensing. Depending on the state (or states) in which you are operating, licenses for your role in the industry (cultivator, processor, distributor, retailer, etc.) may be artificially limited to a set number of licenses.
Legal cannabis states also require tracing of cannabis products from seed to sale. Accurate record keeping is essential to compliance reporting. Some cannabis operators turn to software solutions to make this tracking and reporting easier by automating these processes.
Regardless of the industry role your company fills, working with partners that are experts in the intricate details of the regulatory framework for cannabis companies can help ensure you are compliant at every step in your business.
Streamlining Supply Chain Logistics
Creating a strategy for maintaining a streamlined supply chain will help with key challenges cannabis businesses face like preventing loss due to delays. This includes when sourcing from both plant-touching cannabis businesses and ancillary suppliers. Supply chain issues differ, depending on whether the focus is on highly regulated cannabis and its products or non-cannabis needs like packaging.
Due to federal prohibition, cannabis products, including cannabis flower and extracts, cannot cross state lines, limiting the ability to source raw cannabis ingredients, as well as the potential distribution of finished goods. Instead, manufacturers need to source cannabis ingredients and retailers source finished products from within the state they operate.
Mandated third party safety and potency testing also slows down the cannabis supply chain as products awaiting lab testing cause a choke point in distribution as a result of an inefficient number of qualified labs in most markets.
When securing suppliers for your business’s non-cannabis needs, such as fertilizers, solvents, vape cartridges, edibles ingredients, and packaging, careful planning can minimize the need to warehouse supplies while ensuring you avoid costly delays that can impact your revenue.
Protecting Your Cannabis Business
Regardless of whether you are a start-up or a multi-state operator, protecting your business and its assets is a critical step.
The industry remains largely cash-based, one of the largest challenges cannabis businesses face, putting it at unique risk. Issues with securing payment processors leads to cash retail transactions, but the use of cash goes much further. Some cannabis businesses fail to obtain even basic banking services, so bills, taxes, and even payroll must be paid in cash as well.
There have been advances in cashless payment systems designed directly for the cannabis industry that have eased the burden of operating a strictly cash business. Updated banking regulations at the state and national level have also allowed for some financial services for cannabis businesses.
However, it isn’t just cash that attracts potential crime. Cannabis products can easily be moved to the illegal market, making them an inviting target for theft. Some states mandate businesses take measures to protect their businesses and secure their cannabis products against theft.
Because cannabis businesses are high risk, insuring your business is of the utmost importance. Finding the right cannabis industry insurance partner will guarantee that your business is properly covered.
More Cannabis Industry News
Want to stay up to date on the latest? You can find more on important topics in the cannabis industry on our blog.
Or get more information about comprehensive insurance solutions for the cannabis, CBD, and hemp industries from CannGen here.
Disclaimer: Information shared is for general purposes only.
