Arkansas Cannabis Startup Guide

 

Starting a cannabis company in Arkansas? We’ve put together a state-specific guide covering everything from fees and local rules to what you should include in an Arkansas cannabis business plan. Jump to a section by clicking below, or go straight to our sample cannabis business plan.

Arkansas medical cannabis business startup guide and planning banner

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Overview
Cannabis license types
Fees and other barriers to entry
Are cannabis business plans required in Arkansas?
What to include in a business plan
How to research city regulations
Helpful links
Get expert help

Overview of legal cannabis in Arkansas


Since issue 6 passed in 2016, Arkansas adults can buy up to 2.5 ounces of usable cannabis every two weeks if they have a written recommendation from a qualifying doctor. More than 66,000 patients have been approved for medical marijuana cards, and as of 2021, there are 38 dispensaries and 5 cultivators operating. The estimated sales of medical marijuana is projected to be around $300 million in 2021.

It is legal for licensed medical marijuana companies to grow and sell marijuana in flower form, as well as infused products and concentrates, but not baked goods or candy. Home cultivation and recreational cannabis sales are illegal in Arkansas.

Cannabis business license types

Arkansas issues licenses for three broad categories of medical cannabis businesses: dispensaries, cultivators, and testing labs.

Dispensary: This is a retail storefront where patients can purchase marijuana. Arkansas dispensaries must follow strict state-mandated protocols for record-keeping, testing, labeling, hours, and more. (Each state’s rules are different.) In Arkansas, you can apply to be a “cultivating dispensary,” meaning you both grow and sell medicinal cannabis.

Marijuana cultivation: These businesses, also called grow operations, grow cannabis plants indoors or outdoors. Marijuana is then sold through a dispensary. Like dispensaries, grow operations also are required to keep thorough documentation and adhere to state rules for labeling and testing.

Testing lab: Consumers and regulators alike demand consistency and quality control in cannabis products, which creates demand for marijuana testing labs. In Arkansas, dispensaries and cultivators have to get every lot of product tested for pesticides, solvents, THC and CBD concentration, and heavy metals. Testing labs provide these services.

Ancillary business: If you don’t want to grow, sell, or test cannabis in Arkansas, you still have plenty of options. You can create an app, payment processing service, consulting firm, pest management product, automated plant watering system, security service, packaging and labeling service, or anything else you can think of.

Fees and other barriers to entry


Local governments may forbid cannabis companies or certain locations, so check city and county regulations.

Application fees: Applying for a medical marijuana business license in Arkansas costs $15,000 for cultivators and $7,500 for dispensaries, and $5,000 for processors.

License fees: It’s $15,000 for a new or renewal dispensary license in Arkansas. For cultivators, it’s $100,000 for a new or renewal license annually.

Financial requirements: You have to have $100,000 in assets or a bond if you want to run a dispensary, and at least $100,000 in liquid assets. For cultivators, it’s $1 million or more in assets or a bond, and $500,000 in liquid assets.

Criminal history: Medical cannabis business owners, board members, and officers can’t have an excluded felony conviction on record. An excluded felony is a felony involving violence or drugs.

Do you need a cannabis business plan in Arkansas?

A business plan is not required to get a medical marijuana business license in Arkansas, but it will certainly make the process easier. Your application already has to include info about your location and owners, which naturally overlaps with a business plan. And if you plan on raising funding from investors, you definitely need a business plan.

What to include in your business plan


Here’s what an Arkansas marijuana business plan should include:

  • Product/service description: What’s unique about your dispensary? Be as specific as you can. Which strains of flower and which products will you sell?

  • Market research: How many people live within five miles? If you’re creating an app, who will be the user base, and why would they use your app instead of someone else’s? Use concrete numbers verified by a third party whenever possible (instead of estimates).

  • Competitors: Who will you compete with, both directly and indirectly? What do they do well and poorly? What is their online reputation? How will you differentiate your company?

  • Management team: Summarize your qualifications and those of others on your management team, such as your medical director. Obviously include cannabis industry experience, but don’t worry if you don’t have any. Highlight leadership skills, customer service, and business development experience in other industries.

  • Financials: This part can be tricky. You need a five-year financial forecast, including projected annual revenue, operating expenses, costs, and net profit. Each year’s projected revenue should include not only revenue but also your margin and direct costs. You can forecast revenue by estimating how much product you think you’ll sell (based on market potential), your retail price, your production cost, and how much you’ll spend on payroll, rent, and other expenses. Your cash flow statement will show that you’ll have enough cash to stay operational. You might want to include a sensitivity analysis (best- and worst-case scenarios), which shows 15% higher and 15% lower revenue than your initial forecast. It’s important to do a sensitivity analysis based on future potentialities of the wholesale price per pound. You can also include a break-even analysis, showing which month you will be profitable.

  • Arkansas-specific requirements: Include any details that Arkansas requires about your security system, product tracking, secure product transport, waste plan, and other aspects of your business.

  • Investor proposal: If you are presenting your plan to investors, how are you valuing the shares? Consult with your attorney to make sure you are within state and federal compliance. Sometimes, you’ll need your attorney to draw up an offering memorandum, often called a private placement memorandum (PPM). A PPM informs potential investors on the details of the investment vehicle (your company) and potential risks associated with the investment.
How to research city regulations


Google your city or municipality name and “cannabis regulations” or “marijuana laws” (here’s some info about Texarkana). If your city or municipality’s website doesn’t have information about cannabis, contact your city clerk, city manager, or town hall.

Helpful Links
Get expert help


Confused or overwhelmed yet? That’s normal. With such a highly regulated industry, and one with different rules in every state, starting a cannabis company can be very complex. Get help with your cannabis business plan from Masterplans, the industry leaders. We’ve worked with hundreds of cannabis entrepreneurs like yourself to create investor-ready documents and presentations so you can not only meet regulations but get the funding you need. Click below for your free, confidential consultation:

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