Illinois Cannabis Startup Guide

Starting a cannabis company in Illinois? We’ve put together a state-specific guide covering everything from available license types to fees, regulations, and what you should include in a Illinois cannabis business plan. Jump to a section by clicking below, or go straight to our sample cannabis business plan.
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Overview
Cannabis license types
Fees and other barriers to entry
Are cannabis business plans required in Illinois?
What to include in a business plan
How to research city regulations
Helpful links
Get expert help

Overview of legal cannabis in Illinois

Medical marijuana is legal in Illinois, but not recreational. Since HB 1 passed in 2013, Illinois adults can possess up to 2.5 ounces of cannabis every 14 days if they have a written certification from a doctor. More than 34,000 patients have registered for medical marijuana use in Illinois. Medical marijuana dispensaries in the state could generate up to $150 million in sales this year. Not bad for a pilot program (which Illinois’ medical marijuana operations will be through July 2020). Growing cannabis at home is illegal.

Cannabis business license types

Illinois issues licenses for two broad categories of cannabis businesses: dispensaries and cultivators (grow operations). Cultivators are responsible for testing their own cannabis; the state does not license separate testing facilities.

Dispensary: This is a retail storefront where patients can purchase marijuana. Dispensaries must follow strict state-mandated protocols for record-keeping, advertising, inventory tracking, security, location, product testing, and more. A few of the rules include that Illinois dispensaries can only be open between 6 a.m. and 8 p.m., they must be at least 1,000 feet from a school, and are not allowed to grow cannabis.

Marijuana cultivation centers: These businesses, also called grow operations, grow cannabis plants indoors or outdoors. Marijuana is then processed and used to create products such as extracts or oils or sold to a dispensary in flower form. Cultivators are allowed to manufacture cannabis-infused products such as brownies and tinctures as long as they don’t require refrigeration or “hot-holding.” Like dispensaries, cultivators are highly regulated in Illinois--for instance, you must be at least 2,500 feet from a school.

Ancillary business: If you don’t want to grow or sell cannabis in Illinois, there are plenty of other ways to be part of the booming cannabis industry. You can create a marijuana app, payment processing service, advertising agency, consulting firm, pest management product, accounting firm, automated plant watering system, security service, packaging labeling service, or legal firm--and that’s just the tip of the iceberg!

Illinois medical and recreational marijuana business plan facts callout.

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 cannabis business license in Illinois costs $5,000 for a dispensary and $25,000 for a cultivator.

License fees: It’s $200,000 for a new cultivator license in Illinois ($100,000 to renew) and $30,000 for a new dispensary license ($25,000 to renew).

Financial requirements: Brace yourself. Cannabis cultivators have to have $2,000,000 in an escrow account or surety bond in an Illinois bank, and dispensaries have to have $50,000.

Background check: If you’ll be the principal officer of a medical marijuana business in Illinois, you have to consent to being fingerprinted and undergoing a criminal history background check. You also have to disclose if you’ve ever been charged with a crime.

Do you need a cannabis business plan in Illinois?

A business plan is not required to get a medical marijuana business license in Illinois, but it will certainly make the process easier. Your application already has to include an operation and management practices plan, patient management practice plan, site plan, and floorplan, some of which naturally overlap 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 Illinois marijuana business plan should include:
  • Product/service description: Will you run a dispensary, grow operation, cannabis consulting firm, or something else? What’s unique about your business? Be as specific as you can. If you’ll open a marijuana dispensary, which strains of flower or manufactured products will you sell?

  • Market research: If you’re opening a dispensary, how many people live within five miles? If you’ll wholesale flower or edibles, how many dispensaries will you sell to? 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. (Think of it as a shorter, “greatest hits” version of your resume.) Include cannabis industry experience, as well as 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. For marijuana cultivators, 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.

  • Illinois-specific requirements: If not included elsewhere in your application, you should include details in your business plan about your security system, product tracking, secure product transport, manufacturing waste plan, and anything else required by your state.

  • 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 information about Chicago and Decatur). If your city or municipality’s website doesn’t have information about cannabis, check recent local news coverage or 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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