Michigan Cannabis Startup Guide

Starting a cannabis company in Michigan? We’ve put together a state-specific guide covering everything from available license types to fees, local rules, and what you should include in a Michigan 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 Michigan?
What to include in a business plan
How to research city regulations
Helpful links
Get expert help

Overview of legal cannabis in Michigan

Medical marijuana use has been legal in Michigan since 2008, but companies have only been able to get cannabis business licenses since 2016. Currently, Michigan adults can possess up to 2.5 ounces of usable cannabis if they have a certification from a qualifying doctor. More than 277,000 patients have registered for medical marijuana use--the second-highest number in the country. People can also grow marijuana at home for medicinal use.

Medical marijuana dispensary sales in Michigan could be as high as $425 million in 2018. The state is considering allowing online sales and home delivery and may even legalize recreational use in November 2018.

Note: Michigan’s Department of Licensing and Regulatory Affairs spells marijuana “marihuana” because that’s how it’s spelled in the Marihuana Tax Act of 1937. However, the Department notes that both spellings are acceptable.

Cannabis business license types

Michigan offers five main medical cannabis business licenses: growers (aka cultivation), provisioning centers (aka dispensaries), secure transporters, processors, and safety compliance facilities.

Growers: These businesses, also called grow operations or cultivators, grow cannabis plants indoors or outdoors. With a Class A grower license, you can grow up to 500 marijuana plants; Class B is up to 1,000; Class C is up to 1,500. Marijuana is then either sold to a processor or “provisioning center” (dispensary).

Provisioning centers (aka dispensaries): This is a retail storefront where anyone 21 and over can purchase marijuana with a doctor’s recommendation. Provisioning centers must have cannabis tested and labeled before selling it to the public. They can’t sell alcohol or tobacco products, just cannabis.

Processors: Processors buy cannabis from licensed growers, then process and/or create infused products and sell them to provisioning centers.

Transporters: These businesses transport marijuana between licensed medical cannabis companies (such as from a grower to a provisioning center). They must follow strict regulations, such as entering a route plan into Michigan’s monitoring system and carrying cannabis in sealed containers.

Testers/safety compliance: Safety compliance facilities have to be accredited. After that, they can test cannabis for CBD and THC content, fungicides, insecticides, mycotoxins, and other elements.

If you don’t want to grow, test, transport, process, or sell cannabis, you still have plenty of options. You can create an app, payment processing service, advertising and branding agency, ad network, consulting firm, pest management product, automated plant watering system, security service, packaging and labeling service, or anything else you can think of -- the sky’s the limit.

Michigan 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: All license types have to pay $6,000 in application fees.

License fees: Medical marijuana business license fees vary based on how many licenses are subject to assessment in Michigan. The license fee for a Class B or C grower, processor, dispensary, or secure transporter ranges from $10,000 to $57,000. The license fee for a Class A grower is $10,000 or less. Cities and counties may add an additional annual fee of $5,000 or less, on top of the statewide licensing fee.

Tracking: Michigan requires medical marijuana businesses to use a third-party inventory control and tracking system (more details here).

Chauffeur’s license: Businesses seeking a secure cannabis transport license have to ensure each of their drivers has a Michigan-issued chauffeur’s license.

Background check: Medical marijuana business license applicants have to undergo a background check as part of their application pre-qualification.

Do you need a cannabis business plan in Michigan?

A business plan is not required to get a medical marijuana business license in Michigan, but it will certainly make the process easier. Your application already has to include a facility plan, technology plan, marketing plan, staffing plan, and inventory and recordkeeping plan, 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 a Michigan medical marijuana business plan should include:
  • Product/service description: Will you run a dispensary, grow operation, testing lab, processor, transporter, or something else? What’s unique about your business? Be as specific as you can. If you’ll open a dispensary, which strains of flower or whose 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. Obviously include cannabis industry experience, but it’s fine if you don’t have any. Highlight leadership skills, customer service, and business development experience in other industries.

  • Michigan-specific details: Inventory control and record-keeping plan, etc.

  • Financials: You need a five-year financial forecast with projected annual revenue, operating expenses, costs, and net profit. Each year’s projected revenue should include revenue, margin, and direct costs. Forecast revenue by estimating how much product you’ll sell (based on market potential), retail price, 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.

  • 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 Lansing’s page). 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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