New Jersey Cannabis Startup Guide

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

Overview of legal cannabis in New Jersey

Since SB 119 passed in 2010, New Jersey adults can possess up to 2 ounces of usable cannabis every 30 days if they have a certification from a doctor. About 31,000 patients have registered for medical marijuana use in New Jersey, and reportedly about 500 more register every week. State dispensary sales could be as high as $35 million in 2018. Allowed medical marijuana products include lozenges, topical products, and dried flower, as long as THC content is lower than 10%. Edibles, tinctures, and home cannabis cultivation are illegal.

As far as medical marijuana businesses go, New Jersey is divided into three areas: north, central, and south. Only four dispensaries are allowed per region (a recent increase in July 2018), or 12 total for the entire state. Competition is stiff: more than 100 companies applied for the six new licenses, and those chosen will be announced in November 2018. According to New Jersey Dept. of Health Commissioner Shereef Elnahal, the selection committee looks for diversity, ability to responsibly ramp up cultivation, and solid professional history of meeting patients’ needs.

Cannabis business license types

New Jersey only issues vertically integrated licenses for medical marijuana businesses, or businesses that grow, manufacture, and sell cannabis. These are called alternative treatment centers, or ATCs. Standalone cannabis cultivation is illegal.

Alternative treatment center: ATCs have to grow their own marijuana and manufacture any products they want to sell, such as marijuana lozenges or topical creams. They then package, label, and sell it at a retail storefront. ATCs must follow strict state-mandated protocols for security, record-keeping, and hours, among other things.

The New Jersey Department of Health (not independent testing labs) tests medical marijuana for THC content, bacteria, and other elements. Independent testing labs may become necessary if the state legalizes recreational marijuana sales and use in the future.

If you don’t want to sell cannabis in New Jersey, 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!

New Jersey 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. (Here are some municipalities in New Jersey that have banned medical marijuana sales.)

Application fees: Applying for a cannabis business license in New Jersey costs $20,000, but if you aren’t chosen, you get $18,000 of that back.

License fees: It’s $20,000 each year for a medical marijuana business license in New Jersey.

Background check: All ATC owners and employees have to get fingerprinted and undergo a criminal history background check. You also have to disclose any criminal convictions of owners, board members, investors, and employees.

Medical involvement: Included in the official list of ATC selection criteria is “Documented involvement of a New Jersey acute care general hospital in the ATC’s organization.” The state wants either a proposed plan to organize a medical advisory board, or bylaws and list of members of your ATC’s medical advisory board.

Do you need a cannabis business plan in New Jersey?

Yes. A business plan that is five pages or less is required to get a medical marijuana business license in New Jersey (see page 10 here). The state wants to see your five-year budget, projected expenses, and revenues. They also refer to this as your “financial suitability and sustainability plan.” In addition, you have to provide a balance sheet, income statement, and cash flow statement. And if you plan on raising funding from investors, you definitely need a business plan (although we suggest one that’s longer than five pages). Your best bet is to develop a full-length business plan (20-40 pages) for internal and/or potential investors’ use, then distill the financial projections within it down to five pages for your license application.

What to include in your business plan

Here’s what an New Jersey marijuana business plan should include:
  • Product/service description: What’s unique about your alternative treatment center? Be as specific as you can. Which strains of flower and/or manufactured products will you sell?

  • Market research: How many people live within five miles? How far away is the nearest existing dispensary? 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.) Obviously 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.

  • New Jersey-specific requirements: If not included elsewhere in your application, you should include details about your security system, product tracking, secure product transport, manufacturing waste plan, nonprofit involvement, and anything else required by the 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

About 40 New Jersey towns have banned cannabis. If you’re not sure about yours, google your city or municipality name and “cannabis regulations” or “marijuana laws.” (Here’s Oceanport, for example.) 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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