Starting a cannabis company in Pennsylvania? We’ve put together a state-specific guide covering everything from available license types to fees, requirements, and what you should include in a Pennsylvania 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 Pennsylvania?
What to include in a business plan
How to research city regulations
Helpful links
Get expert help
Overview of legal cannabis in Pennsylvania
Since Senate bill 3 passed in 2016, Pennsylvania adults can possess a 30-day supply of cannabis if they have a recommendation from a doctor who has registered with Pennsylvania and taken a required course. However, it’s illegal to sell marijuana flower or edibles, or to grow marijuana at home. This could be changing in the future, though, since there have been product shortages, and smokable flower could become legal. About 528,000 patients have registered for medical marijuana use in Pennsylvania, and total sales from medical dispensaries in the state could reach $900 million in 2018.
Cannabis business license types
Pennsylvania issues licenses for two broad categories of medical cannabis businesses: dispensaries and grower/processors.
Dispensary: This is a retail storefront where patients can purchase marijuana. In Pennsylvania, you can open three storefronts with a dispensary license. Dispensary business license holders have to track their cannabis every step of the way, from buying it from a grower/processor to selling it to the consumer--including ID verification.
Grower/processor: These businesses grow cannabis plants indoors, then process and/or create products such as creams or gels and sell them to dispensaries. Pennsylvania growers/processors have to use a seed-to-sale cannabis tracking system, as well as keep a daily inventory log. They also have to get their medical marijuana tested by an independent lab.
Independent labs have to be approved by the Pennsylvania Department of Health but not licensed. (Here’s the application to become an approved cannabis testing lab.)
If you don’t want to grow or sell cannabis in Pennsylvania, 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!
Fees and other barriers to entry
Pennsylvania communities can’t block licensed dispensaries or grow operations, but that doesn’t mean all local governments look on it favorably--or that you can ignore zoning laws. Check your city and county regulations.
Application fees: Dispensaries must pay a $5,000 application fee. It’s $10,000 for growers/processors.
License fees: A new license for a grower/processor is a steep $200,000 ($10,000 to renew). It’s $30,000 per new dispensary location ($5,000 to renew).
Tracking: Dispensaries and growers/processors have to use an electronic system to track your inventory daily, and state officials have to be able to access it. You also have to track security, surveillance, record-keeping, delivery and transport, sales, purchasing, processing, and more.
Medical presence: A doctor or pharmacist has to be on dispensary premises during operating hours.
Criminal record check: Medical marijuana business owners, financial backers, employees, and volunteers all have to get fingerprinted and undergo a criminal history record check to see if you’ve been convicted of anything related to selling or possessing illegal drugs.
Financial requirements: If you’re applying for a grower/processor license, you have to have at least $2 million, and at least $500,000 of that has to be in a bank. If you’re applying for a dispensary license, you only have to have $150,000, all of which must be in the bank. (See section 606 here.)
Do you need a cannabis business plan in Pennsylvania?
A business plan is not required to get a medical marijuana business license in Pennsylvania, but it will certainly make the process easier. Your application already has to include a description of responsibilities and business activities, how you’ll track plant waste, and how you’ll recall defective marijuana. Plus, you have to convince reviewers you can maintain systems for security, surveillance, tracking, and record-keeping. Much of that 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 a marijuana business plan should include:
- Product/service description: Will you run a dispensary, grower/processor, or something else? What’s unique about your business? Be as specific as you can. If you’ll open a marijuana dispensary, which products will you sell?
- Market research: If you’re opening a dispensary, how many people live within five miles? If you’ll create oils or pills, 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.) 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.
- 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 prices. You can also include a break-even analysis, showing which month you will be profitable.
- Pennsylvania-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, waste plan, and anything else required.
- 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 for Pittsburgh.) 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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