Starting a cannabis company in California? 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 California cannabis business plan. Jump to a section by clicking below, or go straight to our sample cannabis business plan.
Since proposition 215 passed in 1996, California adults can possess up to 8 ounces of cannabis if they have a recommendation from a doctor. Nearly 1 million patients have registered for medical marijuana use in California. People can also grow marijuana plants at home for medicinal or recreational use. Medical marijuana sales from dispensaries could reach $200 million in 2021.
Thanks to proposition 64’s passage in 2016, California adults 21 and over can possess up to 1 ounce of flower or 8 grams of concentrate for recreational use. Businesses can grow and sell recreational marijuana and products, and California is one of the few states with no restrictions on the types of cannabis that businesses can sell (many states ban edibles that look like candy, for example). Recreational marijuana sales from dispensaries could reach $5 billion in 2021.
And you don’t have to grow, manufacture, or even sell cannabis to participate in the booming industry. Just look at Weedmaps, the “Yelp for dispensaries,” which is based in California. Weedmaps had ad revenue of $300,000 within a year of launching in 2007 and now generates an estimated $14 million in annual revenue.
California has 11 different cannabis business licenses. Here are a few of the major ones:
Retailer (aka dispensary): This is a retail storefront where anyone 21 and over can purchase marijuana.
Reailer, non storefront:As of early 2018, California is one of the only states where marijuana delivery is legal. A “non-storefront retailer” is a cannabis delivery service. These companies process online orders from consumers who are of age, then provide convenient at-home delivery once or on a recurring basis. They do not have a retail storefront open to the public.
Cannabis cultivator: These businesses, also called grow operations, grow cannabis plants indoors or outdoors. Marijuana is then either sold through a dispensary or sold to a business that will create products with it, such as edibles or oils. Some cultivators are “vertically integrated,” meaning they grow, process, and sell cannabis to the public.
Processor: Cannabis processers (or manufacturers) buy cannabis from cultivators or other product manufacturers, then produce items like edibles and extracts. In California, there are four types of manufacturing licenses: extraction using a voitile solvent, extraction using mechanical method or non-volitile solvent, infustions, and packaging and labeling only. Processors can then sell those products to cannabis retail stores or other product manufacturers. Cannabis processing is overseen by California’s Manufactured Cannabis Safety Branch (MCSB).
Nursery: Cannabis nurseries sell only clones, immature plants, seeds, and other agricultural products.
Lab testing: Marijuana testing labs use methods like liquid or gas chromatography to analyze products for CBD and THC content, pesticides, terpenes, bacteria, fungi, and heavy metals, to name a few. California is one of the states that mandate that dispensaries must get their products tested to remain in compliance. California requires testing for more than 60 components.
Distributor: A marijuana distributor transports cannabis, arranges for testing, and performs quality assurance.
Distributor, transport only: These businesses can transport cannabis to and from licensed cultivators, manufacturers, and distributors, but not to or from dispensaries/retailers. They also cannot arrange for testing or perform quality assurance.
Event organizer: You can only host cannabis events if you have a cannabis event organizer license. (More info here.) This license doesn’t allow you to sell, cultivate, or transport cannabis — you have to have a separate license for that.
Microbusiness: If you grow cannabis in an area smaller than 10,000 square feet, you could qualify for a marijuana microbusiness license. However, you also have to become a licensed distributor, manufacturer, and retailer (more info here).
If you don’t want to grow, distribute, test, or sell cannabis, but still want to participate in this growing industry, you have plenty of other 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.
Cannabis business licensing can be confusing in California, because there are three different state cannabis licensing authorities: the Bureau of Cannabis Control (which licenses retailers, distributors, testing labs, and microbusinesses), the California Department of Public Health’s Manufactured Cannabis Safety Branch (which licenses marijuana manufacturers who make edibles and other non-flower products), and the California Department of Food & Agriculture’s CalCannabis Cultivation Licensing (which licenses cultivators and runs the cannabis tracking system for California).
Permits: California requires recreational marijuana businesses to get both state and local business permits. Local governments may forbid cannabis companies or certain locations, so check city and county regulations.
Application fees: It’s $1,000 to apply for most medical or recreational marijuana business in California. Cultivation application fees are based on scale of the operation, and can be as much as $8,655.
License fees: The costs for new and renewal licenses vary. For recreational marijuana businesses, the cost of a license varies based on your business’s gross annual revenue—dispensary fees can be as high a $96,000 per year. California’s Bureau of Cannabis Control regularly busts unlicensed marijuana businesses, so don’t skip the licensing step!
California requires detailed information about your cannabis business, including property boundaries, room dimensions, entrances and exits, description of activity, number of cameras, transportation and inventory procedures, and much more -- basically a business plan. The required documents vary based on which type of license you’re seeking. While a complete business plan is not required, it is best practice and developing a comprehensive business plan will help you address all pertinent areas and prepare your company for licensing. And if you plan on raising money from investors, you’ll definitely need a business plan.
Here’s what a California cannabis business plan should include:
Google your city or municipality name and “cannabis regulations” or “marijuana laws” (here’s Los Angeles, for example). If your city or municipality’s website doesn’t have information about cannabis, contact your city clerk, city manager, or town hall.
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: