Colorado Cannabis Startup Guide

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

Overview of legal cannabis in Colorado

Medicinal and recreational marijuana sale and use are legal in Colorado. Patients can possess up to 2 ounces of usable cannabis and grow up to six plants at home for medicinal use if they have an online certification from a doctor. More than 87,000 patients have registered for medical marijuana use, but this has decreased since recreational use became legal. Medical cannabis sales via dispensaries could be as high as $390 million in 2018.

Thanks to amendment 64’s passage in 2012, Colorado adults 21 and over can possess up to 1 ounce of flower or 8 grams of concentrate for recreational use. Recreational dispensary sales could hit $1.3 billion in the state this year. Businesses can grow and sell medical and recreational marijuana and products, as long as edibles aren’t shaped like a fruit, animal, or person.

Cannabis business license types

Colorado issues licenses for five broad categories of cannabis businesses: retail stores (aka dispensaries), cultivation facilities (aka grow operations), infused product manufacturers (e.g., extracts or edibles), transporters, and testing labs. In Colorado, cannabis business licensees must follow state-mandated protocols for waste disposal, operating hours, recordkeeping, packaging, signage, advertising, and more.

Dispensary/retail store: This is a storefront where patients/consumers can purchase marijuana if they are 21 or older and have valid ID, and a doctor’s certification for medical marijuana.

Marijuana cultivation facilities: These businesses, also called grow operations, grow cannabis plants indoors or outdoors. Marijuana is then either sold through a dispensary or sold to an infused product manufacturer.

Infused product manufacturing: Cannabis manufacturers produce items like edibles, capsules, and oils, then wholesale them to dispensaries.

Testing lab: Consumers and regulators alike demand consistency and quality control in cannabis products, which creates demand for marijuana testing labs. These 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. Colorado cannabis testing facilities have to have a laboratory director on staff who has a valid Colorado M.D. license.

Transporter: These businesses transport marijuana between licensed cannabis companies (such as from a grower to a dispensary). You can transport both medical and recreational cannabis in Colorado, but you will need a separate license for each.

Ancillary business: If you don’t want to grow or sell cannabis in Colorado, 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!

Colorado 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 Colorado costs $2,500 for a medical cultivation business, testing lab, or infused product maker. Application fees for a medical dispensary are based on the number of patients and can range from $9,000 to $22,000. Application fees are $4,000 for recreational cultivation or infused product manufacturing. Recreational testing labs have to pay $2,000 in application fees. New recreational dispensaries have an application fee of $4,500, but only $2,250 if you have an existing medical dispensary and are adding a recreational dispensary, or $250 if you’re converting from a medical to recreational dispensary.

License renewal: It’s $1,800 to renew a license for a medical cultivator, testing lab, or infused product maker in Colorado. Medical dispensary license renewals cost $2,300 to $7,300. Recreational cultivation license renewals cost $1,800 to $7,100 (and higher if you have more than 13,800 plants). Recreational dispensary, testing lab, and infused product manufacturing license renewals cost $1,800.

Criminal record: Cannabis business license applicants must be of “good moral character,” can only receive investment from people also of “good moral character,” and can only employ people whose (lack of) criminal history confirms they’re of “good moral character.” Applicants also cannot have been convicted of a felony in the past five years. (See page 44 here.)

Occupational license: You have to have a valid occupational license to possess, grow, manufacture, test, sell, transport, or deliver medical or recreational marijuana in Colorado. Learn more here.

Inventory tracking system: Medical marijuana centers, grow operations, and testing facilities have to use an inventory tracking system that identifies, weighs, and tracks cannabis, including post-harvest waste. Plus, at least one medical marijuana business owner must be trained in administering the tracking system.

Do you need a cannabis business plan in Colorado?

A business plan is not required to get a medical or recreational marijuana business license in Colorado, but it will certainly make the process easier. Your application already has to include floor plans, funding source(s) details, and ownership structure, 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 Colorado marijuana business plan should include:
  • Product/service description: Will you run a dispensary, grow operation, testing lab, cannabis consulting firm, product manufacturer, 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 and/or types of 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. 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.

  • Colorado-specific requirements: If not included elsewhere in your application, you should include details in your business plan about your facility layout 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

Google your city or municipality name and “cannabis regulations” or “marijuana laws” (here’s info on Denver). 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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