Massachusetts Cannabis Startup Guide

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

Overview of legal cannabis in Massachusetts

Since question 3 passed in 2012, Massachusetts adults can possess up to 10 ounces of cannabis for medicinal use every 60 days if they have an electronic recommendation from a doctor or nurse. More than 52,000 patients have registered for medical marijuana use. Massachusetts medical marijuana sales for 2018 could be as high as $160 million.

Thanks to question 4’s passage in 2016, Massachusetts adults 21 and over can possess up to 10 ounces of cannabis for recreational use--including up to one ounce in public. Businesses can grow and sell recreational and medical marijuana and products, as long as edibles don’t look like candy and aren’t shaped like a fruit, animal, or person. Recreational cannabis sales via Massachusetts dispensaries could reach $250 million in 2018. People can grow up to 6 marijuana plants at home (12 per household), either for medicinal or recreational use.

In October 2018, Massachusetts’ Cannabis Control Commission (CCC) will decide whether to license recreational marijuana delivery service and cannabis lounges, where people can consume marijuana in public.

Cannabis business license types

Retailer: These are medical or recreational dispensaries where consumers can purchase marijuana. Medical marijuana dispensaries in Massachusetts have to grow most of the marijuana they sell or buy some of it from other dispensaries. They’re not allowed to deliver marijuana, and consumers can’t enjoy it on-site. Registered marijuana dispensaries, also referred to as RMD or medical marijuana treatment centers, are not-for-profit organizations that grow and sell medical marijuana.

Cultivator: Marijuana cultivators, also called grow operations, grow cannabis plants indoors or outdoors for recreational or medical use. They might also process and package the product. Marijuana is then either sold through a dispensary or sold to a product manufacturer. Standalone medical grow operations are not allowed in Massachusetts.

Product manufacturer: Cannabis manufacturers produce items like edibles, capsules, and oils. In Massachusetts, these manufacturers can wholesale or transfer these products to dispensaries, but not directly to the public.

Independent 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.

Transporter: These businesses securely transport cannabis. They can be third-party companies, or they can be licensed cannabis cultivators or retailers that wish to also obtain a transporter license.

Research facility: A research facility can’t sell marijuana, but it can grow and purchase it for research. Examples of marijuana research facilities could be a college, nonprofit, or corporation. No one under 21 can do cannabis research.

Microbusiness: This can be a Tier 1 cannabis cultivator (up to 5,000 square feet of canopy), product manufacturer, or both. If the latter, it must buy less than 2,000 pounds of marijuana annually.

If you don’t want to grow, sell, manufacture, or test 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, or packaging and labeling service--the possibilities are endless.

Massachusetts medical 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: For recreational marijuana businesses, the application fee is $100 to $600 for cultivation (based on grow size and type--see page 10 of this PDF) and $300 for a retail store, testing lab, product manufacturer, or microbusiness. For medical marijuana businesses in Massachusetts, the application fee is a whopping $31,500.

License fees: Medicinal cannabis companies must pay a $50,000 license fee in Massachusetts whether it’s a new or renewed license. Recreational cannabis retailers, product manufacturers, and testing labs must pay a (much lower) $5,000 license fee. Recreational cannabis cultivators have to pay a license fee ranging from $625 to $25,000 (based on grow size and type--see page 10 of this PDF). Recreational cannabis microbusinesses only have to pay half the fee they would normally pay.

Working capital: Massachusetts requires medical marijuana companies to have at least $500,000 in working capital.

“Host community agreements”: Some Massachusetts cities require medical dispensaries to pay five- or six-digit fees as part of a “host community agreement” allowing them to operate there.

Monthly tracking system fee: Massachusetts requires cannabis companies (except for microbusinesses) to pay a monthly fee to use seed-to-sale tracking, an electronic system to document cultivation, growth, harvest, preparation, and sale of cannabis products.

Background check: All marijuana business license applicants have to undergo a background check and fingerprinting to ensure you haven’t been convicted of distributing controlled substances to minors.

Do you need a cannabis business plan in Massachusetts?

A business plan is not required to get a medical marijuana business license in Massachusetts, but it will certainly make the process easier. Your application already has to include a management and operations profile, sources of capital, proposed business timeline, municipality certification, and plans for security, storage, transport, inventory, quality control, personnel, record-keeping, training, and diversity. Some of these naturally overlap with a business plan, so be smart and develop your business plan first, and your application will be easier and much more thorough. 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 recreational marijuana business plan should include:
  • Product/service description: Will you run a dispensary, grow operation, testing lab, transporter, product manufacturer, microbusiness, 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.

  • 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.

  • Massachusetts-specific requirements: If not included elsewhere in your application, you should include details in your business plan about your security system, seed-to-sale product tracking, testing, advertising, anti-diversion mechanisms, and anything else required for your license type.

  • 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 local 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 business application” (here’s info on Boston). 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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