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.

In November 2020, New Jersey voters approved a ballot initiative to legalize cannabis, which resulted in the passage of legalized adult-use cannabis in February 2021. Adults aged 21 and up are allowed to possess up to one ounce of marijuana. Cannabis can be delivered by businesses, as well as marijuana lounges for legal consumption. Edibles are permitted, but cookies, brownies, candies, and other baked goods are not.

In August 2021, the New Jersey Cannabis Regulatory Commission published its regulations, making it possible to apply for cannabis licenses.

The New Jersey program emphasizes equal access and establishes three priority programs for applicants:

  • Social Equity Businesses: Owners who live in economically depressed areas of the state or who have been convicted of cannabis-related offenses in the past.
  • Diversely Owned Businesses: Any company that is minority-, woman-, or disabled-veteran-owned.
  • Businesses in Impact Zones: Businesses in state-designated Impact Zones with high unemployment and crime rates.However, the Cannabis Regulatory Commission gave municipalities the power to opt out of the program, and as many as 70% of the state's municipalities have decided not to participate in legal cannabis sales in the near future.



Cannabis business license types

New Jersey licenses recreational cultivators, wholesalers, processors, retailers, and micro-businesses.

Cultivator: These businesses, also called grow operations, grow cannabis plants indoors or outdoors. Grow operations also are required to keep thorough documentation, including water sources, smell abatement procedures, and so forth.

Wholesaler: These companies purchase cannabis from cultivators, then distribute to processors and/or retailers.

Processor: Processors buy cannabis from licensed growers, then process and/or create infused products and sell them to dispensaries.

Retailer (aka dispensary): This is a retail storefront where adults can purchase marijuana. Typically, dispensaries must follow strict state-mandated protocols for product tracking, security, record-keeping, and hiring.

Micro-business: These businesses grow and/or sell cannabis on a smaller scale. Microbusiness cultivators can operate in premises up to 2,500 square feet and have no more than 10 employees. There are, however, opportunities for these businesses to convert to standard licenses after at least one year of operation. Noteably, these licenses will not count against license limits set by the state. 100% of microbusiness owners must be NJ residents.

Alternative treatment center: Alternative Treatment Centers (ATCs) are what New Jersey calls its medical marijuna businesses. They are all vertically integrated (they have to grow their own marijuana and manufacture any products they want to sell, and sell it at a retail storefront). ATCs must follow strict state-mandated protocols for security, record-keeping, and hours, among other things. The state is no longer accepting medical marijuana applications.

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!



Fees and other barriers to entry


Local governments may forbid cannabis companies or certain locations, so check city and county regulations. As of August 2021, many mucipalities have opted not to allow recreational dispensaries. Here is a list of cities that have opted in.

Application fees: The cost of obtaining a medical cannabis business license in New Jersey ranges from $800,000 (for a vertically integrated business with one dispensary) to $1 million (for a vertically integrated business with multiple dispensaries). The recreational application fees, on the other hand, are much more reasonable. A standard license application costs $2,000, while a microbusiness application will is $1,000. If your application is denied, you will be refunded 80% of your application fee.

License fees: License fees vary depending on size. You can see a full fee schedule here, but for an overview:

  • Cultivator: $5000-$50,000
  • Manufacturer: $20,000-$30,000
  • Retailer: $10,000
  • Microbusiness: $1,000
  • Testing Lab: $4,000

Do you need a cannabis business plan in New Jersey?


It's unclear whether a busines plan will be required for a recreational cannabis business. A business plan was required to obtain medical marijuana business license in New Jersey (see page 10 here). Regardless of what the state requires, if you plan on raising funding from investors, you definitely need a business plan.

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 cannabis business? 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


As of August 2021, many mucipalities have opted not to allow recreational dispensaries. Here is a list of cities that have opted in. If you’re not sure about yours, google your city or municipality name and “cannabis regulations” or “marijuana laws.” 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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