New York Cannabis Startup Guide

Starting a cannabis company in New York? 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 York cannabis business plan. Jump to a section by clicking below, or go straight to our sample cannabis business plan.

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Latest News:

September 1, 2021: New York State Senate approves Governor Hochul's nominees for key recreational cannabis oversight positions. Read the story here.

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Overview
Medical vs. Recreational Cannabis
Cannabis license types
Fees and other barriers to entry
Are cannabis business plans required in New York?
What to include in a business plan
How to research city regulations
Helpful links
Get expert help

Overview of legal cannabis in New York

New York became the 16th state to legalize cannabis in March of 2021, and just the third to do so via state legislature. Adults over the age of 21 can possess up to 3 ounces of cannabis. An adult can grow up to 6 plants (3 mature and 3 immature) but cannabis grown at home cannot be sold and is intended for personal use only. The law will allow for the commercial sale of cannabis via licensed establishments, but the program is not expected to begin until late 2022.

The legal cannabis market will be run by the New York Office of Cannabis Management (OCM).

Medical vs. Recreational Cannabis


New York legalized cannabis for medical use in 2014. Patients are required to have a recommendation from a state-registered doctor or nurse practitioner. The medical program is one of the strictest in the nation, allowing only for vaporization (smoking is prohibited), ointments, and tablets/lozenges. The state's medical marijuana program has only 140,000 patients, accounting for less than 1% of the total population. In 2021, medical marijuana sales are expected to reach $300 million. The state only allowed ten licensed businesses to operate, each with up to four dispensaries and a cultivation facility. Medical marijuana businesses are all vertically integrated.

Conversely, the adult-use program is expected to allow as many as 900 licenses and will encourage social equity, with a goal of 50% of licenses awarded to applicants who have been harmed by the prohibition of cannabis.


Cannabis business license types


While the medical program no longer issues licenses, the new adult-use market is expected to offer a several license options when it launches.

Retailer (aka dispensary): This is a retail storefront where anyone 21 and over can purchase marijuana.

On-Site Consumption: The state law allows for licenses for on-site consumption will be allowed. Owners of on-site consumption licenses cannot have any other license type. Details on the license will be developed by the OCM.

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.

Processor: Cannabis processers (or manufacturers) buy cannabis from cultivators or other product manufacturers, then produce items like edibles and extracts.

Nursery: Cannabis nurseries sell only clones, immature plants, seeds, and other agricultural products.

Testing lab: 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.

Delivery: 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. It is unclear whether New York will allow delivery to the end consumer

Microbusiness: Microbusinesses are cannabis licenses for small scale opertation. Details on microbusinesses have yet to be announced.

Nursery: A cannabis nursery can produce clones, seeds, and immature plants to be sold to licensed cultivators.

Ancillary business: If you don’t want to grow or sell cannabis in New York, 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. Municipalities have until the end of 2021 to opt out of the New York adult-use cannabis program via referendum.

Application fees: The application fee schedule is still being finalized.

License fees: The annual licensing fee schedule is still being finalized.

Do you need a cannabis business plan in New York?

A business plan is not required to get a cannabis license in New York, but it will certainly make the process easier. Your application already has to include your operating plan with information on manufacturing, sale, security, hours, and staffing, 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 New York marijuana business plan should include:
  • Product/service description: Will you run a dispensary and grow operation, cannabis consulting firm, or something else? What’s unique about your business? Be as specific as you can. If you’ll open a marijuana dispensary, which strains or products will you sell?

  • Market research: If you’re opening a dispensary, how many people live within five miles? 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.) 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 York-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, quality assurance, and anything else required by your 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”. 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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