Washington Cannabis Startup Guide

Starting a cannabis company in Washington? We’ve put together a state-specific guide covering everything from available license types to fees, regulations, and what you should include in an Washington cannabis business plan. Jump to a section by clicking below, or go straight to our sample cannabis business plan.

Washington medical and recreational cannabis business startup guide and planning banner

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

Overview of legal cannabis in Washington state

Recreational and medical marijuana are both legal in Washington State. Patients with a written recommendation from a doctor can possess up to 3 ounces of usable cannabis, as well as grow up to six marijuana plants at home. Nearly 50,000 patients have registered for medical marijuana use in the state, significantly up from under 19,000 in 2017.

Washington has combined its medical and recreational marijuana programs. That means that recreational dispensaries can sell medical marijuana if they get an endorsement for medical cannabis, which requires additional testing and different labeling than recreational products do. About 200 recreational dispensaries in Washington also sell medicinal marijuana.

The number of recreational marijuana customers in Washington is estimated to be about 1.5 million people. Adults can possess up to 1 ounce for recreational use. Marijuana sales at recreational dispensaries in Washington could reach $1.7 billion in 2021.


Cannabis business license types

Washington issues licenses for five broad categories of cannabis businesses: producers (cultivators), processors, retailers (aka dispensaries), researchers, and testing labs.

Producer: These businesses, also called cultivators or grow operations, grow cannabis plants indoors or outdoors. Marijuana is then either sold through a dispensary or sold to a producer that will create products with it, such as edibles or oils. In Washington, producer license-holders can also sell marijuana seeds, clones, and immature plants to medical marijuana cooperatives. You can be both a producer and a processor. More info is here.

Processor: Processors buy cannabis from licensed growers, then process and/or create infused products, package and label them, and sell them to dispensaries. Products that appeal to kids, as well as gummies, are forbidden. More info is here.

Retailer (aka dispensary): This is a retail storefront where patients and consumers can purchase marijuana. Dispensaries must follow strict state-mandated protocols for labeling, disposal, inventory, transport, and more. You can’t sell cannabis online or offer delivery in Washington. More info is here.

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.

Ancillary business: If you don’t want to grow or sell cannabis in Washington, there are plenty of other ways to be part of the booming cannabis industry. You can create a marijuana app, payment processing service, 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. Check out this map to see if commercial cannabis is permitted in your area.

Application fees: Applying to be a cannabis producer, processor, or retailer in Washington $250 for recreational companies. The state is no longer accepting applicants for medical-only licenses.

License fees: It’s $1,480 for a medical or recreational cannabis business license in Washington, whether you’re a producer, processor, or retailer.

Tracking: All commercial cannabis businesses are required to use Washington’s seed-to-sale tracking system, appropriately titled Cannabis Central Reporting System (CCRS).

Background check: You must undergo a criminal background check. If you’ve been convicted of a felony, or more than two possession misdemeanors, you aren’t eligible to get a marijuana business license.


Do you need a cannabis business plan in Washington?

Washington is not currently accepting applications for cannabis producer (cultivation) licenses, and it’s unknown whether business plans will be required as part of the application process in the future. Business plans are not required for other cannabis businesses in Washington. However, a business plan will certainly make the application process easier. Your application already has to include an operating plan, source of funds statement, and management summary with names, titles, qualifications, and functions, all 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 an Washington marijuana business plan should include:

  • Product/service description: Will you run a dispensary, grow operation, testing lab, processor, wholesaler, 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 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. (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.

  • Washington-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, manufacturing waste plan, and anything else required by the state of Washington.

  • 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,” or check this map of Washington cities and whether they allow cannabis businesses. 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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