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Cannabis Entrepreneurship 101: How to focus your business idea

Doing this research at the outset will help set your business apart.

6 min

The first step to starting a business is figuring out whether there’s even a need for what you’re hoping to sell. Post-legalization, the first cannabis start-ups benefited simply by being on the market the earliest. Moving forward, any savvy start-up will likely have to find and develop the idea behind their product or service if they want to be successful. That may mean thinking about what you will do differently and defining yourself in more specific terms than just “cannabis business.”

Are you opening a dispensary or starting a tech company? What needs are currently unmet by the industry? Then, ask questions about whether the idea is scalable and profitable. Finally, think about your pricing, target market, and how your idea works within current legal frameworks. Doing this research at the outset will help set your business apart. 

“Validate that what you have to offer is actually valuable, not just something that your friends and family say ‘oh yeah it’s a great idea,’” quips Krista Jennings, a business strategist who works with start-ups looking to scale up. “In the early stages of their life, start-ups are really susceptible to their own echo chambers and the love of their own idea, but that enthusiasm can’t be the only thing that drives your business forward.” 

What makes your cannabis start-up different? 

Defining and setting limitations on who you are and what you offer helps your voice and ideas come across to the right people. First, Jennings advises that businesses take stock of what exact problems their product or overall brand solves for their ideal customer. 

“You really need to just look at the three to five top players in the same area you’re looking to break into, and ask yourself, why is it that you like their business?,” said Jennings. “What’s so unique about their business that sets them apart?” 

Jennings offers that you can mimic those successful models, or more importantly, take note of what your start-up could do better. “With the other people in my industry, they’re just as talented, but their customer service is horrible,” she continued. “I’ve made the intentional decision to prioritize my customer service. That one thing can make a huge difference. The world of cannabis is very similar. The rush to get established in the industry post-legalization has left room for start-ups to be thoughtful about what they’re bringing to the table, because being first isn’t going to cut it any longer.”

When comparing your start-up idea to the companies already in your field, here are some suggestions on what you can focus on to set your idea apart.

  • Customer service. Making your customer your primary focus will help you build the foundation for a solid, long-lasting relationship. “If you come out with something and your product is amazing and you have great customer service? That’s going to allow you to grow leaps and bounds,” she said. 
  • Education. As new market data emerges, it’s clear that many consumers are looking for trustworthy ways to navigate the ins and outs of what products, strains, and varieties work best for them. Being that source of information and providing that public education could be the inroad to a market that’s just in waiting. 
  • Use case. Perhaps you have a recreational product that could also have medical uses, or vice versa. Sometimes differentiation is as simple as recontextualizing the product.  One of the most significant developments since legalization is the growing interest in medical cannabis. This group skews 35+ and includes more women. These figures have yet to translate into sales, but perhaps no one brand is speaking to their needs yet.    
  • Purpose. Being intentional about how your company is different from the rest may also come down to its purpose. That could mean being more of a social impact platform. It could also be reflected in your hiring choices, advocacy, or even your fee structures.

Your price point may set your product or service apart

When researching the competition, you should find out what your cannabis customers are willing to pay for similar services or products, and understand what other companies are hitting those price points. 

  • Aiming high: often translates that your product or service is of a higher quality, or more limited in quantity. While that can work to distinguish your brand and set it above the rest in terms of perception, you run the risk of pricing out new customers and driving people back to the black market. 
  • Pricing lower: may grant a competitive edge to get customers interested in your brand/product. A June 2020 report from Brightfield Group indicated that with the flood of cannabis product options for consumers to choose from, the distinguishing factor is typically price and not brand name. This may also be a distinguishing factor for winning over consumers from the black market, though serious consideration needs to be given to how this affects your business model overall.
  • Taking either extreme can prove fatal for different reasons, explains Jennings. “People make it too complicated either by pricing themselves too high, and out of the market, or they price themselves really low and people don’t take them seriously,” she said. Ultimately there generally needs to be some consistency between the product or service, the branding and its price point. Finding the balance that makes you both competitive and profitable will often depend on the offering and the market research you do.   

Market research is an ongoing process

Market research can be valuable to your start-up in its earliest days, but once you’ve done the research and put together a business model, that doesn’t mean your work is over. 

“It’s not something you do once,” Jennings advises. “It’s something you’re constantly doing because the landscape of consumers, consumer behaviour, consumer experiences, are always evolving and changing. Being knowledgeable about the different moving parts in your industry is a good thing to have a handle on.” 

Once you’ve established your focus, the first feedback you get from your customers may help inform your steps forward. The more focused your idea is at the outset, the better information you’ll likely get in return. 

“Let’s target this specific group of people and see what data we get back after six to eight months,” she explains about her approach. “Within that timeline, you'll be able to gather a lot of information before the eight month mark is even reached. You really want to understand their behaviour, when and what they’re most likely to buy. Be clear about the information you want to get from it.”

Focusing your cannabis start-up early on can help you differentiate yourself from your competitors, and help you come to market with a strong offering that is more likely to succeed.

“A lot of times people wait until they build out this lofty system or sales funnel to focus their idea, but they haven’t even tested to see if the product is really valuable and something people want and are willing to invest money in,” Jennings said.  

“It’s important for you to figure that out and differentiate that very early on before you invest time and energy into all these tools, automation, all these things that will make your business run very efficiently.”

Extracts

  • Understand what problems you are solving for your customer. Answering this will help you develop a profitable business model, and may open up new opportunities to build customer loyalty.
  • Knowing what your cannabis customers are willing to pay for similar services or products, and the companies that are able to provide it can help give you a solid understanding for how to best differentiate your own product while remaining profitable.
  • Market research is an ongoing task. Learning the business environment, customers' wants and needs are insights that can help ensure your cannabis start-up’s longevity and ability to scale down the line.

This is not an offer to sell or a recommendation to trade in securities. This content may contain forward-looking information and/or data from third parties and is subject to limitations as discussed under The Rise's Terms of Use. Forward-looking information is based on assumptions that may be incorrect and is subject to risks, including those set out in Canopy Rivers' AIF and MD&A available at www.SEDAR.com. The views expressed above are those of The Rise’s editor and do not necessarily reflect the views of Canopy Rivers. Readers should not place undue reliance on this content.