Starting a Cannabis Business in Washington

by | Mar 10, 2023 | Blogs, Cannabis

Starting a Cannabis Business in Washington

Thinking about starting a cannabis business in Washington? It’s a great place to get started. Here are the steps you’ll need to take to start your Washington dispensary, including legal requirements, security, and more.

A Brief History of Cannabis Legalization in Washington

Washington was a trailblazer in legal cannabis use. Medical marijuana has been fair game in Washington since 1998, though the path for patients to get the drug was murky. Unregulated dispensaries popped up, but legislative forestalling and raids posed major roadblocks for the industry.

Then, in November 2012, the state passed a landmark bill legalizing non-medical possession. This paved the way for recreational cannabis sales in the coming years. Adults over 21 can now possess and use cannabis in various forms–but they cannot grow their own plants for recreational use.

For that, they need a dispensary.

Washington’s Cannabis Market

Since the first retail sales in 2014, Washington’s legal cannabis market has grown to a $1.4 billion industry. And 2022 marked the first year that retail sales declined–a reflection of a nationwide post-COVID trend. Starting in July 2021, as people returned to work, they visit dispensaries less frequently and spend less at each visit. Industry experts hold that the market is still in a growth phase, just at a slower rate than the pandemic-driven boom.

According to a 2016 survey, nearly 20% of Washington adults had used marijuana within the past 12 months. If the industry sale trends are any indicator, that proportion has likely increased. And with approximately 8 million adults living in the state, there’s a large market up for grabs.

Washington’s excise tax for cannabis products sits at 37%, far higher than any other state. If recreational marijuana use is legalized at the federal level and interstate commerce becomes possible, this tax structure may pose issues for Washington retailers.

Still, it’s a big and growing market with a lot of potential. So how do you claim your share?

Types of Cannabis Businesses

If starting a cannabis business in Washington is on your mind, a retail store might not be your only option. Consider the following examples of cannabis businesses that you could operate:

  • Retail: Offering cannabis, edibles, CBD oil, and similar products for recreational use.
  • Cultivator: Breeding and growing marijuana plants for sale to retailers or manufacturers.
  • Manufacturer: Extracting THC and CBD for edibles, vape cartridges, and other goods or manufacturing these products yourself.
  • Laboratory: Testing cannabis products for safety, quality, and dosage.
  • Distributor: Transporting cannabis products from one business to another.
  • Hybrid: Incorporating cannabis into another popular business or activity, such as yoga, art, or cooking.

Just like any other industry, cannabis businesses also have functional needs beyond the products they sell. You could consider supporting cannabis businesses with packaging, accessories, marketing, financing, legal assistance, and more. There are plenty of ways to be involved in Washington’s cannabis market without selling cannabis products (useful if you have trouble getting a license).

How to Start a Cannabis Business in Washington

The specific procedures for starting a cannabis business in Washington state will vary depending on the type of business you select. However, there are several essential steps that all product-related enterprises will follow.

Create a Plan

Successful business ventures require meticulous planning. You could complete this process independently if you have previous business ownership or management experience. Or you can get help from the Washington Small Business Development Center or a similar resource.

Focus on these items to start your business plan:

  • Business Model: How will you generate revenue? What products and services will you offer?
  • Funding: What is your startup budget? How will you get funding? (More details below.)
  • Management: What legal entity will you choose for your business (LLC, sole proprietorship, etc.)? What personnel will you require? What is your organizational structure and hierarchy?
  • Niche: What market gap are you attempting to fill? Why should people choose your business over others? In any business venture, standing out is critical.
  • Target Market: Who will be your customers? What information do you have about them?
  • Marketing: How will you tell your audience about your business?

After you’ve covered the basics, you can nail down other areas like competitors, sales projections, partnerships, and distribution. Things may change as you get started, but having a basic plan will ensure your Washington cannabis business is feasible and that you do not overlook any critical aspects. Plus, you’ll probably need that plan to get funding.

Applications, Licenses, and Other Legal Considerations

Starting a cannabis business in Washington requires some legal hoop-jumping. There are a lot of regulations, and you have to follow all of them to stay in business. The Washington State Liquor and Cannabis Board (WSLCB) is your central information source and regulatory body.

One of the most important steps is getting a license. The WSLCB has license applications that vary based on the type of business. At the time of writing, certain licenses (including new retailer licenses) are unavailable. If you can’t get the one you want, consider changing to a different business type, partnering with an established owner, or simply waiting. There’s not much else you can do. Be aware that you may have additional local requirements to fulfill.

You’ll need insurance for your cannabis business before you open your doors. The state requires liability coverage of at least $1 million. Also consider supplemental policies for your building, personnel, inventory, customers, and commercial vehicles. Insurance can be a lifesaver for fledgling businesses.

Also, you must register to pay taxes. Marijuana sales and excise taxes have played a significant role in the industry’s legalization efforts. And the state will definitely notice if you don’t!

There are additional legal concerns, like intellectual property, zoning, advertising, employment laws, and so on. Given the complexity, contacting a lawyer or small business incubator may be prudent.

Financing Your Business

Starting a company might be more expensive than you realize. The federal marijuana ban makes it tricky for owners to obtain financing and bank accounts. That’s also one reason why retail sales are still mostly cash. (But fair warning: you can’t pay your business taxes in cash without special permission.)

If that’s the case, how do you get financing? Large FDIC banks may prove difficult. Try small local banks, private investors, and specialty lenders like Canna Business Resources or FundCanna. As long as your financier is US-based, it’s fair game.

You’ll also need a bank account. Once again, alternative options can be your friend. As the industry establishes itself, cannabis-friendly and specialty banks are emerging. Research options like Sound Credit Union and Bespoke Financial to find a bank that meets your requirements. The state’s Department of Financial Institutions maintains a list of cannabis financial service providers to get you started.

Washington Cannabis Security Requirements

When preparing to launch, safeguarding your business against crime is critical. Much like insurance, security measures protect your business from disaster. And also like insurance, security is required by law.

State law requires all cannabis businesses to have the following security measures in place:

  • Identification badges for all employees and non-customer visitors
  • A visitor log
  • An alarm system on all doors and windows
  • Business security cameras that record 24/7 and store footage for at least 45 days
  • Systems and procedures to aid in the state’s traceability efforts, including unique physical tags for cannabis plants and products, inventory records, and sales records.

The statutes are, of course, more detailed. Read them thoroughly and ask questions about anything that’s unclear.

Cannabis security is serious business. Your local government might have even stricter regulations. And you might want more security measures in place, anyway. Look into standard options like panic buttons, motion sensors, perimeter intrusion detection systems, and so forth. {LINKS} As the saying goes, better safe than sorry.

Other Considerations

As you embark on your new business venture, you may encounter unexpected challenges and opportunities. Adapt your plans, use your resources, and ask for help when you need it. You may also want to spend some time thinking about the following:

  • Staffing: Hiring practices, background checks, training programs, management styles, pay structure, company culture
  • Growth: Product development, expanding into new markets, strategic partnerships, acquiring other businesses
  • Strategy: Goal setting, long-range planning, sales forecasting, annual budgets, capital investments

There’s always more to learn, try, and do. That’s the fun of launching a business.

Secure Your Washington Cannabis Business with Deep Sentinel

Starting a cannabis business in Washington is a lot of work and involves plenty of moving parts. Criminal activity is yet another thing to worry about. But what if you didn’t have to worry?

Deep Sentinel offers peace of mind to dispensary owners, growers, and other business owners through cannabis live security camera monitoring.

Smart security cameras continuously monitor your property after your staff has left for the night. As soon as the system detects any unauthorized activity, it immediately notifies a live security guard team. These guards can intervene and contact the police on your behalf, providing the fastest and most comprehensive coverage available.

If you want to safeguard your new cannabis business with the best security in the industry, choose Deep Sentinel.

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