Medical Marijuana License Business planning

Medical Marijuana License Business

PlanningCobo Hall, Detroit Michigan

September 22, 2017

Business Planning• Assists in Attracting Investors

• Necessary for Applications

• Necessary for Operations and Budgeting

• The Effectiveness of a Business Plan is Dependent upon the source of its data

• Must be conservative

• The more detailed the better

• branding and style is important

Fundamental Components of a Business Plan

• Executive Summary

• Table of Contents

• Team Members

• Keys to Success

• Mission Statement

• Start-Up Costs

• Market Analysis

• Pro-Forma Financials

• Projected Revenue

• Projected Expenses

• Product Offerings and Services

• Marketing Plan

• Projected Cash Flow/Liquidity Requirements

• Repayment of Capital Contributions

Executive Summary

Provides a brief summary of the scope of the entire project and goals. Defines the past, current and

future landscapes. It sets the stage and should be written with both excitement and persuasion.

Corporate Summary• Corporate structure and history

• Identifies the members, officers, organizers and core team along with their history of accomplishments and compliance

• Photos are nice touch

• Summarizes capital contributions

Keys to Success

What makes you special and why?

What sets you apart from the competition?

Pro Forma Financials• Financial estimates based upon historical and

reliable data

• Even though this industry is new, accurate data can still be obtained with thorough investigation

• Write accompanying statement about details of figures

• What can you do to investigate?

MarijuanaBusiness Daily®

Marijuana BusinessFactbook 2017Exclusive Financial Data For Cannabusinesses & Major lnvestors

$24900

Chapter 2: State-By-State: Legal Overview, Market Data and Outlook

© Copyright 2017, Marijuana Business Daily, a division of Anne Holland Ventures Inc. You may NOT copy this Factbook, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact [email protected] or call (401) 354-7555 x1.

Page 79

State tax requirements Dispensaries will pay 3% on gross retail receipts. The bill allows MMJ to be subject to sales tax, though rules have yet to be finalized

Number of dispensaries and cultivators allowed

No statewide limits, though local municipalities can choose to ban or limit the number of MMJ businesses

Number of dispensaries and cultivation sites operating in early 2017

No state-licensed MMJ businesses are operational yet, though an estimated 100-200 dispensaries were operating illegally early in 2017. The first regulated dispensaries are expected to open in 2018

Number of registered patients

218,556 (up from about 179,000 in early 2016)

Estimated 2017 MMJ sales via dispensaries

$100 million-$150 million (versus $140 million-$180 million in 2016)Note: It’s extremely difficult to project revenues in 2017, as it’s unclear how the state and cities will approach the multitude of unregulated, technically illegal dispensaries that exist. Detroit has been closing dozens of dispensaries that don’t comply with new city laws, for instance. So sales could drop precipitously despite a further increase in patients.

What to watch in 2017 A five-member licensing board and separate marijuana advisory panel will be created in 2017 to oversee the implementation of more specific aspects of the new MMJ law – such as application fees and testing guidelines. Whether existing dispensaries - which have operated in a largely unregulated environment - can make the transition to the new program is unknown, but many might go out of business or be forced to shut down in 2017.

MMJ Business Stability Rank for 2017:

D

It will likely be a tumultuous year for existing MMJ businesses as the state gears up for a regulated market. The playing field is about to change, and scores of dispensaries and grows could close. The new MMJ law requires all municipalities to adopt an ordinance authorizing marijuana businesses to operate locally, which has created licensing bottlenecks in states like Massachusetts that have implemented similar measures. More clarity around these rules will be provided as details are ironed out, and the establishment of statewide rules will reduce volatility in the future. But for 2017 there will be a high level of instability.

MMJ Business Opportunity Rank for 2017:

A

With the second-largest medical marijuana patient base in the nation and no statewide caps on the number of MMJ licenses that can be awarded, Michigan will be brimming with opportunity for both plant-touching and ancillary companies. The application process will open on Dec. 15, 2017, though only in-state applicants will be considered for the first year. And while final details around license and application fees are still being worked out, they look to be quite low relative to other medical markets in the country.

Market Analysis Strategies

• Visit and price other dispensaries

• Talk to owners and employees

• CannabisBenchMarks.com

• MJ Business Daily Factbook

http://cannabisbenchmarks.com

Bringing transparency and efficiency to cultivators, dispensaries, investors, traders,and other cannabis market participants through validated production cost data and

standardized benchmark price assessments.

In 2015, the U.S. Spot Index reached a peak of $2,133 in September, before prices declined precipitously with the fall harvest. The average price during the fourth quarter of 2015 was $1,852 per pound. One year later, increased supplies from new andexpanded capacity, as well as improved cultivation techniques and better supply chain management, drove prices down $365per pound, or 19.7%, to $1,487 per pound during the fourth quarter of 2016.

During 2016, the U.S. Spot Index peaked at $2,096 in May, reached a low of $1,386 in November, and averaged $1,789 for theyear. In the first quarter of 2017, changing supply-demand fundamentals continued to drive prices lower. Prices averaged$1,613 during Q1, declining $340 per pound, or 17.4%, from the $1,953 per pound average witnessed during the first quarter of2016.

We are dedicated to providing a valuable service that participants from across the cannabis industry can rely on to makeeducated, informed decisions. We thank you for your support. Sincerely,The Cannabis Benchmarks Team

ANNUAL REVIEW & OUTLOOK

2016-2017 EDITION

Over 65 pages of detailed commentary and analysis

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HOME (/) ABOUT US (/ABOUT-US.HTML) PRODUCTS AND SERVICES

CONTACT (/CONTACT.HTML)CannabisBenchmarks.com

http://cannabisbenchmarks.com

Chapter 3: Medical Marijuana Dispensaries & Recreational Stores


Page 123

Such is the case for the majority of established businesses that are not yet generating revenue, as they hail largely from states like Massachusetts and Alaska where program officials continue to work through large backlogs of applicants.

Chart 3.03: Typical Annual Revenue By Store Type

Copyright 2017 Marijuana Business Daily, a division of Anne Holland Ventures Inc. All rights reserved.

Typical Annual Revenue By Store Type

Median

Regulated MMJ Dispensary

Recreational Only & Combo

Stores

Unregulated MMJ Dispensary

$3,000,000

$1,800,000

$740,000

Dispensaries in regulated medical marijuana markets tend to generate the most revenue on a per-store basis, as these businesses often operate in markets with strict caps on the number of licenses available. In Arizona, for example, just 130 dispensaries are authorized to serve a large, growing base of patients (approximately 120,000 as of early 2017). Although recreational retailers have a much larger addressable market, the number of adult-use stores has been growing rapidly, leaving a smaller share for each individual business.

Medical is also a more mature segment of the marijuana market, meaning MMJ dispensaries have had a longer runway to grow their businesses. The first recreational shops in the United States opened in Colorado in 2014, while many dispensaries have existed much longer and therefore have had more time to bolster their revenues.

Note that the revenue figures for this chart – and all subsequent charts in this chapter pertaining to sales – are on a per-store basis. While most dispensary and rec store owners operate just a single location, larger players with multiple locations are becoming more prominent in the industry. Reporting revenue on a per-store basis helps account for this trend.

Chapter 3: Medical Marijuana Dispensaries & Recreational Stores


Page 121

Chart 3.01: Retail Overview: Typical Revenue, Expenses & Startup Costs For Dispensaries And Recreational Marijuana Stores


Annual Revenue

Annual Operating Expenses

Startup Cost (Businesses

Launched In Last Three Years)

$3,000,000

$1,920,000

$775,000

Regulated MMJ Dispensaries

Annual Revenue


Startup Cost (Businesses

Launched In Last Three Years)

$740,000

$400,000

$100,000

Unregulated MMJ Dispensaries

Retail Overview: Typical Revenue, Expenses & Startup Costs For DispensariesAnd Recreational Marijuana Stores

Annual Revenue


Startup Cost (BusinessesLaunched In Last Three Years)

$1,800,000

$1,140,000

$192,500

Recreational Only & Combo Stores

Median

Although annual revenue, operating expenses and startup costs differ quite substantially based on the market each dispensary or rec store serves, the numbers reveal a profitable business proposition for all retailers. Dispensaries in the regulated medical market take in significantly more revenue than rec stores or unregulated dispensaries, but lofty startup costs and operating expenditures eat into profits. On the other end of the spectrum, dispensaries in the unregulated market can get off the ground and begin operating relatively cheaply, but the revenue potential isn’t as high compared to regulated MMJ dispensaries or rec stores.

Marijuana Business Factbook 2017

© Copyright 2017, Marijuana Business Daily, a division of Anne Holland Ventures Inc. You may NOT copy this Factbook, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact [email protected] or call 401.354.7555 x1.

Page 122

Average Dispensary & Rec Store Profit Margin:Unregulated MMJ Dispensaries: 18%

Regulated MMJ Dispensaries: 15%

Recreational Only & Combo Stores: 21%

All Dispensaries/Rec Stores: 19%

Retailer Revenue Figures Chart 3.02: What Portion Of Retail Cannabis Businesses Are Generating Revenue?


Unregulated MMJ Dispensary Regulated MMJ Dispensary Recreational Only & Combo Stores

100%

92%

11%

89%

8%

Generating Revenue Not Generating Revenue Yet

What Portion Of Retail Cannabis Businesses Are Generating Revenue?

Establishing operations is no simple or quick feat for medical and recreational marijuana retailers.

Regulations governing businesses in the cannabis industry are often very extensive, covering everything from record-keeping, security, packaging, etc. In many cases, retailers are required to have detailed operating procedures in place before sales even begin, which can lead to delays between when retail businesses are launched and when they actually start serving patients/customers.

Also, delays on behalf of state medical and recreational programs are not uncommon, as hiccups in the application, licensing and rule promulgation process leave businesses waiting to open their doors.

Revenues 2018 2019 2020

Flower 75% 57% 45%

Edibles 20% 35% 45%

Accessories 5% 8% 10%

Total $500,000 $3,000,000 $3,360,000

Expenses 2018 2019 2020Saleries $150,000 $500,000 $500,000Benefits $6,500 $6,500

Insurance $5,000 $20,000 $20,000Office Supplies $300 $1,000 $1,000

Packaging $625 $2,500 $3,000Security $900 $3,600 $3,600

RentUtilities $1500 $6,000 $6,000

Phone/Internet $625 $2,500 $2,500Goods Sold $160,000 $1,875,000 $2,100,000Prof Fees $15,000 $10,000

Compliance $1,250 $5,000 $5,000Licensing $15,000 $15,000Marketing $7,500 $30,000 $30,000

Total Expenses $327,700 $2,482,100 $2,702,600

EBITA $517,900 $657,400

Costs NotesBuilding $0 Ross contribution old store

Buildout $250,000 Needs new roof and hvac

Security System $15,000 10 camerasPOS Software $1,000 down payment and training

Computers $12,500 5 computers (one for office)

Display Cabinets $7,500 60 total square feet display

Signs (In and Out) $10,000 2 outdoor, 2 indoorProfessional Fees $40,000 lawyer, architect, CPAApplication Fees $15,000 city and state

Equipment $1,000 4 scalesWebsite $2,500

Furniture $16,000 Desks, chairs, waiting room

Total $360,000

Start-Up Costs