business planning - step by step: create a great plan through reliable financial projections

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Medical Marijuana License Business Planning

BARTON MORRIS | CANNABIS LEGAL GROUP

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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 (but brief) The Better

• Branding and Style are Important

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Importance of a Business Plan for Applications• Regulators may use it against you especially if there are specific promises

utilized to be persuasive - i.e. community improvement, special

programming

• Your license is only issued for one year

• Use these numbers to set your goals

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LARA Administrative Rule 6 Application Requirements

A business plan with the: 1. Anticipated number of employees and 2. Projected gross receipts

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City of Lansing Rule 1300.5(11)License Application Submission

A copy of the proposed business plan including, but not limited to, the following:

1. the proposed ownership structure of the establishment including including percentage ownership of each person or entity

2. a current organizational chart that includes position descriptions and the names of each person holding each position

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Fundamental Components of a Business PlanRed = State Application Required Information

• Keys to Success

• Mission Statement

• Start-Up Costs

• Market Analysis

• Pro-Forma Financials

• Projected Revenue

• Branded Cover Page

• Executive Summary

• Table of Contents

• Team Members

• Investment Opportunity/ROI

• Organizational Chart

• Projected Cash Flow/Liquidity Requirements

• Number of Employees and Anticipated Labor Costs

• Projected Expenses

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Executive SummaryProvides 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.

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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

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Organizational Structure

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Keys to Success

What makes you special and why?

What sets you apart from the competition?

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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? Where do your sources of information come from?

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Market Analysis Strategies Visit and price other dispensaries

Talk to owners and employees

CannabisBenchMarks.com

MJ Business Daily Factbook

PriceofWeed.com

Data from Colorado, Oregon, Washington, and Arizona

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Key Desirable Data Number of Patients City/County

Census Population City/County

Marijuana Used per Patient

Historical Wholesale Price per Pound

Retail Price per Ounce

Average Time Per Patient

Number of Area Facilities

Number of Customers per week

Average Sale Per Patient

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How to Forecast Retail Sales?• Evaluate the competition

• Ascertain the patient customer potential • Estimate the number of weekly sales

• Understand the average sale per patient

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Michigan Medical Marijuana Patient Count Data

Bureau of Medical Marihuana Regulation ◦ Laws Rules and Other Resources

◦ BMMR Legislative Reports

◦ MMMA Act Statistical Reports

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2014

Medical Marijuana Act Statistical Report

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2015

Medical Marijuana Act Statistical Report

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Medical Marijuana Act Statistical Report

2016

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County# of patients (Dec

2016)Population (July

2016)Patient to Population

Ratio

Wayne 34,941 1,749,366 2.00%

Oakland 24,416 1,243,970 1.96%

Macomb 19,455 867,730 2.24%

Kent 8,754 642,173 1.36%

Genesee 14,802 408,615 3.62%

Top Five Michigan Counties - Medical Patients

+Unregulated Retail Prices - Detroit, December 2017

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147,070 (132,300) Arizona Dispensary Patients

7,000 average pounds sold per month

25.82 grams per patient per month average

2017 Arizona Average Patient Purchase Amount

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How to Forecast Wholesale Sales

• KNOW THE WHOLESALE MARKET RATE

• HAVE A GOOD MARKETING PLAN

• GROW GOOD WEED

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$597.00 arcviewgroup.com

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Gross Revenue 2019 2020 2021

$1,638,000 $1,965,600 $2,358,720

$1,638,000 $1,965,600 $2,358,720

Expenses 2019 2020 2021

Employee Salaries $607,588 $698,726.2 $803,535.13

Community Improvement $16,380 $19,656 $23,587.2

Insurance $60,000 $60,000 $60,000

Office Supplies $2,400 $2,400 $2,400

Packaging $3,000 $3,000 $3,000

Utilities $6,000 $6,000 $6,000

Cost of Goods Sold $819,000 $982,800 $1,179,360

Professional Fees $15,000 $10,000 $8,000

Compliance $4,500 $4,500 $4,500

Licensing Fees $15,000 $15,000 $15,000

Marketing $25,000 $25,000 $25,000

Lease Payments $18,000 $18,000 $18,000

Security $3,000 $3,000 $3,000

Total $1,594,868 $1,848,082.2 $2,151,382.33

EBITA $43,132.00 $117,517.80 $207,337.67

Three Year Revenue and

Expense Projections - Retail

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Income Projections 2018 2019 2020

Flower $4,000,885.00 $6,898,600.00 $6,545,000.00

Trim $126,094.00 $212,330.00 $194,650.00

Total Revenue $4,126,979.00 $7,110,930.00 $6,739,650.00

Expense Projections 2018 2019 2020

Insurance $20,400.00 $22,440.00 $24,684.00

Inventory Software $8,160.00 $8,976.00 $9,874.00

Licensing Fees $15,000.00 $16,500.00 $18,150.00

Accountant/Bookeeping $10,800.00 $11,880.00 $13,068.00

Attorney Fees $15,000.00 $16,500.00 $18,150.00

Security Monitoring $636.00 $700.00 $770.00

Telephone $2,376.00 $2,614.00 $2,875.00

Rent $7,500.00 $8,250.00 $9,075.00

Compliance Audits $1,200.00 $1,320.00 $1,452.00

Labor $459,268.00 $505,195.00 $555,715.00

Utilities $186,000.00 $204,600.00 $225,060.00

Facility Upkeep $32,400.00 $35,640.00 $39,204.00

Genetic Acquisitions $9,600.00 $10,560.00 $11,616.00

Staff Training $18,000.00 $19,800.00 $21,780.00

Marketing $24,000.00 $26,400.00 $29,040.00

Secure Transportation $9,804.00 $10,784.00 $11,863.00

COGS Variable Expenses

Packaging $10,800.00 $11,880.00 $13,068.00

Nutrients/Media $45,000.00 $49,500.00 $54,450.00

Labor $288,000.00 $316,800.00 $348,480.00

Utilities $72,000.00 $79,200.00 $87,120.00

$1,235,944.00 $1,359,539.00 $1,495,494.00

Three Year Revenue and Expense

Projections - Cultivation

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Costs Notes

Building $0 Ross contribution old store

Buildout $250,000 Needs new roof and hvac

Security System $15,000 10 cameras

POS 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 indoor

Professional Fees $40,000 lawyer, architect, CPA

Application Fees $15,000 city and state

Equipment $1,000 4 scales

Website $2,500

Furniture $16,000 Desks, chairs, waiting room

Total $360,000

Start Up Costs

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Business Planning Tips• Make it Look Good and Readable • Keep it Simple But Complete • Use an NDA • Increase Revenue Projections with Marketing

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Marketing Strategies• Internet Based Content/Educational Marketing • Brand Awareness • Train/Certify Employees Regularly • Emphasize and Dedicate Resources to Compliance

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• Advertising

• Books and Records

• Facility

• Inventory Tracking

• METRC Compliance

• Reporting Requirements

• SanitatioRequirements • Security

• SOP’s

• Signage

• Visitor Procedures

• Waste Disposal

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Thank You