1. Hire Your Professional Team Early
If you have ever heard Dana deliver her presentation on general licensing and compliance, you know step 1 is find real estate, step 2 is hire your team. This includes your architects, attorneys and the lead operational gurus for your business (master grower, chemist, baker, lead salespeople, accountant, etc.)
Make sure you have your site and building plans ready to go, including a floor plan. Each city has different requirements. If you are under a deadline, you want those plans drawn out in advance so that all your engineer or architect is working on in the final hours are the city or county specific requirements in the applicable ordinance (usually articulated through your attorney).
Every single application we have helped prepare always requires at least 3 rounds of revisions with the architectural drawing team. These professionals are used to common sense, standardized requirements – the cannabis industry, as you already know is anything but standardized. From APN’s to North Facing Arrows to simply marking entrances to the property (not the building) we have caught numerous oversights that save our clients money and delays in the licensing process.
The Cannabis Corporate Law Firm offers its services solely on an hourly basis. This means you and your clients can retain our firm to do a once (or twice, or thrice as the case may be) over to make sure that all the i’s are dotted and t’s are crossed. Of course, we also offer A to Z assistance.
2. Invest in Your Community and Do Good
With all the interest in California’s emerging commercial cannabis industry, many cities and counties have chosen a merit based approach to licensing where applicants are scored on various criteria. Some criteria favor local businesses, because of their past local employment practices, but by far, we see community enrichment at the top of the list. The good news is, this is something you can do now to start preparing for your local application.
We recommend that our clients start investing in community specific nonprofits, such as children’s organizations, hospitals and local charities. Another area where clients are able to really catch the attention of municipal actors is the Chamber of Commerce. Sponsor an event or simply joint, that activity is likely to rack up additional points that could be the difference.
Another hot topic for many cities and counties is diversity and social equity. We were recently at the launch party for the Cannabis Diversity Council and Alliances, which supports homelessness based charities and efforts. These are a great group of uplifting, supportive industry professionals and we encourage everyone to join in and support their efforts.
While we are discussing charities and helping others, we encourage you to undertake more volunteer or donation activities this summer. It is a great chance to connect with your community and it feels good to help those in need. We support the Orange County Rescue Mission on a regular basis. We encourage you to pick a local charity and get involved.
3. Safety and Security Plans
Employee safety should be at the top of your list. Not only is California an extremely employee-friendly state, but taking care of your employees is just the right thing to do. You want to ensure their safety and that of anyone who comes to your business. To that end, start developing your safety and security plans early. There are services and consultants out there who will draft your safety and security plans for you. Make sure these people have the proper qualifications or license; some cities require your security plan to be assessed and signed off by a qualified security consultant. The California Department of Consumer Affairs – Bureau of Safety and Investigative Services allows you to search for licensed security companies – just select the appropriate license type.
4. Have landlord signed off if you don’t own the property.
This seems like a no-brainer if you are leasing the property, but you would be surprised how difficult landlords can be once they have you on the hook. When you execute your lease, please ask the landlord to sign the appropriate form or affidavit confirming that the landlord authorizes your business to engage in commercial cannabis activities on the property. This will come in handy later and is one less thing for you to do when you are filing your application.
5. Budgets and Capitalization
We are seeing more and more cities require proof of capitalization as part of the application process. Even our previously favored City of Adelanto (because of the relatively simple application process and $7,000 application fees) recently added the requirement that the applicant show proof of capitalization.
In order to prove sufficient capitalization, you will first need a realistic budget. Do not forget to include things like licensing fees (state and local), legal and accounting fees, labor costs, rents and utilities and the costs of the products required to run your operation. We have seen clients omit everything from loan repayments, to state licensing fees to the cost of crude oil or plants. Make sure you are not solely focused on finishing your build out, and that you include operations through the end of the year.
As for the actual proof, this comes down to your source of funds. More power to you if you can show the money in the bank. If not, start getting creative. We recently had to include a photograph of cash to prove capitalization (of course Dana checked with the city in advance to make sure this was acceptable). Other sources of funding can be signed promissory notes, deeds of trust and letters of credit. We recommend that you have these kinds of documents notarized before submitting them to the city or county; it increases the legitimacy of the document.
Rules of Thumb for drafting your cannabis business budget:
1. Take the number you think you need to get through your first year and multiply it by at least 1.5 – now you are getting closer to your realistic cost to get up and running.
2. In terms of adequate capitalization, we typically see requirements range from three to twelve months of operations.
3. Structure your business entity to allow for raising capital in the future; you are probably going to need it.