5 Tips to Start a Successful (and Legal) Grow Operation

You’ve probably heard this many times before: being in the cannabis business right now is mostly about compliance. It’s not hard to come up with an idea that could prove profitable, even in a short time; what’s hard is to implement it in a way that doesn’t raise eyebrows among federal and state-level regulators or government agencies.

In this context, cultivation is one of the hardest nuts to crack.

It’s not only a business of shrinking margins and rapidly increasing competition, but also one under heavy scrutiny. So, what can an entrepreneur do to make his or her odds of success higher?

Benzinga reached out to Serge Chistov, the financial partner of Honest Marijuana Company, one of the best known, all-natural marijuana cultivation companies in the U.S. Chistov has hands-on, direct experience setting up a grow operation, creating what he has defined as “the right environment for the right products.”

“Starting a business in such a regulated environment takes a tremendous amount of time, maybe two or three years,” he told Benzinga.

From this quote comes Chistov’s first piece of advice: Conduct all of the necessary research and due diligence before venturing into the space in order to remain compliant while setting up a profitable, well-located business.

In this line, location is also important, not only due to the fact that each jurisdiction has its own laws and regulations, but also because the price of real estate, environmental conditions, labor availability and access to water and electricity vary from place to place. Assemble the right team and spend all the money you need to on quality legal and tax advisory before setting up shop, he suggested.

“You’ll save thousands, if not millions of dollars going forward,” he said.

Coming from a Wall Street financial advisory background, Chistov realized early on that, like many other rapidly developing industries, the cannabis industry would become “over-saturated and over-supplied” pretty quickly.

“My philosophy when building the business was aiming at bringing a technological differentiation, whether that was in quality, packaging or whatever,” he said.

That’s another key to success, especially in a shrinking margins environment—differentiation.

In Honest Marijuana Company’s case, it was the organic, clean approach to the product, a packaging technology that helped preserve the freshness of its products while remaining environmentally friendly, and alternative consumption methods to avoid smoking weed.

Another important thing is patience.

“People often think they can come into the cannabis industry and become a multi-millionaire in just two years, just by being involved in the industry. But, nothing is further from the truth, especially in developed markets,” Chistov voiced.

There’s space for creative, innovative businesspeople to succeed in this space, he said.

“But you need to know the reasons why you get in, you need to know how your products will be seen in relation to other existing and upcoming products,” he continued.

The fourth and fifth components for success are product quality and consumer education.

“Many consumers don’t know why they would need your product or what are its health implications, so you have to educate them on the benefits of, say, organic marijuana versus non-organic weed,” Chistov added.

It’s a long process, but it’s indispensable as marijuana consumption becomes normalized in the mainstream.