Ought to I spend money on my good friend’s marijuana enterprise?

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Stop! Before you decide to give money to your friend’s marijuana startup, there are four things you should consider

Author of the article:

Terry Hacienda • • The fresh toast

Release date:

February 04, 2020 • • March 6, 2020 • • Read for 4 minutes There are more than 30,000 marijuana companies employing over 225,000 people, with average sales exceeding $ 2.5 million. There are more than 30,000 marijuana companies employing over 225,000 people, with average sales exceeding $ 2.5 million. Photo by Getty Images

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Cannabis and CBD are the hottest industries in the US and Canada. Both expect a market of $ 25 billion by 2025. There are more than 30,000 marijuana companies that employ over 225,000 people, with average business revenue exceeding $ 2.5 million.

With all the hype, it seems like almost every friendly gathering now has at least one friend’s canna business pitch: “For only $ 5,000, get in on this great opportunity on the floor!”

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Before you get started, there are four things to keep in mind before investing.

Only invest money that you can afford to lose

Investing is not about giving your money away, it is about putting it into action with the potential to make more money in the future. This distinction is important and implies that you need to be careful when entering the industry. Jan Hendrickson, former CEO of US Bank, says: “All startups are risky. Enter only what you can afford to lose and understand that your return on investment will be up to twice as long as you think and likely to be less. Plan for that. “

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Keep in mind that Walt Disney, France Ford Coppola and George Foreman went bankrupt in early business before they made it big.

If all you want to do is be a good friend, you can also prepare for the idea of ​​not getting your greens back. However, make sure that you get something else in return, such as: B. free products or a lifetime discount for the company in question.

Know the market and the business plan

While an idea often sounds innovative, the way it is executed is critical to its success.

Michael Leen, who founded and sold a clothing company and sales company, said, “Before you invest, do you know the market and do you understand the business plan?” If you don’t understand the gist of the business plan and expectations, you can go on a rude one Encounter awakening. Is it trying to solve a problem or is it responding to a consumer’s needs? Do your own independent research on related companies, the competition, and the market.

A well-developed written business plan should contain a rough roadmap of what future milestones to expect depending on your funding. These expectations increase accountability when the company deviates from its plans.

Add in the federal cannabis illegality and complicated state-to-state legal landscape and you have increased the risk. The cannabis business has higher costs and no tax exemption. Is the financing of the plan realistic? A good rule of thumb is that it will take twice as much money and twice as long to recover.

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You should consider whether your friend’s cannabis startup is capable of clearly addressing an existing problem, and if not, it might not be a solid investment.

Diane Czarkowski, founding partner at Canna Advisors, stated, “Has your friend ever started a business before? This is not an industry for first time business owners. Being a start-up is challenging, and being a start-up in a start-up industry is even more complicated. “

“And that’s the thing,” adds Javier Hasse, Managing Director at Benzinga Cannabis. “Starting a successful business is easier said than done. Even the best thought out business plan is practically worthless if not accompanied by strong execution. Entrepreneurs must equally be able to stick to their plans if necessary and change their plans if necessary, ”explains Hasse, author of the bestselling book“ Start Your Own Cannabis Business ”.

How organized are the founders, do they have the skills and perseverance to complete the project, how well (and often) you communicate with your friend, and can they share both good and bad news – all of these should be considered before writing the exam.

When and how do you receive a payout?

“You should have a clear understanding of how your investment will pay off for you. Is it for profit or are they planning to sell and you get a portion of the sale? “says Noa Kahner, founder of Kahner Global, who runs a successful series of investor conferences in the US, Canada and the UK.

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It is easy to get caught up in the excitement of building a business, but make it clear how your investment can grow and how you can pay off. Since most startups fail, if the new business you’re looking to invest in is successful, you should know how to get your money.

TheFreshToast.com, a US lifestyle website that provides lifestyle content and medical marijuana information for The GrowthOp through its partnership with 600,000 doctors through Skipta.

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