Subscribe to Entrepreneur for $5

Insider Tips for Crafting a Cannabis Business Plan That Attracts Investors

Follow this expert advice to create a business plan that proves you know what you're doing and can start and grow a profitable cannabis business.

Opinions expressed by Entrepreneur contributors are their own.

The following excerpt is from Ross O’Brien’s book Cannabis Capital. Buy it now from Amazon | Barnes & Noble | iTunes

Cavan Images | Getty Images

In every section of a business plan, investors are looking for a depth of knowledge about your industry and your business and the ways in which you’re preparing to manage with all the considerations identified. They’re looking for what you’re doing and why, who’s involved, and how you’ll be able to execute. They want to see a solid playbook that will serve as a set of operating principles to get them through unforeseen challenges when things don’t go as planned.

Here are some recommendations to help you write each section of your business plan:

Executive summary

It’s best to write a four- or five-page executive summary that can also be shared by itself. The contents should make sense to some­one who would read it independently of the plan or accompanying presentations. It should summarize the entire scope of the business plan and company over­view, be high-level but fact-based, and high­light the key tenets of the business that are necessary for anyone to properly understand what the business does, why, who’s involved and how it will build from where it is currently.

Include the compa­ny’s mission statement in the executive summary up front. The final section can include, for the purposes of raising capital, a summary of the transaction that’s being pursued (amount of capital and what it’s being used for) and where the company is projected to be as a result of that investment. It’s also helpful to con­clude with a state­ment about the business’s goals regarding an exit strategy.

Related: 4 Key Things You Have to Manage in Your Cannabis Business in Order to Succeed

Management team

It’s critically important for anyone reading a business plan to know the key people involved. This is more than just bios and backgrounds — it should include a description of both the organizational chart out­lining the reporting structure and the key roles and responsibilities. Also include the advisory board or other key external members of the team, like bankers and attorneys.

Product/Service or technology

Every company has a value proposition that’s most commonly rooted in identifying an un­met need in the marketplace or a novel solution to a significant problem. Investors need to clearly under­stand what your value proposition is and what you sell. This could be a whole roster of products and/or services or a single scientific development or propri­etary technology. Clearly knowing what you have to sell will define how you build the business in the near and long term.

Business model

Clearly articulate how the company plans to make money. For example, if you’re a direct-to-consumer CBD brand, the profitability and long-term value you’re creating will be predicated on your ability to 1) source the best quality CBD at the best prices; 2) create a recognizable brand; and 3) sell better than any of your competitors. This means your business will focus not on the production of CBD but rather buying it at one price and marking it up to resell to customers.

Opportunity/Addressable market

This section should start at a macro lev­el and describe the sector and industry the business operates in. This should be brief as most readers will already know that the cannabis industry is rapidly growing. Include statistics and research; cite the source anytime you present data. Validat­ing that you’re in a large and rapidly expanding mar­ket is the objective for this section. Once you do that, move quickly into the “addressable market” — the market you can directly sell to or otherwise monetize. “All cannabis users globally” isn’t an addressable market because no company can sell to all people everywhere. This section should also point out what needs your company is specifically solving, some­times referred to as a “pain point.”

Sales and marketing

Here’s where you describe your strategy for marketing and selling the product or service. Marketing is the promotional efforts you under­take to create a potential client. Selling is the conversion of customers’ interest into sales. Inves­tors want to know how you’ll generate sales and who your clients are. This section should also show how you’ll scale and identify the key hires and how they’ll be managed. How do you pay commissions? How will you find the talent you need? Have you considered payroll taxes and benefits in your projections? How will your cus­tomers pay you? The more details you add about “how” your business will deliver on sales, the more believable your projections will be to investors.

Operating plan

This is the all-encompassing “how.” How you’ll build the business’s infrastructure will impact the financial projec­tions, the cost basis at which you’ll operate, and the ability to deliver profits. This section should include the orga­nizational charts, both functional (the roles and responsibilities) as well as reporting structure. Also describe the third-party companies and resources you’ll require such as accounting firms, law firms and partners within the supply chain. Do you need to source products from a distributor? If so, who is that distributor and what terms have you negotiated? Do you need to lever­age industry-specific software or regulatory com­pliance services such as testing or reporting? What are the costs and contract terms? Who will manage these key relationships?


When you describe accurately where your compa­ny’s place is within your industry, direct and indi­rect competition becomes clear. A word of caution is that every business has competition, and to say that you “have no competition” is not only inaccu­rate but also shows a lack of ma­turity and understanding to investors. A good way to define your competition is to analyze your indus­try and highlight others who are trying to face the problems or have a similar value proposition. You can then select the industry-specific elements of the business that all the companies can be compared against.

It’s also good to identify direct and indirect competitors, including non-cannabis businesses. For example, if your company has a novel solution to processing credit cards, American Express, Visa and Mastercard will be your competition at some point. Direct competitors are com­panies that operate with a similar business model in your industry. Indirect ones are other businesses that would have an interest in participating in your industry if they’re not already there.


This section should include a profit & loss statement, cash flow statement and balance sheet. For com­panies that have been operating for a year or more, this should include all historical statements as well as projections. It’s also good to include rele­vant financial information for a transaction here that should include a detailed use of proceeds and a capitalization table (the current ownership of the company). Your objective is to show that there’s some real financial plan­ning in place and that you’re setting targets that can be used to measure success. Investors will al­ways scrutinize the financials heavily, so it’s wise to provide as much detail as possible.

Related: How the Feds Protect the Cannabis Industry and How Things Could Change

Regulatory considerations

The number-one concern from investors and op­erators alike in cannabis is regulatory risk. Every cannabis entrepreneur should have their finger on the pulse of the regulations that impact them most directly and have thoughtful contingency plans and risk mitigation strategies that are clearly articulated in the business plan. The regulatory playing field needs to be de­fined in order to build the playbook for the company that can adapt.

Exit strategy

It’s important for the investors and company to be aligned on how the value will be created in a company, then extracted through some liquidity or exit event. Include the exit strategy in the business plan because the desired outcome will inform how the company will be developed. For example, if a management team is real­ly focused on going public, the company will build out resources and spend differently than a business that will remain private. This is critical data for the busi­ness and financial modeling contained in the plan and a section that investors will want to spend time reviewing to ensure that there’s a reason­able expectation that they can receive a return on their investment.