None of the 53 provisional licenses awarded by state regulators to date have gone to a so-called “microbusiness,” co-op, or farmer — labels typically given to small business owners. Additionally, 45 of the 53 licenses have gone to businesses that already have a medical marijuana dispensary, rather than to first-time operators.
But behind the scenes, numerous small businesses are taking root, trying to overcome myriad challenges in the industry in the process.
“It’s so exciting from a small business perspective,” said Caroline Frankel, who received a preliminary license last Thursday for Caroline’s Cannabis, a high-end cannabis boutique in Uxbridge. “There are a lot of barriers and hurdles. Going into community outreach meetings and (doing) it all myself — it’s scary. But every hurdle, I’ve overcome.”
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There are plenty of hurdles — from finding a landlord with suitable space that is willing to lease to a cannabis business, to negotiating a lease, to finding capital, to negotiating a contract with a town. That’s not to mention the usual complexities of applying for a state license.
For small businesses with relatively little capital to spare on outside attorneys and brokers, success has meant navigating those waters alone.
“If I didn’t know how to do something, I’d research and find out how,” Frankel said. “I didn’t know how to present to a municipality, but I rehearsed my presentation until I felt comfortable… to get the board’s support.”
Other businesses “would send their attorneys. We did it ourselves,” said Angela Brown, CEO and co-founder of T Bear Inc., a marijuana manufacturing company that hopes to create high-end edibles and other cannabis products.
Brown and her co-founder, Brian Cusick, found a 8,000-square-foot spot in Wareham and successfully negotiated a lease. When it came to negotiating a host community agreement with the town, Brown and Cusick did that themselves, too.
Kim Gibson, co-founder of microbusiness Gibby’s Garden, said she has saved “thousands” by using her expertise as a contractor to do most of the buildout of her small Uxbridge cultivation business, and has contracted with people she knows in the industry for the HVAC work. She’s also done much of the work that a cannabis attorney would typically perform, including negotiating a contract with the town.
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“We have a lawyer, but he allows me to do as much of the footwork as possible and I flip it to him to bless it, he makes a couple changes, and it comes back,” Gibson said. “It’s a low-cost version. We talked to some cannabis lawyers out there that sell us the lump sum service package and we gulped and said no. We’ve done most of it on our own.”
Like many small businesses, Gibson is also self-funding the operation, using a loan from her 401(k) and personal equity to start the business. All told, she said the “humble” growing operation will probably cost $300,000 to launch.
Brown, Cusick and the other co-founder of T Bear Inc. — Cusick’s father — say they hope to raise $1 million in a “friends and family” round, plus another $1 million from investors once the business is open.
“You cannot go to any bank,” Brown said. She added that she’s still working a second job.
Industry experts caution that newcomers to the space will face challenges. Jim Smith, an attorney with Smith, Crawford & Costello who works with several marijuana clients, said small groups spending their own money should be careful of getting in over their heads.
Smith pointed to the fact that many adult use dispensaries are being born from existing medical dispensaries — with their own product to sell and store to sell it in — leaving little room for small businesses that only operate in one of those spaces. He added that IRS tax rules don’t allow cannabis businesses to take any tax deductions besides the cost of goods sold.
“I’d caution businesses to look at those (facts) hard,” he said. “We don’t represent anyone who is retail only. I don’t want to hurt people. It’s very risky.”