To diversify the cannabis market, an increasing number of states are offering cannabis microbusiness licenses. Cannabis microbusinesses require less start-up capital and operational funding than the typical cannabis enterprise, allowing earlier market-entry for those seeking to launch small-scale, intrastate operations.
These licenses come with considerable nuances restricting business expansion, which is why they are meant for a certain type of small-scale entrepreneur seeking to avoid complexities and big-spending. Entrepreneurs with expansion in mind may find a traditional licensing approach more suitable.
The microbusiness license has limitations which include: activities the license covers, number of licenses available per operation, number of plants, size of cultivation facility, distribution limitations, and sales caps. The microbusiness plant count restriction in comparison to operation costs may pose a challenge to succeeding profitably with this model.
So far, only three states have issued microbusiness licenses: California, Massachusetts and Michigan. California is leading the microbusiness landscape by having already issued upward of 300 licenses. Seven newly recreational states have developed microbusiness (or craft grower) programs: Connecticut, Illinois, New Mexico, New Jersey, New York, Vermont, and Virginia. In Washington, a draft bill to provide “craft cannabis endorsement” would allow cultivators on-site retail sales.
In terms of microbusiness operational success, one approach has been allowing for vertical integration to promote sustainability. Another is granting social equity applicants exclusive (but temporary) access to cannabis delivery licenses. Michigan has proposed legislative changes to make the microbusiness model more viable, including doubling the authorized plant count.
Some states hold social equity as the core rationale for this opportunity because it is designed to provide market access to those with less access to capital. Applicants with less access to capital tend to be minorities, convicts, those with disabilities, and those disproportionately affected by the war on drugs. States with social equity in mind have implemented policies to reflect this goal. For example, Michigan has offered a 25% fee reduction if the applicants agree to a five-consecutive year residency and commitment to operate in a disproportionately impacted community, and a 25% fee reduction for applicants who have a marijuana-related conviction.