How To Build A Business In The Legal Gray Zone

Updated on January 28, 2023
hemp essential oil in small glass bottle. container with cannabis leaves and cannabis seeds on wooden.

The cannabis market is rapidly budding all around the world, leading many entrepreneurs and investors to consider building a business in the legal gray zone surrounding recreational and medicinal cannabis while they still have an opportunity to reap a massive return on their early investments. Despite the tantalizing allure of making huge sums of cash by tapping into the ongoing cannabis craze, however, it’s imperative to remember that legally-dubious business propositions end up in catastrophe just as often if not more so than they do in great success.

Thriving in the current cannabis market is possible, but it’s certainly not easy, especially if you’re uncertain of the legal landscape you’re treading upon. Here’s how to build a business in the legal gray zone without losing it all.

Understand that this is an inherently risky proposition

The first and most essential thing to understand is that what you’re doing may be morally acceptable and even admirable, but it’s nevertheless legally dubious and liable to result in tragedy. This isn’t to say that starting a business in the legal gray zone isn’t worthwhile, but rather to acknowledge the reality that most of such businesses do not end up enduring for long, let alone making a hefty profit for those who put their sweat and tears into them. If you’re fooling yourself into thinking that you can earn a quick buck by pivoting to cannabis without doing your legal homework, you’re setting yourself up for dismal failure.

Now that you know the challenges and daunting possibilities that await failed businesses, you can focus on the joyful success you may achieve if you play your cards right. The international cannabis market is booming, after all, with total worldwide sales projected to reach a whopping $40.6 billion by 2024, according to some estimates. If you tread cautiously and avoid scandals, lawsuits, and other hurdles to success, your cannabis-based business could very well earn up reaping a tremendous profit in the long-term, especially when markets finally become free of stigmatization and prohibition.

So, how should you go about preparing to launch a business in the legal gray zone? First and foremost, retain an excellent legal expert who can provide you with unparalleled advice in trying times, as you may find yourself frequently in need of a good lawyer in the days to come. This isn’t even necessary an intimidating or negative thing, either; virtually every successful business needs a good lawyer whether they’re in a legally-dubious industry or not, and your business in particular will benefit tremendously from having in-house counsel given by an expert.

Hiring a lawyer for a cannabis company may seem almost hilarious, given that just a few years ago you were more likely to hire a lawyer to get you off from a cannabis charge, but industry publications have gone to great lengths to elucidate how to hire a good cannabis lawyer without overpaying. Skip this step at your own peril, as relying on your own advice when it comes to complex legal developments can land you in some serious hot water.

Have a plan for marketing

The next step is to consider how you intend to get the word out about your business. Marketing isn’t easy when the products or services you’re trying to advertise could very well be illegal in various areas. Similarly, you may not end up violating the law at all but nevertheless anger consumers who aren’t approving of recreational or medicinal cannabis, so being able to tap into your target market without igniting a PR firestorm is an essential element of success in this industry. When it comes to bolstering your brand’s image and getting the word out, you can’t go wrong by relying on the examples set by other companies who have already forayed into this legally gray zone.

Set some time aside to research the methods relied upon by cannabis companies to market themselves amidst the ongoing cannabis boom if you’re concerned about advertising. Of course, it must also be noted that some strategies may work for other companies yet backfire for yours, so always consider the legal and nearby cultural context of your target market before totally copying someone else’s marketing strategy. By injecting some personal flair into the advertisements and avoiding legally-questionable methods, you’ll soon be attracting customers to your new business without simultaneously attracting unwanted attention from legal authorities or prohibitionists.

How are you going to store your money?

This may seem like a relatively trivial question to many entrepreneurs or investors who are only somewhat familiar with the cannabis industry, but it’s a simple matter of fact that banking and transferring the proceeds from your CBD vape juice based business is not an easy feat in this day and age. Public attitudes towards recreational marijuana, medicinal marijuana, cbd oil and other tasty products may be warming up, but banking regulations are infamously slow to develop and change. If you’ve relied on a bank for previous business endeavors, you may be shocked to discover that they’re no longer interested in doing business with you after you become involved in the cannabis industry.

This will change as time goes on, stigmatization fades, and the legal environment evolves, but for now it’s something that every prospective cannabis entrepreneur has to grapple with. The New York Times has conducted a thorough investigation into where pot entrepreneurs go when they can’t find banks willing to take their money, and it’s worth a thorough review if you’ve yet to consider your financial prospects. If your business takes off and you end up generating hundreds of thousands of dollars in cash payments each month, you won’t have time to figure this out as you go along, so some foresight right now could save you from a tremendous headache down the line.

You should also have a system in place for managing and paying your employees well before you open your doors, as an all-cash business in any industry can find itself in a legal gray zone when it comes to reporting incomes and fairly reimbursing workers. Always champion transparency and legitimacy when it comes to your internal financial arrangements and payment system, and you’ll avoid the bulk of legal trouble that could fall upon you for dealing with such huge sums of physical cash.

You’ll eventually need to pivot

Finally, it’s important to realize that sooner or later, you’ll need to pivot from operating in a legally gray zone to running a legitimate, fully-fledged business when cannabis inevitably becomes widely legalized. Support for recreational and medicinal cannabis alike continues to skyrocket with each passing year, so don’t expect your company to be operating in a legally-dubious area for long. You can’t rely on banks now, but eventually you may need to, and lack of access to a certain market in the present moment doesn’t mean you’ll always be prohibited from reaching out to those consumers.

In a few years, when cannabis is effectively universally accepted, many budding pot entrepreneurs will be going bankrupt because they won’t be able to handle the pivot to legitimacy. Always keep the future in mind when you launch your cannabis business, and soon you’ll discover that operating a business in a legally gray zone is challenging but comes with a unique set of rewards ripe for the taking.

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