Experts to cannabis entrepreneurs: Slow down, build good team, do your research

State Sen. Nicholas Scutari has been the leading advocate of legalizing adult-use marijuana in New Jersey over the past decade — it was an effort to correct many social injustices of the past.

Now that Gov. Phil Murphy and the Legislature have finally agreed on how to regulate cannabis, Scutari (D-Linden) said there is a business opportunity moving forward.

“By implementing a regulated system that allows people age 21 and over to purchase limited amounts of marijuana for personal use, we will bring marijuana out of the underground market, where it can be controlled, regulated and taxed, just as alcohol has been for decades,” he said.

“New Jersey will now be a leader in legalizing a once-stigmatized drug in ways that will help the communities hurt the most by the War on Drugs and realize the economic benefits of the new adult-use cannabis market.”

But how?

Those looking to get into the industry will have questions. We turned to some experts for a quick thought on next steps.

We asked them: What advice would you give those looking to enter the business today, now that the bill has been passed?

Here is advice from the leaders at seven firms with cannabis practice groups. And, since we so often list people A-Z, we decided to go Z-A:

Lee Vartan
Co-chair, Cannabis Law Practice
Chiesa Shahinian & Giantomasi

The passage of this legislation is significant in that it gives clearer form to the framework, timing and overall roadmap to licensure in New Jersey. As we await additional direction and regulations further narrowing down the scope of what it takes to engage in the state’s cannabis sector, my advice to aspiring entrants would be to begin pounding the pavement now to secure the prerequisites of a compelling bid to the state as it seeks to scale up and meet what will undoubtedly be a strong demand for adult-use cannabis.

Now is the time to develop a strong team, consider real estate needs and achieve buy-in from municipal leaders. This proactive stance will ensure that cannabis entrepreneurs are ahead of the game once regulations are in final form and additional calls for applicants are issued.

John V. Pellitteri, CPA
Partner, cannabis practice leader
Grassi Advisors & Accountants

Don’t jump in too quickly. While the passing of this legislation is opening up many new doors, cannabis entrepreneurs still have the hurdle of their applications, which will be heavily scrutinized. In addition to researching and identifying the subsector they want to enter (e.g., cultivation, manufacturing, retail), applicants need to demonstrate an ability to raise capital and develop a social equity platform.

Cannabis licenses are limited, and the competition will be high, so putting your best foot forward from the start is critical. The cannabis industry is like no other — don’t go into it blindly. There are unique tax obstacles, limited funding sources and other challenges due to cannabis still being an illegal substance on the federal level. These should all be considered before even reaching the application stage.

While it is tempting to be part of history and get in on this new business opportunity quickly, you want to manage your risk by doing your homework and developing a business plan that will support your profitability in spite of these obstacles.

Charles Messina, Esq.
Partner, co-chair, Cannabis Law Group
Genova Burns

There are so many ancillary services, such as accounting, insurance and real estate, that will become necessary and benefit from this industry. Defining your brand early on to “sell shovels” during this green rush is now more important than ever with the signing of the historic legislation.

For those seeking recreational cannabis licensure: Get familiar with the bill. Figure out what type of license you want and where it makes sense for your team to operate. Municipal approval for an applicant’s desired location will be critical, so start planting and watering those seeds now. And, most of all, as with any industry, partner with professionals like us that you can trust to guide you through the process.

Victor J. Herlinsky Jr.
Co-chair, Cannabis Industry Practice Group
Sills Cummis & Gross P.C.

Prospective cannabis clients are now going to be scrambling to find prospective locations to site their cultivation facilities, dispensaries and other cannabis-related operations. Before making the investment, operators should make sure that they are aware of the past/current local regulations governing cannabis in their specific prospective locations.

The law that Gov. Murphy signed effectively wipes the slate clean, as local ordinances prohibiting the cultivation or distribution of cannabis are now null and void.  Municipalities now have 180 days to reenact these prohibitions or they will be proscribed from enacting such bans for a five-year period.

Now would be an ideal time for prospective cannabis operators to revisit local municipalities to gauge their willingness to site cannabis related facilities in their locales.

John D. Fanburg, Esq.
Managing member and co-chair, Cannabis Industry Practice
Brach Eichler LLP

1. You need to develop a realistic business plan with enough capital to get you through the early stages of the new New Jersey industry;
2. Identify a location/town that will welcome this business;
3. Engage advisers’ knowledge from a corporate, tax, real estate, and legal perspective;
4. Begin to identify your team — who will be your first hires to get the business off the ground with you;
5. Take this new business opportunity very seriously. It will be highly regulated and not for the faint of heart;
6. Depending upon your position in the industry — grower, producer, dispensary, security, testing, marketing/branding, or delivery — different needs will require different approaches to the new marketplace.

Guillermo C. Artiles
Chair, Government Affairs & Cannabis practice groups
McCarter & English

Individuals should be revisiting conversations they may have had with local officials previously, or ignite new ones immediately. The state has done its work by setting up a framework for adult-use cannabis and will continue to do so through the Cannabis Regulatory Commission, but the granular work will now be done at the local level via ordinance or resolution.

Real estate, organizational, and financial planning — while all critical pieces of the puzzle — should all be done with a local backdrop in mind. No matter how great the applicant or entity, it will not succeed without local support.

Eric Altstadter, CPA
National Cannabis & Hemp Practice leader
EisnerAmper LLP

Not much has changed now that New Jersey has moved forward. After all, cannabis is still illegal, according to the federal government. And that hasn’t changed. Entrepreneurs still need to decide which part of the industry they want to be part of. For example, are they a grower, dispensary, cultivator, manufacturer or a logistics company?

Keep in mind that you can become part of the cannabis ecosystem by providing ancillary business services, such as professional services, packaging and security, to name just a few. Entrepreneurs should create a solid business plan that focuses on their business model and how to achieve their goals and contain the steps necessary to achieve those goals.

Cannabis still has many other challenges that need to be considered, such as an entrepreneur or organization developing the right relationships. These companies should build relationships with a bank, an attorney, an insurance agent, a CPA and others.