With more states legalizing marijuana for recreational use, there’s a growing demand for cannabis delivery services to get the product to the consumer.
Getting into the cannabis business (also known as the cannibuisness) is a little more complicated than other delivery industries. You have to consider state laws, acquire special licensing, know how to market and manage your company, and so much more.
We’ve put together this comprehensive guide to get you started in the cannabis delivery industry and help set up your small business for success.
How to start a cannabis delivery service
- Decide what type of cannabis delivery business you’ll be
- Determine your operating location
- Choose your business structure
- Conceptualize your brand
- Write a business plan
- Get funding
- Create avenues of contact
- Secure an office
- Secure a storage facility
- Choose your delivery vehicles
- Register your business
- Get a business license
- Take out the proper insurance and coverage
- Get a mobile payment system
- Open a business bank account
- Set up payroll
- Find an accountant
- Hire drivers and employees
- Know your marketing and advertising limitations
- Install vehicle GPS tracking
1. Decide what type of cannabis delivery business you’ll be
There are several different types of cannabis delivery service arrangements you can create. Determining your specific business model is the first step to starting your company.
The main types of cannabis delivery services include:
- Independent delivery services: Third-party delivery service that delivers on behalf of local cannabis dispensaries or online retailers that don’t have their own couriers.
- Dispensary delivery services: In-house delivery for your own brick and mortar, physical dispensary.
- eCommerce delivery services: In-house delivery for your own online dispensary that deals exclusively in online sales.
2. Determine your operating location
The location in which you operate your delivery business will affect your taxes, legal requirements, and revenue. The laws around cannabis are constantly changing and every state is different. In many states, recreational marijuana is completely legal while in others, it’s illegal or only medical marijuana is allowed. Knowing what your rights are as a delivery service is a critical first step in starting a marijuana delivery service.
3. Choose your business structure
Will your cannabis delivery service be a sole proprietorship, partnership, limited liability company (LLC), corporation, or coop? Your business structure will impact your business registration requirements, how much you pay in taxes, and your personal liability.
4. Conceptualize your brand
Starting a business means creating a business name and designing a logo. Your name and logo should reflect the type of service you offer while also being a reflection of yourself and your vision for the company.
5. Write a business plan
You’ll need a formal and documented business plan that clearly describes the company’s goals, operations, your standing in the cannabis industry, marketing objectives, and financial projections. A business plan can help you get funding and potential partnerships for your company. It also acts as a helpful guide to keep you on track when getting your business off the ground.
6. Get funding
In order to start any business, you need capital, and unless you have a lot of money saved up, you’ll need to source funding from investors. Your business plan can help with this. Whether you’re looking for private investors or taking a loan out from a bank, you’ll need documentation to support your intention for the business and how the funding will be used.
7. Create avenues of contact
Starting a business means being seen online and giving people ways to contact you. You’ll need to build a website, create email addresses, take out a business phone number, and print business cards.
8. Secure an office
Nowadays this step is optional. If you choose to rent out office space, we recommend finding something with good parking since you’re getting into the marijuana delivery business. Having a physical office also offers you a place to focus, take calls, meet with drivers and clients, and more.
If you decide to operate without an office, you’ll need to consider securing parking locations for your fleet. Whether it be outside of your work-from-home setup or at a rented lot, aim to park your company cars in a safe location.
9. Secure a storage facility
This step only applies to you if you’re in the eCommerce cannabis business and you aren’t delivering on contract for another company. So, if your company deals exclusively with online sales, you’ll need a safe storage facility for your product. This may require a temperature-controlled room or unit to keep certain cannabis products at a specific temperature.
Note: We don’t recommend storing your product at the same location as your office for maximum safety purposes.
10. Choose your fleet vehicles
As a cannabis delivery service, you’ll need to purchase or lease company cars to transport the cannabis products. Since you’ll be transporting a controlled substance, we don’t recommend branding your vehicles with your business name, logo, or contact information. The more your vehicles blend in with the rest of the vehicles on the road, the safer your drivers will be.
Note: You may need to equip your vehicles with cooler bags to keep certain products (such as cannabis beverages) cool during transport.
11. Register your business
You’ll need to register your business with the IRS to receive your Employer Identification Number (EIN). You’ll use your EIN for things like opening a bank account and paying taxes.
After that, you’ll likely need to register your delivery business with one or more state or local government agencies. (Some of this will depend on your decision to run payroll or not.)
12. Get a business license
Business license requirements for cannabis delivery vary from state to state and between local municipalities. Who you file your organizational paperwork with will depend on your business location; some states will file with the Secretary of State’s office while others will need to work with local licensing agencies.
The cannabis industry also has specific licensing requirements for employees. For example, in Nevada, all employees and volunteers must register for an agent card which includes a background check.
You may also need to apply for a cannabis delivery license to legally transport and deliver cannabis products to consumers.
13. Take out the proper insurance and coverage
Just like any other legitimate business, your cannabis delivery business will need the proper insurance and coverage. This includes:
- General liabilities insurance: General liability insurance covers you, your business, and your employees should you be sued for an accident caused by negligence during business activities or operations.
- Marijuana Surety Bond: Otherwise known as a Cannabis Surety Bond, is a licensing bond that acts as a financial guarantee to the state that you’ll conduct your business according to the laws and regulations governing your license. You may need separate bonds if you operate in multiple states.
- Contents insurance: Whether your cannabis business requires an office, a storage facility, or both, you’ll need contents insurance to protect the contents of those facilities.
- Vehicle insurance: Whether it’s you or your drivers operating the delivery vehicles, you’ll need auto insurance. Your policy may vary if you let drivers use the vehicles for personal use.
- Workers’ compensation insurance: This type of insurance is not mandatory but it has the ability to cover employees and contractors should they injure themselves on the job.
14. Get a mobile payment system
This step will depend on what type of cannabis delivery business you are. If you are an In-house delivery service for your own brick and mortar dispensary, you need a mobile payment system to collect payment once you get to a customer’s location. On the other hand, if you are being contracted out by a dispensary or online retailer, you might not need a mobile payment system because the supplier is already collecting payment for the orders ahead of time and you’re simply invoicing those companies for your delivery services.
15. Open a business bank account
To run a marijuana delivery service, you’ll need a business bank account. In order to open a business bank account, you’ll need your Employer Identification Number (EIN), Social Security Number (SSN), personal identification (e.g. your driver’s license), business license, and any state or municipal-specific registrations. Check with the bank ahead of time to see if they’ll require any additional documentation.
16. Set up payroll
This step will depend if you have full-time or part-time employees or if you will simply be working with contractors and their payment structure (e.g. salary, hourly, by the mile, etc.).
Employees will need to complete a W-4 form while contractors must fill out a W-9 form. Employees should be set up to receive direct deposits while contractors are can choose this option or you may prefer to go with paper checks.
17. Find an accountant
Since you’ll be running a business with many moving financial pieces, it’s advisable to find someone to do your bookkeeping and your taxes. Since marijuana isn’t yet legal on a federal level, you might not be eligible to deduct all your business expenses. These are things that you could discuss in more detail with a corporate accountant.
18. Hire drivers and employees
Unless you are running a sole proprietorship, you’ll need to hire staff to help you with the operation of your cannabis delivery. When it comes to delivery drivers, you can either contract them out or hire them as full-time or part-time employees.
Regardless of the employee status, you’ll need to collect information about your drivers such as their driver’s licenses and driving records. Since they’ll be transporting a controlled substance and potentially driving company vehicles, you’ll want to ensure you’re hiring trustworthy and responsible drivers as part of your cannabis delivery operation.
19. Know your marketing and advertising limitations
Marketing a cannabis business isn’t the same as marketing any other business as there are certain restrictions and limitations when it involves the cannabis industry.
For example, at this moment, Google Ads doesn’t allow advertising for cannabis; however, you can still set up a Google My Business account so your company shows up on organic search results on Google.
20. Install vehicle GPS tracking
Vehicle tracking software is essential for anyone operating in the cannabis delivery service. Being able to see the exact location of your vehicles in real-time helps keep your drivers safe and your customers happy. Driver behavior data that’s collected allows you to see how safely and cost-efficiently they’re operating your vehicles and live tracking links can be sent to customers so they can see on a map exactly where their delivery is while it’s en route.
Additionally, features such as vehicle health data also keep your delivery vehicles running smoothly so there are no unexpected maintenance or repair costs. The tracking devices can easily be installed in any vehicle and managed from any device such as a smartphone, tablet, laptop, or desktop.
Set up your marijuana delivery service for success
Whether you’re delivering marijuana to end-users as a cannabis delivery service or transporting it between licensed facilities as a secure transporter it’s essential to know the key steps listed above to set up a legal cannabis business in your state of operation.
Keep your employees and vehicles safe on the road while reducing operational costs with Force by Mojio’s GPS tracking solution for the cannabis delivery industry.
Start a free trial to experience the benefits of tracking software and how it can help your cannabis delivery service take off.