The cannabis industry in Canada has experienced significant growth since legalization in 2018, with sales reaching over $2.6 billion in 2020, according to Statistics Canada. Ontario is Canada’s largest market for cannabis, with a growing demand for recreational and medical cannabis products.
Starting a cannabis business in Ontario can be a lucrative opportunity for entrepreneurs with the necessary experience, resources, and passion. Additionally, the Canadian government has provided a supportive regulatory framework that facilitates the establishment of cannabis businesses.
It is worth noting that starting a cannabis business is a complex undertaking that requires compliance with Alcohol and Gaming Commision of Ontario (AGCO) and federal regulations, financial investment, and operational expertise.
Businesses need to differentiate themselves by offering high-quality products, innovative marketing strategies, and excellent customer service.
Here are the general steps to follow if you are looking to start a cannabis business in Ontario:
Step 1: Determine the Type of Cannabis Business You Want to Start
You may choose to operate as a cultivator, processor, micro-cultivator or micro-processor, retailer, or cannabis testing laboratory. The type of cannabis business you choose will determine the license application process and requirements.
Here are the steps to follow for determining the type of cannabis business you should start:
Research the cannabis industry: Before deciding on the type of cannabis business to start, research the industry’s different segments, such as cultivation, processing, retail, and distribution. Gain an understanding of the industry’s current state, trends, challenges, and opportunities.
Assess your skills and interests: Determine the skills and expertise you possess and your interests. Consider whether you have experience in growing plants, processing cannabis products, running a retail business, or managing supply chains.
Evaluate your resources: Assess your financial resources, including your budget, investment capital, and funding options. Also, consider your human resources, such as your potential team’s size, skills, and experience.
Consider the local regulations: Learn about the local regulations and laws that apply to the different types of cannabis businesses in Ontario. Consider the licenses, permits, and compliance requirements that are necessary for each type of business.
Determine the market demand: Assess the market demand for different types of cannabis products, such as medical cannabis, recreational cannabis, and CBD products. Research the target market and consumer preferences, such as preferred strains, product formats, and packaging.
Identify potential competitors: Research the existing cannabis businesses in Ontario and their products, services, and pricing. Determine whether there are gaps in the market that you can fill with your business idea.
Seek advice: Consult with industry experts, advisors, and legal professionals to get advice on the most viable cannabis business ideas for your skills, resources, and market demand.
Step 2: Obtain a License for Your Cannabis Business
Obtaining a cannabis business license in Ontario requires careful planning, attention to detail, and a significant investment of time and resources. The Cannabis Act and AGCO regulations set out strict rules and requirements for operating a cannabis business.
Here are the general steps you’ll need to take to obtain a license for your new business:
Determine the type of license you need: There are various types of licenses available in Ontario, depending on the type of business you plan to operate. These include cultivation, processing, sale for medical purposes, sale for recreational purposes, and research licenses. Make sure you know which license you need before applying.
Familiarize yourself with the regulations: The Cannabis Act and AGCO regulations establish the rules for operating a cannabis business in Ontario. You will need to familiarize yourself with these regulations before applying for a license.
Develop a business plan: Your business plan should outline your goals, strategies, and financial projections. You will need to provide this as part of your license application.
Obtain necessary permits and approvals: Depending on the type of business you plan to operate, you may need to obtain additional permits and approvals from other government agencies, such as Health Canada.
Complete the application process: You can apply for a cannabis business license through the AGCO online service delivery portal. You will need to provide detailed information about your business, including your business plan, financial information, security measures, etc.
Pay the fees: There are fees associated with applying for a cannabis business license. The fees vary depending on the type of license you are applying for and the size of your operation.
Wait for approval: The approval process can take several months, depending on the type of license you are applying for and the complexity of your application. Once your application is approved, you will receive your license and be able to begin operating your cannabis business in Ontario.
Step 3: Secure Funding
The cannabis industry is still relatively new, and you can face financing challenges due to regulatory and legal requirements.
However, there are several government grants and loans available to new businesses in Ontario. These grants and loans can help you cover the costs of starting and growing your business.
Additionally, several funding sources specialize in providing funding to cannabis businesses.
Here are some steps you can take to increase your chances of securing funding:
Determine the funding required: Determine how much funding you need to start and operate your cannabis business. Estimate your start-up costs, including equipment, rent, inventory, licensing, and legal fees. Also, determine your ongoing expenses, such as salaries, utilities, and marketing expenses.
Explore funding options: There are various funding options for cannabis businesses in Ontario, including traditional financing, equity financing, debt financing, and government funding programs. Research the different funding options available and determine which ones are suitable for your business.
Prepare a funding proposal: Prepare a funding proposal that outlines your business plan, funding requirements, and how you plan to use the funds. Be clear about the expected return on investment for investors or lenders.
Reach out to potential investors or lenders: Reach out to potential investors or lenders who specialize in cannabis businesses. Attend industry events, network with industry professionals, and use online resources to connect with potential investors or lenders.
Complete due diligence: Before accepting funding, ensure that you complete due diligence on potential investors or lenders. This includes researching their reputation, experience, and financial history.
Close the deal: Once you have secured funding, close the deal by signing the necessary agreements and legal documents. Ensure that you understand the terms and conditions of the funding and comply with the requirements.
Step 4: Find a Location
Finding a suitable location for a cannabis business requires careful research, due diligence, and compliance with local regulations.
Below is a general overview of steps you can take to determine the best location for your new cannabis business:
Research the legal requirements: AGCO has specific requirements for the location of cannabis businesses such as distance from schools. Research the legal requirements and ensure that the location you choose complies with all the regulations.
Determine the zoning requirements: Each municipality has zoning requirements that determine where cannabis businesses can operate. Research the zoning requirements in the area where you want to open your business and ensure that your location meets all the requirements.
Research the local market: Research the local market to determine the demand for cannabis products and services in the area. Analyze the competition and determine if there is room for a new business.
Consider accessibility: Choose a location that is accessible to your target market. Ensure that the location is easily accessible by public transportation, has ample parking space, and is located in a safe area.
Consider the cost: Determine the cost of renting or purchasing a space in the area. Compare the costs of different locations and choose a location that is within your budget.
Consider the infrastructure: Choose a location that has the necessary infrastructure, such as electricity, water, and internet connectivity, to support your business operations.
Consider the community: Consider the community’s attitudes towards cannabis businesses. Ensure that the location you choose is in a community that is open to cannabis businesses and is supportive of your business.
Visit the location: Visit the location to assess its suitability for your business. Check for any potential issues such as construction or renovations that could affect your business operations.
Make a decision: Consider all the above factors and make a decision on the best location for your cannabis business.
Step 5: Comply With Regulations and Laws
The cannabis industry is highly regulated in Canada, and failure to comply with regulations can result in fines, legal action, and the loss of your business license.
Below are some of the efforts necessary to make your business compliant with AGCO. You can find more details about laws and regulations on the Commission’s website.
Licensing and permits: All cannabis businesses in Ontario must obtain the necessary licenses and permits from AGCO. This includes licenses for cultivation, processing, sale, and distribution.
Security: Your businesses must have appropriate security measures in place to prevent unauthorized access, theft, and diversion of cannabis products. AGCO has specific requirements for security systems and procedures.
Packaging and labeling: All cannabis products must be properly packaged and labeled according to the regulations set by Health Canada. This includes the use of child-resistant packaging, warning labels, and THC content labeling.
Advertising and promotion: The businesses must comply with strict advertising and promotion regulations set by Health Canada. The regulations prohibit the use of certain types of advertising and promotion, including celebrity endorsements and sponsorships.
Age Verification: All cannabis businesses must have procedures in place to verify the age of customers before selling cannabis products. The legal age for purchasing cannabis in Ontario is 19 years old.
Record-keeping: Cannabis businesses must keep detailed records of all transactions, including inventory, sales, and distribution. AGCO has specific requirements for record-keeping, and failure to comply can result in penalties or revocation of licenses.
Retail Store Restrictions: Cannabis retail stores are subject to restrictions on location, hours of operation, and the number of stores that can be operated by a single owner or operator.
Environmental regulations: Cannabis businesses must comply with environmental regulations, including the use of pesticides and waste disposal regulations.
Employment regulations: Cannabis businesses must comply with employment regulations set by the Ontario Ministry of Labour, including minimum wage requirements, hours of work, and health and safety regulations.
Step 6: Hire Employees
The cannabis industry in Canada is relatively new and rapidly growing, and it may be challenging for employers to find candidates with experience in the industry.
However, networking with industry professionals and attending industry events will help you connect with potential candidates.
Additionally, providing training and professional development opportunities may also help attract candidates who are eager to learn and grow in the industry.
Here are some steps to get you started in your search for qualified employees:
Develop job descriptions: The business owner should develop job descriptions that outline the roles and responsibilities of each position, including required skills, qualifications, and experience.
Advertise the job: The job postings should be advertised on relevant job boards, social media platforms, and cannabis industry forums to attract qualified candidates.
Screen resumes: After receiving applications, the employer should screen resumes and cover letters to determine if the candidate meets the requirements for the job.
Conduct interviews: The employer should conduct interviews with qualified candidates to assess their skills, experience, and fit for the position.
Perform background checks: The employer should perform background checks, including criminal record checks and reference checks, to ensure that the candidate is suitable for the job.
Offer employment: Once a suitable candidate is identified, the employer should offer employment, including details of the job offer, salary, and benefits package.
Onboard new employees: After the employee accepts the job offer, the employer should provide orientation and training to ensure that the employee is familiar with the company policies and procedures, safety regulations, and job duties.
Follow employment regulations: The employer should comply with employment regulations set by AGCO for cannabis retail store employees as well as other regulations including minimum wage requirements, working hours, and employment standards, to ensure that the employee’s rights are protected.
Step 7: Set Up Your Operations
After ensuring compliance with relevant regulations, securing funding, and finding a good location, it’s time to set up your operations. Following are the efforts that will help you get your operations up and running.
Establish supply chain: Establish a reliable supply chain for obtaining high-quality cannabis seeds, plants, and products.
Develop quality control systems: Develop quality control systems that ensure the safety, potency, and consistency of cannabis products.
Set up accounting and inventory systems: Set up accounting and inventory systems that comply with local regulations and enable accurate tracking of finances and product inventory.
Establish marketing and distribution channels: Establish marketing and distribution channels to reach customers and distribute products.
Step 8: Market Your Business
Effective marketing can help you attract customers, build your brand, and increase your revenue. However, the cannabis industry in Canada is subject to strict regulations, and you will need to ensure that your marketing efforts comply with these regulations.
For example, you will need to ensure that your marketing materials do not make any health claims or target minors.
Develop a marketing strategy: Develop a marketing strategy that outlines the goals, target audience, messaging, and marketing channels for promoting your business.
Comply with advertising regulations: Comply with advertising regulations set by the federal and provincial governments, including restrictions on advertising to minors and promoting cannabis as a lifestyle product.
Build a brand: Build a brand that reflects the values and mission of the business and resonates with the target audience. This includes developing a unique logo, packaging, and messaging.
Create a website: Create a website that showcases the products and services offered by your business, including information on the product’s quality, testing, and effects.
Optimize SEO: Optimize the website for search engines to improve visibility and attract more visitors to the website.
Leverage social media: Leverage social media platforms such as Instagram, Twitter, and Facebook to reach customers and promote the business.
Participate in industry events: Participate in industry events such as trade shows, conferences, and festivals to promote your brand and reach a wider audience.
Partner with influencers: Partner with influencers in the cannabis industry to promote your products and services.
Offer promotions and loyalty programs: Offer promotions and loyalty programs to incentivize customers to purchase products and become repeat customers.
Starting a cannabis business can be a challenging but rewarding experience. With the growing demand for cannabis products and the supportive regulatory environment in Ontario, there are many opportunities for entrepreneurs to build successful businesses in the industry.
Whether you are planning to open a retail store, cultivate cannabis, or provide ancillary services to the industry, it’s important to carefully plan your business and ensure compliance with relevant regulations.
With the right approach and a commitment to quality and compliance, your cannabis business can thrive and contribute to the growth of this exciting industry.
Resources for Starting a Cannabis Business in Ontario
Cannabis At Work – Staffing and recruitment agency that specializes in the cannabis industry.
Lift & Co. – Leading Canadian cannabis media and technology company.
About the author
Maurice (Moe) Muise learned the ins-and-outs of government while an employee of the Government of Canada in Ottawa for 10 years. His current focus is helping small businesses in Ontario to identify and maximize government grants to grow their business.
Click here to learn more about Moe’s background and how he can help your business.