RECREATING THE SUCCESSES

AND
OVERCOMING THE CHALLENGES
OF BEING A CANNABIS BUSINESS OWNER

WRITTEN IN COLLABORATION WITH JOHNNY GREEN FROM WEEDNEWS

 TABLE OF CONTENTS

Introduction . . . . . . . . . . . . 3
Bring a Part of History . . . . . . . . . 4
Social Entrepreneurship . . . . . . . . . . 5
Helping Contribute to a Healthier Society . . . . . . 6
Doing What You Love .. . . . . . . . . . 7
Cannabis Ventures Can Be Very Profitable . . . . . . 8
Financial-Related Hurdles . . . . . . . . . . 9
Differing Barriers to Entry, Fierce Competition Regardless . . 10
Navigating Regulations and Potential Federal Prosecution . . 11
Head Start on Exports by Canada . . . . . . . . 12
Ongoing Stigma . . . . . . . . . . . . 13
International Hemp Competition . . . . . . . 14
Bad Actors in the Space . . . . . . . . . . 15
Changing Consumer Demand . . . . . . . . . 16
Battling Misinformation, Prohibitionist Lobby . . . . . . 17

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 2
 INTRODUCTION

One of the most rewarding things that a person can do is start their own business. Conversely,
one of the most stressful things that a person can do is start their own business. As any
entrepreneur will likely tell you, owning a business can often be a love/hate relationship, but
successful entrepreneurs will be quick to tell you that the benefits outweigh the challenges.

For many people, being their own boss is a lifelong dream. Being in that situation can provide
a tremendous amount of freedom and flexibility which, in turn, contributes to a very desirable
lifestyle. It can also involve a lot of stress as inevitable hurdles and roadblocks have to be
overcome along the way. This is particularly true for the cannabis industry because there are
so many uncertain and shifting factors at play.

Owning a cannabis business comes with all of the benefits of owning any other business, but
it also provides benefits that are unique to the cannabis space. The same can be said for the
challenges. Operating in the cannabis space involves challenges that are often only found
within the cannabis industry. The cannabis industry is the most exciting, fastest growing
industry on the planet right now, and as such, entrepreneurs are flooding into the space. But
do all of them know what they are signing up for?

Entrepreneurs frequently let emotion and the allure of the cannabis industry drive their
decision-making processes, which can be detrimental. Just because cannabis is popular and
the industry is growing exponentially doesn't necessarily mean that abundant financial
success is guaranteed, despite what some people within the industry will say. Entrepreneurs
must always keep things in perspective, be mindful of what challenges are virtually
guaranteed to pop up, find motivation outside of just driving up profits, and work as hard as
possible.

Below are some of the benefits and challenges that cannabis entrepreneurs experience in
their business pursuits, many of which are not often discussed That is especially true for the
challenges. People are quick to talk about the glamorous side of the cannabis industry but are
much more hesitant to talk about the rough side of the pursuit of success in the cannabis
space. By being mindful of the benefits of operating a cannabis business while at the same
time anticipating the many unique challenges that come with running a cannabis company,
entrepreneurs can increase their chances of succeeding in the most exciting industry on
earth.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 3
 THE BENEFITS: BEING A PART OF HISTORY

Getting in at the very front end of what will no doubt become one of the largest industries on
earth is tremendously exciting. It's very rare that a multi-billion dollar industry is created
virtually overnight. But that is exactly what is happening with the emerging cannabis industry
which has been made possible by cannabis reform victories. Prior to states reforming
cannabis laws (starting with California in 1996) cannabis was completely prohibited in the
United States for several decades.

Cannabis' illegal status did not mean that people weren't exchanging currency for cannabis,
because they absolutely were throughout prohibition. However, the profits from those
transactions benefitted an unregulated market which has historically been largely controlled
by gangs, cartels, and other dangerous people. Time is proving that consumers would prefer
to make their purchases from regulated sources as sales figures in legal states continue to
increase year after year.

Part of the growth of the cannabis industry can be attributed to people taking advantage of
newly found freedoms and making purchases for the first time, but growth has been much
more driven by transitioning already existing unregulated markets and sales to regulated
ones. Every state that launches a regulated cannabis industry instantly contributes to the
exponential growth of the overall industry.

With only 6 states allowing adult-use cannabis sales

(Colorado, Washington State, Oregon, Alaska,
California, and Nevada) the industry is still in its
infancy. Yet, despite its young age, the cannabis
industry already generates billions of dollars in sales
in just the United States alone. The global market is
still very young too, which means that the cannabis
industry has a very bright future and so do those
that are able to take advantage of the once-in-a-
lifetime opportunities that now exist.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 4
 THE BENEFITS: SOCIAL ENTREPRENEURSHIP

One of the biggest benefits of being a cannabis business owner is that, when done correctly,
it can have the ability to solve community-based issues. This is a concept known as social
entrepreneurship. Social entrepreneurship can be direct and indirect when it comes to the
cannabis industry. Many responsible cannabis business owners dedicate a portion of their
company's profits directly towards worthy causes involving social, cultural, or environmental
issues.

But even for those companies that are not in a position to make direct contributions to
charitable efforts, they are still participating in social entrepreneurship by being responsible
members of the cannabis industry. Every successful, responsible cannabis business helps
push reform efforts forwards whether they realize it or not. A cannabis company operating the
right way in a legal state is a glowing example that can be pointed to by advocates pushing
for reform in other states and countries.

It's no secret that a rise in support for cannabis reform has been paralleled by the rise in the
exponential growth of the cannabis industry. In 2010 the cannabis industry in the United
States was much more limited than it is now. Some states had quasi-legal medical cannabis
industries in operation but many more did not. No states had legal adult-use sales occurring.
According to Gallup, 46% of Americans supported cannabis legalization at that time.

Zoom forward to Gallup's latest poll in 2017, and

support has surged to 64%. A lot of that can obviously
be attributed to non-industry factors such as increased
awareness about the harms of cannabis prohibition.
However, the success of the cannabis industry in the
last decade in states that have regulated cannabis
sales has been a huge motivating factor for many
Americans that are now getting on the right side of
history.

When voters in one area see increased tax revenues, increased job creation, and the local
economic boost that comes with allowing legal cannabis commerce to occur somewhere else,
they are much more likely to approve similar public policy changes to bring the same activity
to their own area. Responsible cannabis business owners help boost reform efforts via their
successful companies, which is always something that is worth highlighting and celebrating.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 5
 THE BENEFITS: HELPING CONTRIBUTE TO A HEALTHIER SOCIETY

For many decades cannabis was portrayed by opponents and mainstream media as being
void of any medical benefit and harmful to people that consumed it. Unfortunately, many
people believed those false claims which served as the basis for cannabis' current federal
Schedule I status. However, in the last two decades that false propaganda has eroded
considerably and consistently.

Cannabis has been proven to be safer

than alcohol. Cannabis has proven to be
effective at managing pain. Cannabis has
been proven by thousands of peer-
reviewed studies and countless personal
testimonies to possess numerous
medical benefits. Patients suffering from
all types of conditions have found relief
by using the cannabis plant.

The positive results of studies and the personal experiences of individuals have been spread
around the world by advocates on social media which have contributed to increased
awareness. That increased awareness has resulted in more and more people deciding to
make the safer choice, which is not only helping their lives, it's also helping improve society as
a whole by lowering dependence on substance abuse or medication programs that are
funded by tax dollars.

Studies have found that opioid-related issues are significantly lower in states that have legally
operating cannabis industries. Studies have also found that prescription drug costs that are
paid for via public entitlement programs such as Medicaid are lower in states that have
medical cannabis industries. People are suffering less and living healthier lives wherever the
cannabis industry is allowed to operate. Entrepreneurs that are a part of that should feel good
about helping contribute to a better world by providing their cannabis products and services.

Helping people that are suffering from one or more medical conditions and helping people
improve their wellness strategies is very worthwhile. Helping increase access to legal
cannabis directly or indirectly is something that cannabis entrepreneurs can be proud of
because with that increased access comes increased health benefits for society. A healthier
citizenry is something that all members of society benefit from, whether they consume
cannabis or not.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 6
 THE BENEFITS: DOING WHAT YOU LOVE

A popular saying states that if you are doing what you love in order to make a living, then you
never work a day in your life. That's not to say that there won't be rough roads and a lot of
hard work ahead as with virtually every business pursuit, but there's a lot of truth to the
premise involved with the original saying. For many cannabis entrepreneurs, being able to
make a living doing what they love is invaluable.

Imagine waking up every morning and going to your cannabis garden, or dispensary, or
ancillary cannabis company. You would obviously still need to be profitable enough to make
ends meet, but the intrinsic value of putting in a full days work in a cannabis company that you
founded is significant. It's easy for entrepreneurs to pour their souls into a cannabis company
when they have a passion for the plant.

For many cannabis entrepreneurs, they have dreamed of the day when they could operate a
legal cannabis company. Some have operated in the shadows while living in fear for many
years, while others have waited a long time to even begin because there were no legal
options. Unfortunately, the legal cannabis industry is not open to everyone right now, so to be
able to start a legal cannabis company is a tremendous privilege that cannabis entrepreneurs
should always cherish.

People only get so many trips around the sun, and with how much time is spent working,
doing what you love for a living is very important. That's even truer when the work includes
equity in a cannabis startup that you founded. Being a successful business owner is
rewarding, but being a successful cannabis business owner is especially fantastic for long
time cannabis fans.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 7
 THE BENEFITS: CANNABIS VENTURES CAN BE VERY PROFITABLE

You can't talk about the benefits of owning a cannabis company without talking about the
profit potential of the cannabis industry. Profit should not be the only motivating factor for
cannabis companies, but it's obviously a major motivating factor. The 'green rush' is very real,
and growing in profit potential with every passing year.

Arcview Market Research, in conjunction with BDS Analytics, estimates that the overall
economic impact of the cannabis industry will increase to $40 billion by 2021. The Brightfield
Group estimates that the international market for cannabis sales will hit $31.4 billion by 2021.
For the United States specifically, New Frontier Data estimates that the cannabis industry will
top $24 billion by 2025.

The cannabis industry has already become larger than many long-standing industries and is
poised to pass many others in the near future. It seems like new projections are popping up all
the time, with the numbers continuing to grow. In many cases, initial projections have proven
to be too conservative. Ultimately, only time will tell how big the cannabis industry will get but
one thing is for sure - there is a tremendous amount of opportunity for entrepreneurs and
investors.

It is OK to be motivated by the profit potential of the cannabis industry as long as

entrepreneurs are responsible and good stewards of the plant. Greed is never a good
motivating factor, whether that's in the cannabis industry or outside of it. But it's fine for
entrepreneurs to pursue financial success in the cannabis industry as long as they keep things
in perspective. After all, the cannabis movement needs successful cannabis businesses for
the reasons previously stated earlier in this article.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 8
 THE CHALLENGES: FINANCIAL-RELATED HURDLES

Arguably the biggest challenges facing cannabis entrepreneurs revolve around financial
issues. One of the biggest ones is Section 280E of the federal tax code. In 1982 Congress
created Section 280E of the federal tax code that forbids businesses from deducting ordinary
business expenses associated with the 'trafficking' of Schedule I substances, which
unfortunately includes cannabis.

VIDEO: How Section 280E Affects YOUR Business

Access to reliable banking is an ongoing problem for the cannabis industry as well, and until
comprehensive, permanent legislation is passed by Congress that addresses the issue, the
banking issue will likely remain. Many cannabis companies are denied basic banking services
and even more were set up with banking access just to see that access terminated with little
to no notice.

Financing is also an unnecessarily major hurdle for cannabis entrepreneurs. A significant

amount of investor money is up for grabs by cannabis entrepreneurs, however, that's not
always a desirable route to go for some cannabis industry members for various reasons.
Cannabis companies should be able to apply for business loans like any other business, but
unfortunately, that's not the case. Federally backed small business loans are not an option.

It is vital that members of the cannabis industry keep the pressure on their federal lawmakers
to address these financial issues. These financial challenges are a reality that cannabis
companies have to deal with right now but it doesn't have to be that way. If enough consistent
pressure comes from the cannabis industry there will come a day when the votes in Congress
will be there to reform public policy to address these issues. Until changes are made, the
cannabis industry (and its members) will never reach its full potential.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 9
 THE CHALLENGES: FIERCE COMPETITION

Different cannabis markets have different barriers to entry. The lowest barrier to entry in the
United States is in Oregon where there is no cap on cannabis industry licenses and the cost
for each license is much cheaper compared to other markets like New York or Illinois. Oregon
and California are currently the only two states that have no limit on cannabis industry
licenses, although local regulations can limit the number of licenses operating in a particular
part of each state.

The barrier to entry in states with limited licenses is very high because there are only so many
licenses up for grabs. Even when aspiring cannabis entrepreneurs and investors pay out
seven figures to apply for one or more licenses in those markets there's no guarantee that
they will receive a license. Competition for one of the limited licenses is fierce, with the
winners taking all. Trying to operate in a high stakes environment like that comes with a
seemingly never-ending supply of challenges, and all for no guaranteed treasure at the end of
the heavy lifting.

The competition for a license is not as great in markets like Oregon and California since
almost anyone can get one, but all that means is that the competition shifts to the post-
licensing phase of a company's pursuit. To put the level of competition into perspective,
Oregon has a population that is over one-third smaller than Colorado's population, yet Oregon
has more adult-use cannabis dispensaries and significantly more adult-use producers than
Colorado does.

Oregon's crowded industry has translated to a fierce level of competition for consumer
dollars, with the price for legal cannabis flower and products becoming the lowest in the
nation. It's not outlandish to think that the same situation is likely on its way to California too.
Whether a company is in a limited-license market or a wide-open market, they need to do
everything that they can to stand out beyond just producing a quality product or service.
Anything less than a cannabis company operating at the top of its ability will likely result in
that company folding sooner rather than later.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 10
 THE CHALLENGES: NAVIGATING REGULATIONS AND
POTENTIAL FEDERAL PROSECUTION

The cannabis industry is subjected to what is likely the most confusing regulations in the
business world. For most cannabis businesses in the United States, they must abide by city
ordinances, county ordinances, state laws, and/or bureaucratic rules and regulations, and all
while cannabis remains illegal at the federal level. To make matters worse, the laws, rules, and
regulations governing the cannabis industry are constantly changing and evolving.

It's extremely difficult to navigate it all, even with the help of attorneys and consultants. Some
cannabis business owners operate for a long time just to be a casualty of an updated statute,
administrative rule, or newly enacted local cannabis industry ban. The uncertainty involved
with being a cannabis business operator can be very difficult to deal with and is definitely not
for the faint of heart.

Cannabis business owners need to take an active role in staying up-to-date on evolving
cannabis regulations and always show up and speak up when the opportunity presents itself
at public hearings and during public comment periods. The fight for cannabis reform does not
stop after a successful cannabis policy vote, nor does it stop when business licenses are
issued. The fight will not be over until the cannabis industry is reasonably regulated in a
manner that is fair and relatively easy to navigate, which likely won't be for a while.

As previously mentioned in this article, cannabis is still very much illegal at the federal level.
Cannabis' current federal status means that at any time someone caught producing and/or
distributing cannabis, or even assisting in either of the practices, could be forced to serve
extensive federal prison time. That is a threat that is very serious and is something that all
cannabis entrepreneurs need to always be mindful of until federal prohibition ends.

The Obama administration put in place some protections for cannabis businesses, and the
Rohrabacher-Blumenauer amendment provides protection from federal prosecution for
medical cannabis industry members. However, the Obama-era protections were eliminated by
current United States Attorney General Jeff Sessions and the Rohrabacher-Blumenauer
amendment is not permanent.

Cannabis entrepreneurs need to take the always-looming threat of federal prosecution

seriously. But instead of letting fear get the best of them, cannabis entrepreneurs need to
channel that fear and turn it into a relentless desire to overturn federal prohibition. Cannabis
business operators need to fight for reform until federal prohibition is eliminated, or even
better, federal measures are passed to help push the industry forward nationwide.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 11
 THE CHALLENGES: HEADSTART ON EXPORTS BY CANADA

The cannabis industry is expanding across the globe as countries continue to reform their
cannabis laws. Some countries, such as Germany, do not allow domestic production of
cannabis. All cannabis has to be imported into Germany right now, and that will likely be the
case for many other countries that choose to legalize cannabis for medical and/or adult-use in
the near future.

Lawmakers can sometimes get on board with allowing cannabis sales to occur fairly quickly
but may not be as quick to get on the same page with their colleagues when it comes to
domestic cannabis production, distribution, and/or licensing various processes that go into
transforming cannabis flower into other products. Even after a comprehensive domestic
industry structure is put into place some countries may still find it beneficial to allow cannabis
imports.

Large Canadian cannabis companies have been granted a tremendous head start on
exporting cannabis over cannabis companies in other countries due to Canada's cannabis
policies. That is going to present challenges for cannabis entrepreneurs everywhere else in
countries that do not allow exports. The market reach for their products or services will be
limited to the jurisdictions they are allowed to operate in. Even after exports become legal
where they are located, it will take a long time for non-Canadian companies to catch up.
Meanwhile large Canadian cannabis companies will continue to grow their footprints all over
the globe.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 12
 THE CHALLENGES: INTERNATIONAL HEMP COMPETITION

A big challenge facing the cannabis industry is foreign hemp production. It's something that
will only continue to increase as cannabidiol (CBD) continues to rise in popularity. A great deal
of misinformation exists regarding the legality of CBD products in the United States and
beyond. CBD is the same regardless of where it is derived from, but the highest quality CBD
products are made from whole-plant inputs and extract processes that result in the product
containing some tetrahydrocannabinols (THC).

U.S. Customs and Border Protection allows the import of finished hemp products that contain
no THC, which has resulted in a massive flood of foreign hemp-derived CBD products coming
into the United States market, including where cannabis sales are legal. While CBD products
with no THC are inferior in quality to CBD products that do contain THC, many consumers do
not know that. That's especially true for newbie consumers that avoid THC because they don't
know that it can be taken in small quantities with CBD to produce health benefits without
causing euphoria.

Cannabis companies that are creating high-quality CBD products will have to continue to
compete with companies that import inferior CBD products at a small fraction of the price. It is
vital for cannabis companies that produce high-quality CBD products to continue to educate
consumers about the difference between good CBD products and bad CBD products, how
CBD is sourced, and why domestic CBD products are what consumers should really be after
despite the higher price.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 13
 THE CHALLENGES: ONGOING STIGMA

As far as the cannabis industry and movement have come, there is still a tremendous amount
of work left to do. Even the most successful members of the cannabis industry still have to
deal with a great deal of stigma. Cannabis is more mainstream than it has ever been but there
are still many people out there that have strong feelings of opposition towards the cannabis
plant and those that are involved with it.

In addition to the stigma from the financial services industry, cannabis business owners can
face a lot of stigma from their landlords. Cannabis opponents and federal enforcement
officials know this, which is why landlords have received federal enforcement letters in the
past. Cannabis opponents in the federal government know that just the threat of a crackdown
is enough to deter landlords from renting or leasing to cannabis businesses. Sadly, it's a very
cost-effective way to hinder the growth of the emerging cannabis industry.

Cannabis businesses can also face

unfair scrutiny from their neighbors and
the communities in which they operate.
The longer a cannabis company exists
in a particular area the less this is the
case because a responsible cannabis
company usually gains the trust of
people in the surrounding area due to
defying the negative stereotypes that
may have previously existed in the local
community.

But for new cannabis startups, the stigma can be a very significant hurdle to have to
overcome at a very crucial period of a cannabis company's life. It can become a fatal hurdle if
a cannabis company doesn't get out ahead of the issue. The best thing that a cannabis
company can do is to be active in their communities and be living proof that the cannabis
industry is a great addition to any community. Cannabis companies need to step up and do
their part to improve the communities in which they operate to not only help ensure their own
success, but also the overall success of the greater cannabis industry.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 14
 THE CHALLENGES: BAD ACTORS IN THE SPACE

One massive hurdle that is not discussed very often in the cannabis industry is the detrimental
effect that bad actors in the cannabis space have on the greater industry. The cannabis
industry is operating under a microscope right now, which will be the case for several years
into the future. Every negative story that comes out of the cannabis industry will be magnified
several times over, and every negative headline gives the entire industry a black eye.

Cannabis opponents like Kevin Sabet and other members of Project S.A.M. will pounce on
every negative cannabis industry story and use it as a talking point for several years after it
occurs. Bad actors in the cannabis space are just as harmful as outright cannabis
prohibitionists in that they both contribute to helping keep the prohibition status quo in place.
That directly impacts everyone's cannabis business whether they realize it or not.

Talking about bad actors in the cannabis space is not easy to do, but it is necessary. This is
not to say that people shouldn't be afforded due process, because everyone deserves due
process. But cannabis industry members need to perform their due diligence and be mindful
that when someone has an enormous amount of baggage, it's quite possible that there's a
reason for it.

Cannabis industry members need to be vigilant and do what they can to represent the
industry responsibly and not tolerate those that do not. No one is saying that entrepreneurs
need to lead witch hunts, but they do need to refuse to support bad actors in the cannabis
space, even if it would help their own companies in the short term. The future of the cannabis
industry depends on it.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 15
 THE CHALLENGES: CHANGING CONSUMER DEMAND

The number of products coming out of the cannabis industry seems to be never-ending. If
someone can think of a non-cannabis product that can be consumed by patients and/or
adults, chances are that same product can be adapted for the cannabis industry. Because of
this cannabis consumer demands are always evolving. The days of only being able to
purchase and consume flower are long gone in legal cannabis states. Consumers are
becoming more sophisticated by the day and demanding products that are specific to their
needs.

Cannabis consumers in legal states are becoming more picky about the quality of products
they buy, how much they are willing to pay for cannabis products, and which consumption
methods they prefer to use. Some people want very potent forms of cannabis. Others prefer
strains that are closer to a 1 to 1 THC to CBD ratio. Many consumers prefer smokeless forms of
consumption.

Planning a business model in an industry with consumers that are evolving as much as the
cannabis industry can be very tricky. Cannabis companies need to be built for the cannabis
industry that will exist 3 years from now, 5 years from now, and beyond. Companies that only
consider what is going on currently in the industry or in just the near future will be at a huge
disadvantage when it comes to pivoting after large shifts in consumer demand occur. Those
types of changing trends are virtually guaranteed to occur, so entrepreneurs need to always
be prepared.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 16
 THE CHALLENGES: BATTLING MISINFORMATION

Support for cannabis reform is at an all-time high, but there are still many cannabis opponents
in the United States and across the globe as previously mentioned. They are not nearly as
influential as they once were, but they are still a formidable force that is capable of influencing
voters, lawmakers, and even some consumers. They also have the benefit of prohibition
already being in place. It's much easier to maintain the status quo than it is to achieve political
reform, no matter what level of government is involved.

Cannabis opponents have made it clear that their latest and 'greatest' talking point involves
painting the cannabis industry as the 'next big tobacco.' By repeating their talking point
opponents are obviously hoping to strike a chord with citizens who have been educated on all
of the terrible things that the tobacco industry has done throughout the years.

The fact of the matter is that the cannabis industry is nothing like the tobacco industry, and
cannabis is safer than tobacco. But just because those facts exist does not mean that
cannabis opponents' message will fail to resonate with some people. It is up to members of
the cannabis industry to do their part to help fight the false propaganda. The cannabis
industry needs to always make sure to call out cannabis opponents when they spread
misinformation and/or lies and to continue to educate the public about the real facts about the
cannabis plant.

Recreating the Successes and Overcoming the Challenges Of Being A Cannabis Business Owner 17