Cannabis Extracts

Starting a Cannabis Extraction Business: Everything You Need to Know

If you’re looking to get into the cannabis industry, starting a cannabis extraction business can be a lucrative endeavor. Extracting cannabis has become a popular business venture in recent years due to the increasing legalization of cannabis both medicinally and recreationally. But as with any new business venture, it’s important to do your research first. If you’re thinking about starting a cannabis extraction business, there are a few things you should know first. In this blog post, we’ll cover:

  • The market for cannabis extracts
  • The competition in the cannabis extraction industry
  • The licensing requirements for starting a cannabis extraction business
  • The types of extracts and the equipment you’ll need to extract them

The Market for Cannabis Extracts

The first step is to research the market for cannabis extracts. Cannabis extraction is an evolving industry, with new processes and products emerging frequently. The best place to start is in your state. Go to your local dispensaries, and see which products are most popular. See which products are selling the most, and which products are selling for the highest dollar amount. If you’re in a state that is just becoming legal, and dispensaries are not available for market research, look at states similar to your demographic as well as states that have been in the market the longest, like California or Colorado. This will give you an idea of which cannabis extracts will be in popular demand.

Now that you have an idea which type of extracts you want to produce, it’s time to research the market for your products. Who is your target customer? What are their needs and wants? What do they like and dislike? How much are they willing to pay for your product? These are all important questions that need to be answered before moving forward with your cannabis extraction business.

Quality products will ultimately ensure that you are able to succeed in your market, but you should also consider your demographic when building a brand. You want to make sure it resonates with your audience. Brands like 710 Labs have been able to succeed in multiple markets and build a massive brand following because of their top notch products, and connection to their community. They do an incredible job of listening to their customers and filling their needs.

The Competition in the Cannabis Industry

The Cannabis industry is a competitive space. With many companies becoming MSOs (Multi State Operators) it is important to understand the advantage they will have. MSOs have brand recognition, and are often known by consumers before they move into emerging states. Cookies for example, has over 49 dispensaries in multiple states. But don’t worry, there is ALWAYS room for new companies that service the local market with high quality products. Especially in markets that love supporting local businesses.

Cannabis Extraction Business
Cannabis Extraction Business

It is important to understand who your competition will be. Who are they? What are their strengths and weaknesses? How can you differentiate yourself from them? Identifying your competitors market share, processing capabilities and scalability, and finding potential partnerships with growers or finished product manufacturers (edibles, vape cartridges, etc.) can be a massive help to your emerging business. Another option is to look at vertically integrating you business and taking products from seed to sale, though this will require more funding and strong relationships with the right people. Answering these questions will help you develop a clear marketing strategy for your business.

Obtain the Proper Licensing

In order for your cannabis extraction business to be legal, you must obtain the proper licensing from your state and county. The licensing requirements vary from state to state, so it’s important that you research what is required in yours. Depending on which state you’re operating in, this could be a barrier to entry. Colorado, for example has put a moratorium on new licenses so the only way to obtain one is by buying one from an existing license holder. This makes these licenses extremely valuable and very expensive. Colorado licenses are known to sell for hundreds of thousands of dollars. Other states like Oklahoma released licenses for as little as $2,500.

Obtaining the licensing can be a difficult task, requiring a lot of time, paperwork and money. There can also be ways to reduce the costs. Some states are offering social equity licenses. These licenses can be granted with less cost and requirements. Social equity licenses can be granted to minority groups or individuals with low-level marijuana convictions obtained before legalization. Look into your states opportunities to see if there are programs that can help expedite your licensing process.

How to Decide on Extraction Equipment

All of the previous questions have an impact on deciding which equipment will be right for your business. The biggest factors to consider when selecting the right equipment for your extraction business are:

  • What type of products do you want to make?
  • How much material do you want to be capable of processing?

Which types of extracts you want to make will be a large deciding factor when considering the right type of equipment for your extraction business. Do you want to make smokable extracts? Do you want to make extracts that are suitable for edibles? Do you want to produce extracts for vaporizers? These questions will lead you to understanding which extraction equipment is right for you.

Understanding your throughputs is also very important. Ideally, you want to be able to extract your cannabis or hemp material with as little overhead as possible. Undersizing a system can lead you to have higher costs, if you have to run the extraction system constantly, paying operators for the time. On the other end, you don’t want to oversize the system and not have enough material to run through it.

From a quality control standpoint, it’s important to not mix batches of material. Finding the sweet spot is important, while considering scalability. Many extractors process for other growers, and the more accounts you can land, the more money you’ll be able to make. For more information on Cannabis Extraction Equipment and how to select the right equipment for your business check out our blog post or reach out to us!

How H&H Helps New Cannabis Businesses

While there are many things that new business owners need to research and learn on their own, H&H helps reduce the unknown when moving into a new extraction venture. With our extensive knowledge of equipment and the current landscape of the Cannabis Extracts market, we can help you evaluate what is right for you.

H&H strives to make long term relationships with all of our clients. Our goal is to get you into the right extraction system that is economically viable while providing you the knowledge to produce top quality extracts at scale. Our goal is to reduce your up front costs and work with you long term as your business continues to grow. We work with our clients hands on to provide as much information as possible. Our team of designers and engineers will review your plans to ensure we maximize your processing capabilities within your budget.

Our process is very in depth. Unlike other equipment manufacturers who provide very little information, and even less ongoing support, H&H handles each client with diligence. Our process includes discovery, design, engineering, delivery, installation, training, and ongoing support. We have found this process to be highly effective in setting our clients up for success and cultivating long lasting relationships with our clients.

Starting a cannabis extraction business can be a profitable endeavor—but there are many things to consider before taking the plunge. By doing your research upfront and obtaining the proper licenses, you can set your business up for success. Finding the right partner for your extraction business doesn’t need to be a headache, so reach out to us today and find out what makes H&H the leader in extraction solutions.

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