Welcome to WEEK TWO of the 10 week Marijuana Business Training Course!
This week’s course will cover: ESTABLISHING YOUR COLLECTIVE OR COOPERATIVE
Forming a collective or cooperative (aka, co-op or collaborative) is one of the key steps to being legally recognized. Quite simply, under state’s medical Marijuana laws, a collective allows medical Marijuana patients and primary caregivers to “associate in collectively or cooperatively to cultivate Marijuana for medical purposes.” While money is transacted in both scenarios, there are very specific variances on the regulations pertaining to this exchange, and this is to ensure that both entities are paying the appropriate sales tax regardless of how the transaction is authored. Medical Marijuana and recreational Marijuana are taxed in different ways, and these specifics will be covered later in the section on taxation.
Dispensaries
Dispensaries are technically not recognized by most state programs as independent entities. A Medical Cannabis Dispensing Collective is an organization that provides a service to exclusive members and obtains goods from exclusive members. Dispensary is the common name for the hub of this interaction, but the organization is actually a collective or a cooperative. These organizations are also sometimes called compassion clubs, clinics or cannabis centers, and frequently use a green cross (the green version of red cross) to identify the establishment to prospective patients.
A good point for you to be sure to do your homework on local laws is regarding production and sales. If a collective/cooperative produces more Marijuana than patients can purchase, then it becomes a question of what happens to the excess. In some states, dispensaries are allowed to sell this excess to other dispensaries collectives and co-ops, and in other states it must be destroyed.
Collectives
A collective facilitates the efforts of patient and caregiver members by establishing the allocation of costs and revenues, and the responsibilities of each member to the collective. As such, a collective is not a statutory entity, but it does require organization as some form of business to carry out its activities. The collective does not purchase Marijuana from, or sell to, non-members, and requires that money not be directly exchanged for wares. Instead, money is transacted for the operation of the organization, and the collective simply provides a means for facilitating or coordinating transactions between members.
Collectives can only be started by a qualified legal medical patient, who then opens a dispensary (dispensary owner) and coordinates with card holding caregivers to provide the Marijuana to card holding patients. Collectives are allowed to employ (with reasonable compensation) staff members to produce and transport the Marijuana. A collective is not privately owned, and nothing is bought or sold. Production is done by able members of the collective and distribution is to members in need. In a collective, all members are involved in the cultivation and harvesting.
Cooperatives
A Cooperative is much more structured than a collective. Cooperatives are groups that own their own land and sell the wares of their production to centralized markets. The cooperative purchases the cannabis from members at prices set to deter resale on the black market, and equivalent to the Cost of Production and the Cost of Operations. Producers and buyer members do not exchange money with each other, only the cooperative.
Envision this scenario, wherein a co-op is started with two members, and as the caregiver your grow operation includes 40 plants (in this scenario your state allows 20 plants per patient). This allows you to properly stage the ages of these plants to ensure steady production, and you have wares available for sale when two new qualified customers walk through your doors wanting to become members and purchase your product. You now have four members and your growing operation is now authorized to house 80 plants. This is why it is imperative that you have good systems for keeping track of patient records, and ensuring that all documentation stays current. Each patient is only allowed to register with one co-op.
Discounted Products for Low Income Patients
Consider building into your organization a mechanism to allow certain patients to receive discounted medicine. It is unlikely you will get any auxiliary benefits from providing these services, but these efforts will go a long way for establishing your business as a positive entity with the community. Some Marijuana farms exist solely for the purpose of giving away free medical Marijuana to dying patients suffering from cancer, AIDS and other terminal illnesses, and these farms would be good organizations to collaborate with to provide this service. Aside from the basic value of inherently doing something good for people in need, there is no telling what positive offshoots could occur from helping your community and from showing that being affiliated with this industry is living a life of compassion.
Operations
The most important aspect to understand is that patients most commonly do not have the ways and means to produce the medicine they need, and a single grow operation has a tendency to be unreliable because size limitations can create certain challenges. For example, a one room grow operation that has a run-in with spider mites in the flowering stage or fungus in the air filtration of the drying room could wipe out an entire crop, or at the very least, produce small and undesirable yields. For this reason, collectives and cooperatives operating multi-room greenhouses that can stage plants at different ages, and has a climate controlled drying space, can mitigate disasters in one area through maintaining production and yields through crops grown in another area. Also, the larger space allows for multiple crops at varying ages, so if you have 6 batches of 20 plants rotating on a two-week cycle, after the first three months, you will have a 20-plant crop coming to maturity every two weeks on an endless rotation. Therefore, if something happens to one crop, you can mitigate the negative results with the next crop. Running an operation of this caliber has a lot of other positive benefits for hybridization that will be covered later in the course. Employing competent greenhouse help is an integral element of the operation of the dispensary, and provision of quality local jobs for the economy you choose to operate in.
Growing and curing the plant on a scale of this size generates a large amount of manual labor, and creates a variety of job types for people in the industry. It used to be, especially with big trimming jobs, that caregivers and dispensary owners would only hire local people. However, those wanting to get into trimming with a grower and are new to the area have a much better time finding opportunities due to the card system. People can now move into Medical Marijuana friendly states and counties and get paid to help grow, trim buds, and deliver the meds to patients among many other duties that need to be done on a daily basis. Most people can end up making $30+ an hour doing deliveries (which is also a rewarding job) being able to provide patients their meds when they are not capable to do so on their own. Trimmers can end up with more work that they want, the pay usually starts at $10 an hour, and card carrying employees will often have additional weekly bonuses of free medicine and other perks included as compensation for their time. While the pay is great, the biggest benefit is measured in quality of life. Most often trimmers can set their own schedule (especially once they get the hang of trimming and become effective and fast), and anytime where you can provide people with work that doesn’t involve having to deal with random drug tests or other hoops most other jobs make people jump through is of great value. There are many trimmers who travel up and down the med states helping fellow patients clean up their grow rooms and trim their buds, and these are the people that you want to employ in your dispensary. Many can average $300 a week and including free meds, food, place to crash and anything else to keep them motivated will ensure you retain quality employees.
Another major way your business will provide quality employment is through the retail storefront. As in any service industry, the people selected to represent the facility are the ones who are the face of your business. It is of the utmost importance that the people you choose are not only of great integrity to be trusted with large amounts of Marijuana and cash, and in finding people to fill these jobs, you might be wise to run background checks to ensure their credit is good and they don’t have a history of money related fraudulent behavior. Most importantly, you want to hire intelligent and compassionate people that understand their role as educators for patients. The caregivers and growers are the scientists engineering the plant for the production of specific results in terms of effects on humans, and it is the role of the storefront operators to convey this science to the patients. They must know what strains are intended for what symptoms, and become experts in recommending combinations of consumption for patients to maximize positive effects and minimize undesired effects. This, quite often, will include combining edibles and smokable medicines, and for this reason also important for them to understand quantity and dosage.
READ THE TWB GUIDE FOR MORE INFO ON – The Retail/Co-op Exchange Space ; Finding Employees AND Finding a Job (Experience) ; Finding Medical Marijuana Jobs – Is Moving to a Med State the Way to Grow in a Down Economy? ; Are There Really That Many Jobs Available In The Marijuana Industry? ; Which Jobs Are Easiest For Those Brand New To The Industry? ; Is It Hard To Find Medical Marijuana Jobs If New To The Area? ; How to Find 420 Related Jobs ; Creating Jobs Study: Medical Marijuana will create 1,500 jobs in Arizona
YOUR THIRD ASSIGNMENT
It is now time to get down to brass tacks about owning a non-profit or limited liability corporation, because your assignment next week will be writing your business plan. In fact, you might even want to get started writing and gathering documentation as you begin your research, because it is likely it will take longer than a week to complete. You will find lots of information on the basics of starting a business in the TWB Guide, and your external research should focus on regulations regarding specifics of:
1. Non-profit organizations and not-for-profit organizations
2. Limited liability corporations
3. Registering a business with your state
4. Opening a business bank account
5. Purchasing liability insurance
6. Writing a business plan
We are here to help and want to see you succeed! If you have questions you can email The Weed Business directly at info@theweedbusiness.com.
Happy Trails!
The Green Ninja, DANKO and the Weed Business Team
The Green Ninja has business experience from owning two companies, has operated The Weed Business since 2009, and follows news providers to stay as current on issues and business laws of Medicinal and Recreational Marijuana use in the United States. DANKO is from a Medical Marijuana state for five years and has many card carrying friends providing first hand insights from patients and caregivers, in addition to researching and writing in-depth articles about the most current issues of the industry. Combined, we have spent hundreds of hours looking into different states’ medical Marijuana laws and the industry to make sure the information included is the most cutting-edge and up to date information there is. The Weed Business has a number of other contributors and a large support network, so if you have a question we can’t answer there’s a good chance we know someone who can.
Move On to WEEK THREE
