5 Steps to Bring Your Ancillary Cannabis Product to Market
Many have referred to the cannabis industry as the “next Gold Rush,” capable of producing the nations next generation of billionaires in the next decade.
Well, if we learned anything from the California Gold Rush, it’s that more fortunes were made clothing the miners than mining for gold. As I mentioned in my article about ancillary cannabis businesses, a fully legalized cannabis industry is estimated to be worth more than $100 billion.
Recently, I got the chance to chat with the Co-founder & CEO of 420 Science, Matt LaPrairie (picture left), a young entrepreneur well on his way to securing a substantial slice of that large fortune.
“A fully legalized cannabis industry is estimated to be worth more than $100 billion.”
He and his Co-founder & longtime friend, Gary Kanning, started 420 Science back in the Summer of 2003 when Gary came home from work one evening and began to tell Matt about an idea he had for custom printed jars.
Their company – based out of Austin Texas – has since brought the cannabis industry a number of familiar products including their 420 Jars, the 420 Scope, Smoke Soap, RezBlock & more. Their 420 Jars and 420 Scope even appeared in the popular TV show Weeds back in 2009. Here, you can see some of the jars they make:
Matt and I spoke about what it takes for a person equipped with an idea to actually bring that product to market. Considering 420 Science has grown their business largely based on acquisitions, this area is somewhat of an expertise for the CEO.
I asked Matt what his advice would be for anyone looking to turn his or her “million-dollar idea” into a reality in the cannabis industry. LaPrairie did us one better, and provided us with a step-by-step guideline to share with you.
So without further adieu, here is Matt LaPrairie’s 5 Steps to Bring Your Ancillary Cannabis Product to Market.
5 Steps to Bring Your Ancillary Cannabis Product to Market
1) Validate your idea
The very first step is to make sure this brilliant idea of yours is actually worth pursuing. Talk to your friends who smoke, employees at head shops, and anyone else with a connection to the industry. Are they willing to spend money for your product? If so, COLLECT THEIR MONEY! Seriously, ask for money on the spot. You are now taking pre-orders.
If you can’t convince your closest friends to support you and this idea of yours, then you need to think long and hard about whether this product is truly viable.
2) Make The First Prototypes
Use the money you’ve collected from your pre-sales (and some of your own cash as well) to get some prototypes made. Today it’s easier than ever to produce one-off items, including those made from glass (glassblower), plastic (3D printer), and metal (CNC machine).
3) Test & Refine
It’s time to deliver the beta version of your product to the people who’ve already paid. Get their feedback. Find out what works and what needs to be changed. Make the improvements necessary to achieve your minimum viable product. Your goal at this stage is not perfection. You want to create a product that is good enough for people to buy.
The first iPhone couldn’t send pictures via text message, even though basic flip phones could do that at the time. Save some improvements for version two.
4) Talk To Manufacturers
Get quotes from three manufacturers and make sure the cost to produce your product aligns with your retail price point. Have each manufacturer quote a low initial run, a larger run (10x more), and a really big run (50x more) so you know what your costs will be in the beginning and when sales ramp up.
The bulk of your sales will be wholesale to smoke shops (and 30% off wholesale to distributors), so you need to make sure your costs are low enough to support profit margins for everyone involved. For example, if you want your product to sell for $20 retail, the wholesale price should be $10 and the price to distributors will be $7. That means your cost needs to be below $5.00 (and ideally around $3.50 to $4.00) when you’re ramped up and doing full production runs.
5) Go solo or team up
One of the fun things about running a business, especially in this industry, is going to the trade shows and selling your product. But starting from scratch and getting into one store at a time is challenging. It requires you to have some funding to cover all your manufacturing costs, marketing expenses, and overhead before you become profitable. In addition, your product costs will be higher because you can’t scale as quickly.
“One of the fun things about running a business, especially in this industry, is going to the trade shows and selling your product.” – Matt LaPrairie
That’s why having an established partner is so valuable. That partner could simply be a distributor that already sells to a thousand stores or a more intimate partnership where you team up with a company to cover manufacturing costs, manage the marketing campaigns, and help design the next version of your product.
After you have a working prototype of your product and know the manufacturing costs, you can start talking to companies in the industry to find a partner who’s a good match. I recommend going to the CHAMPS trade shows. There are four each year and you’ll get to meet business owners face to face.
It’s Time To Get Started!
Now that you know the five steps to bring your ancillary cannabis product to market, it’s time to get started. Validate that idea with your friends and others in the industry. Don’t avoid talking to people because you’re worried about someone stealing your idea. That’s putting the cart ahead of the horse.
Ideas are a dime a dozen and you’ll need to talk to people to make any kind of significant progress. Rest assured – someone will copy your idea, but it’ll be after your product is already a proven success. And that’s fine, because by that time you’ll already be working on the next version of your product. Your job is to keep moving forward and to let others keep chasing you.