As the cannabis industry continues to grow across all 50 states (and the world), more and more inspired entrepreneurs are joining the industry. For many it’s not necessary to touch the cannabis plant itself, but simply to work alongside those that do. These businesses are called ancillary cannabis businesses, and although they do not incur all of the same risks as businesses that deal with the plant, they still fall under the cannabis insurance umbrella.
Understanding Ancillary Cannabis Businesses
There are two business models in the cannabis industry: plant-touching and ancillary.
The former is self-explanatory. Plant-touching businesses come into contact with the cannabis plant or its products at a certain point in the manufacturing process, whether it’s cultivation, extraction, or retail.
Ancillary businesses, on the other hand, provide services or products to businesses within the industry. Ancillary businesses do not touch the plant which mitigates the cannabis-specific risks. However, as mentioned, they still fall within the cannabis insurance umbrella, which may still carry stigma for some providers.
Ancillary businesses are in all verticals of the cannabis industry. They can include manufacturing cultivation equipment or grow lights, professional services such as accounting, legal, or insurance, construction, security, marketing, and glassblowers, to name a few. AlphaRoot itself is an ancillary cannabis business since we provide insurance to cannabis companies.
Identifying Risks for Ancillary Cannabis Businesses
While ancillary cannabis businesses do not face the same risk of theft, there are still business risks that must be addressed to set your business up for long-term success.
Ancillary cannabis businesses are still subject to the same laws and regulations as plant-touching businesses. Consider the following examples:
- A cannabis marketing company must know the terms that are and are not allowed in advertising campaigns.
- A glassblower can still face product liability problems.
- Every company that works in the cyber realm deals with cyber risks.
- Having “cannabis” or a weed reference in your business name can lead to banking and credit processing problems even if your business doesn’t touch the plant.
Each business has a specific set of risks based on the nature of doing business. Many of these are common business risks, but some are still specific to the cannabis industry. Each ancillary business requires a customized risk management plan.
Managing Risks with Insurance Solutions
A risk management plan is a key piece of business success, no matter your business, vertical, or industry. It is within this plan that you can identify every risk or exposure your business faces and detail exactly how an occurrence would damage your business. It is not the cheeriest of tasks, but it is important because only known risks can be dealt with.
A risk management plan doesn’t need to be overwhelming. It can be broken into a manageable five-step process of risk identification, analysis, evaluation, tracking, and treatment. Some steps, like tracking, are done over time to ensure your risk management is focused on the proper exposures. Others, like treatment, can be done quickly.
Treatment tasks like cannabis insurance policies are a simple way to mitigate many of the risks ancillary businesses face, without adding more work to your team. A cyber liability policy can provide a safety net against losses from a network attack, product liability can protect against lawsuits and claims, and general liability ensures everyone is taken care of.
The Need for Tailored Insurance Solutions
While there is much overlap in the risks that plant-touching businesses and ancillary businesses face, no two businesses are the same. Therefore, there are no two businesses that need the same insurance solutions. Two glassblowers in different states will have different needs based on each state’s regulations. But rules and regulations can vary in cannabis even at the county and municipal level, so even two ancillary businesses in different counties may need to know different things.
Cannabis is an industry rife with red tape and specialized regulations, and a certain level of knowledge and familiarity is needed to succeed here. Working with a business that operates within cannabis means there is at least a base-level understanding of these nuances, which is critical for businesses seeking insurance coverage.
Ancillary businesses would still do well to develop a network and community of other cannabis businesses. A specialized cannabis insurance company knows the ins and outs of businesses in multiple states and verticals and is better equipped to help ancillary cannabis businesses navigate the risks and stigmas that come with being in this industry. A specialized insurance broker has the knowledge to help businesses of all sizes create a tailored insurance program that addresses their specific risks.
Additionally, a specialized firm has a wide knowledge of risks in every vertical and may point out gaps in your current coverage or risk management plan.
Longevity and Growth in the Cannabis Industry
At the end of the day, proper risk management helps set you up for success. There is no longevity in business without weathering storms, and you cannot weather storms without a plan. The cannabis industry is explosive in growth, but that rapid expansion comes with a lot of volatility. This requires planning, flexibility, and resolve in the business owners that set out to make it big.
Working with a specialized cannabis insurance partner can help set you up for success and longevity. Even ancillary businesses face cannabis-specific risks, which can be confusing to navigate.
Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options.