How to Start a Legal Cannabis Extraction Business

cannibis extraction, grow enclosures

The cannabis extraction industry is sprouting up at an unprecedented rate.

Today, about half of all legal marijuana sales are extracted concentrates. And they’re growing. They are the fastest growing sector of the marijuana marketplace.

The demand is growing so rapidly, in fact, that it is projected that extract and extract-infused commodities are projected to eventually be 90% of all cannabis sales.

Not to mention the growing number of states nationwide legalizing the marijuana industry.

With a market appetite for cannabis extraction operations, it is needless to say that investors and startups are assembling in droves to capitalize on this newfound opportunity to make cannabis commercial.

We’ve compiled some steps to help businesses and entrepreneurs spearhead their cannabis extraction operations to a profitable future. Believe it or not, it won’t take as long as you think.

Research Your Market

Whether you’re in California, Colorado, Washington, or elsewhere, a successful business starts with a thorough, well-developed plan.

Many startups fail because a lack of planning. Emma Gowan of laments that 17% of all startups fail because of a need or lack of a business model.

So, it’s important to ask the right questions when crafting your business plan.

Some questions to consider are: Who is my market? Where is the ideal location for my business? Which states, and municipalities have extraction laws and licensing processes that are the most conducive to my goals? Are the raw materials accessible to process? What niche am I trying to focus on? How much material per month would it take to satisfy this niche?

Answering the above and many other questions and considerations are essential before moving forward with your canna-business.

After you’ve created and sharpened your well-researched business plan, it’s time to move on to license applications.

Readying Your License Applications

As soon as you have identified your preferred location of business, thoroughly researched your market, and hold a well thought out business plan, it’s time to apply to the local municipality for cannabis licensing.

Wait. This is going to be a huge hassle, right?

Not quite.

The process is often more simple and painless than cannabis entrepreneurs expect. Usually, the city or municipality will want to have a copy of your business plan — another reason why it’s beneficial to have it completed beforehand. Over-preparation shows that you are serious and responsible.

After this, municipalities differ case-by-case in what they require from you. However, it is better to have as much information as possible for any inquiries they may have for you. Municipalities can request anything from personal references, code standards, or engineering documents for your facilities.

Some businesses hire a local attorney to help quicken the licensing process because they have experience with the local laws and also connections and contacts within the community; however, this is by no means a requirement.

But beware.

A mistake that is often made by extraction businesses is purchasing real estate before researching local zoning and regulations. Your property must be zoned properly and additionally you must have the consent of the local municipality. For these reasons it is paramount to make your real estate purchase, whether buying or leasing, contingent upon acquiring a license first.

Real Estate Purchase and Construction

After choosing the right location, acquiring a license, and settling on leasing or purchasing a properly zoned property, it is time to start with construction.

Some in the extraction industry choose to hire a whole team engineers and architects; however, the problem with that is that because the cannabis extraction industry is so new, they are often clueless about the safety requirements, compliance standards, and pitfalls of building a lab that are compulsory for satisfying the individual needs of your canna-business.

How can I build facilities without the headache?

Many are choosing to use modular construction as a cheaper and faster alternative. There are several businesses that specialize in modular extraction labs and grow rooms who are familiar with the industry such as GrowEnclosures. Many cannabis startups are choosing this type of construction because of its mobility and flexibility of design. If you need to move your facility, modular construction experts can help you do it in a short period of time and without the nuisance of demolition and reconstruction.

For more information on modular construction, see here.

Order Lab Equipment 

With the help of your team, you should research the necessary equipment prior to getting your lab set up. The process of ordering equipment usually takes place during the construction of your lab.

There are several great vendors out there for the specific tools and equipment required for an extraction business, and startups should be wary of warranty, price, and other elements for a successful purchase. Talk to your vendor about installation and delivery times for the most efficient usage of your resources.


Before the municipality will inspect your lab, the equipment must be installed. A common requirement for municipalities is that a qualified engineered will come to give a field verification of your new equipment.

The final inspector of your facilities is known as the AHJ (Authority Having Jurisdiction) and is usually carried out by the local fire department or other municipal inspector. The AHJ will examine your engineer’s field verification of your extraction tools and equipment to verify that your lab is compliant with local regulations and safe. The AHJ, in addition to the field verification, also does its own inspection before the final approval for your lab.

Ready for Extraction

Now that your equipment is set up and approved by the local municipality, it is important to train your staff for efficient extraction and with strict safety precautions. During the hiring process, it’s important to keep in mind that an operator without a lot of experience or knowledge may be cost-efficient in the short term, but big mistakes can cost far more in the long run.

Now that you’re armed with the knowledge of the processes to start your cannabis extraction business, get out there and capitalize on one of the most lucrative opportunities of our time!