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Key Considerations in Launching a Cannabis Extraction Facility

By Alisia Ratliff

Published: Jul 22, 2021   
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If you are anything like me, you love a great one-liner that just sticks with you. When I sit back and ponder upon the things that go into starting a new business (building a new facility or becoming an entrepreneur), a couple of one-liners come to mind.

“The only impossible journey is the one you never begin,” Tony Robbins.

“Rome wasn’t built in a day, but they were laying bricks every hour,” James Clear.

When planning to launch a cannabis extraction company, there are various considerations both direct and ancillary one must consider. A considerable amount of time should be spent at the commencement of the project to ensure all areas have been contemplated. I have often seen companies moving so fast that key considerations are lost and project execution is severely flawed, causing damaging negative impacts to the facility's productivity.

In this article, we will discuss major considerations, factors that are often missed, and the realities versus optimistic illusion.

Major considerations for launching a cannabis extraction facility 

It’s all about location, location, location. There are various legal cannabis markets across the world and these markets are opening in major countries, such as Canada, the US, Latin America, and Europe as cannabis products are commoditized. Your location dictates your potential compliance standards with several regulatory agencies. Your location also dictates the classification of the environment in the extraction area of the facility (C1D1, C1D2). Imagine starting your build-out in the “perfect” location only to find out that you’re illegally positioned nearby children’s facilities! Know where you plan to operate and meet with all appropriate local, state, or national government officials to understand the laws and compliance fully.

Accreditation and standards are becoming more of a compulsory requirement rather than the nice-to-have to differentiate products in the marketplace. With this in mind, most areas of the world are requiring extraction facilities to operate under current good manufacturing practices (cGMP) or another global food-safe equivalent. Process flow needs to be heavily studied so that it's built into the extraction facility by design. You wouldn’t build your home with the master suite in the center of the structure; it would be inconvenient for you and guests venturing from the foyer to reach the outdoor space.

I find in the cannabis industry, when it comes to investment fund planning, there are two significant areas in the business that get short-changed: staff salaries and equipment. Recruiting and retaining highly qualified personnel is, in my opinion, the single most important thing you can do to set your facility up for success. Having a great project/executive team to lead the project is vital to all considerations being factored in at the planning stage. You’re also increasing your store of knowledge to tackle any challenges, because they will come. Hiring the right competency into your initial staff can be difficult, but just make sure you complete thorough due diligence on each candidate because the guidance of these individuals will be heavily depended upon.

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Commonly overlooked considerations for launching a cannabis extraction facility 

With several facility key considerations to manage, some things are bound to be neglected accidentally. Managing a project that involves building out a cannabis extraction facility, requires management of construction, procurement of equipment, thorough understanding of laws, and so many more aspects. I find most businesses forget to plan storage, waste management, and supply chain management. It's easy to draft up a building layout primarily focused on value-added areas of the building not including bathrooms, broom closets, and inventory storage. Make sure you plan storage areas for materials/goods, product inventory, and cleaning supplies. Also, future proof your building plans to account for expansion or growth.

In my experience as a scientist working in traditional laboratory settings, waste management is a factor that is critical to the success of any laboratory. Previously, we discussed location being a major consideration and this is a good reason why as well. In most countries, there are strict regulations around chemical vapor release, chemical and hazardous material disposal, and hazardous material storage. When planning the build of your facility, ensure you are in the proper location for your activities, you have an in-depth understanding of the laws around storage and disposal of hazardous materials, and you have mitigation strategies in place in the case of a chemical spill. Don’t forget to have a professional, in lieu of staff expertise, characterize the waste you are storing and disposing of. For example, you may have to pay a premium to dispose of waste containing toluene versus waste only including ethanol, methanol, and water.

One of the most overlooked aspects of any cannabis extraction facility is the management of the supply chain. Supply chain management is the management of the flow of goods, between departments, businesses, and locations. This also includes the movement and storage of raw materials, work-in-process inventory, and finished goods, as well as end-to-end order fulfillment from origin to consumption (as we like to say in the industry, seed to shelf). Managing a tight supply chain both externally and internally is key to the success of your extraction site. You must thoroughly vet any potential biomass suppliers to ensure their growing practices align with your quality strategy. For instance, if you are a certified organic product you cannot utilize biomass that’s been treated with fungicides, herbicides, or insecticides. Internally, you should have a robust quality and inventory management system that can effortlessly track and trace all product movement. Having high-level and granular visibility of all movements within the business will lower the risks of contamination and negative impact on profits.

Realities versus optimistic illusions for your cannabis extraction facility 

I understand how exciting it can be to jump into the cannabis industry headfirst, eyes on the liquid gold to be made! However, this isn’t a simple task by any means and serious planning and consideration must go into every forward-moving decision. Many companies find themselves in a continuous remediation pattern with their business strategy, product offering, and infrastructure needs. Whatever you do, avoid the following optimistic illusions like the plague if you want even a small glimmer of success at the end of the tunnel:

  1. “Once we’re making revenue…”
    Oftentimes companies approach the build-out of a facility with the mindset of doing things inexpensively until cash positive. If there’s no set business strategy and fund planning you can quickly find what you purchased is too slow, not certified, or just not fit for purpose.
  2. “We’ll be profitable 6 months after…”
    Have a realistic mindset about what goes into developing an extraction facility. Highly technical equipment takes skilled employees, lots of starting material, and time to develop operating parameters and product specifications.
  3. “We have great bones to do…”
    Be careful assuming you can purchase a building and repurpose it with nice, new fancy equipment. Ventilation, electrical supply, and vapor filtration are some of the major considerations for a facility’s operational health as well as employee safety.

Although we have covered major considerations, overlooked considerations and illusions when building out a cannabis extraction facility, there’s a myriad of other factors that need to also be accounted for. The competency and well-rounded industry knowledge of your planning and design team will steer the direction of the company whether that be success or failure. If you make sure you have the appropriate people at the planning table with an accurate view of realistic goals and timelines, you will be successfully pumping out the liquid gold in no time!

Alisia Ratliff

Chief Executive Officer of Victus Consulting Ventures LLC.

Alisia is the CEO of Victus Consulting Ventures, a cannabis business consulting firm. With over fifteen years of experience across several industries, Alisia uses a breadth of technical knowledge to help build start-up companies, develop strategic direction, and sustain brands in new emerging markets. She has written for Analytical Cannabis since 2021.


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