The cannabis industry has witnessed remarkable growth in recent years, with increasing demand for high-quality products and the need for stringent testing standards. Starting a cannabis testing laboratory involves a multifaceted approach, combining scientific expertise, regulatory compliance, and sound business strategies. This guide will provide a step-by-step overview of how to start a cannabis testing lab.
The guide is organized into sections, covering key aspects of the startup process, and includes video guides and links to additional resources for further insight.
Table of Contents
Step 1: Building the Founder and Scientific Team
Building the founder and scientific team is a critical aspect of establishing a successful cannabis laboratory. A diverse team is essential, encompassing individuals with expertise in business management, regulatory affairs, and cannabis laboratory science.
Strong leadership and business acumen are pivotal for navigating the challenges and opportunities inherent in running a cannabis laboratory. Founders with backgrounds in project management, finance, and strategic planning can effectively guide the company.
Additionally, it is assumed that business operators will either possess funding or have connections to secure necessary funding for the laboratory's operations. Founders with a deep understanding of cannabis industry trends, market dynamics, and client behavior are invaluable. This knowledge enables informed decision-making, positioning the laboratory competitively in the dynamic cannabis landscape.
On the scientific front, hiring experienced scientists is essential. Seek individuals with backgrounds in chemistry, biochemistry, or related fields. Experts in analytical testing methods with exposure to ISO 17025 and general quality assurance play a crucial role in ensuring the accuracy and reliability of results.
This makes specialists in analytical chemistry, chromatography, and spectroscopy essential hires. These professionals play an instrumental role in developing and validating testing methods for cannabinoids, terpenes, and other contaminants.
Quality assurance specialists are equally vital, ensuring the maintenance of testing standards, implementing corrective actions, and guaranteeing the laboratory's compliance with regulatory requirements.
Furthermore, recruiting experts in data analysis and interpretation is crucial. This team contributes to deriving meaningful insights from complex datasets generated during testing, enhancing the accuracy and reliability of the laboratory's results.
Step 2: Obtaining Funding and Understanding Major Expenses
Start-up costs for starting a cannabis testing laboratory can vary widely, but the primary drivers are instrumentation purchase, extensive tenant improvements that are often needed, and sufficient financial runway to operate a fully staffed and functional laboratory while test validation is being conducted.
Raising funding for a startup cannabis testing laboratory poses unique challenges due to several barriers inherent to the industry. When people ask "how to start a cannabis testing lab"? The first thing we emphasize if the challenge of obtaining funding.
First and foremost, the lingering federal prohibition of cannabis in many countries, including the United States, creates hesitancy among traditional financial institutions to engage with cannabis-related businesses. The legal ambiguity surrounding cannabis at the federal level makes it difficult for startups to secure loans or investments from mainstream banks, deterring potential investors concerned about legal repercussions.
Today, many successful cannabis testing laboratories in the US can be traced to being funded by patient, high-net worth individuals investing between $2 - $4 million dollars, typically shortly after state legalization.
Moreover, the cannabis industry's novelty and rapid evolution contribute to uncertainty among investors. The lack of established track records for cannabis businesses, particularly testing laboratories, makes it challenging to project future returns accurately.
Investors often face difficulties in assessing the long-term viability and profitability of startups in an industry marked by shifting regulations and market dynamics. However, there are many cannabis testing laboratories thriving and even expanding into multiple states in the US, the laboratory equivalent of a multi-state operator (MSO) showing that with competent operators, ROI’s that meet private equity acquisition requirements are achievable.
In either case, a solid business plan is essential to increase investor confidence. Click here to learn more about E4's business planning services for cannabis laboratories.
Step 3: Designing the Laboratory and Selecting Analytical Instrumentation
Local regulations often dictate specific requirements for starting cannabis laboratories to ensure the safety of employees, the surrounding community, and the integrity of the testing process.
Adequate ventilation systems are crucial to maintaining air quality and mitigating potential health risks associated with the handling of cannabis and laboratory chemicals. Compliance with security standards is paramount, given the nature of the products being tested and the potential for unauthorized access.
A well-thought-out facility design for cannabis testing labs is essential for the seamless movement of samples through various stages of testing, enhancing operational efficiency and minimizing the risk of analytical and/or compliance errors.
Investing in state-of-the-art analytical equipment is equally pivotal for the success of a cannabis testing laboratory. Accurate and reliable testing is dependent on the quality and precision of the instruments used in the analytical process.
Key equipment includes:
chromatography systems, which are instrumental in separating and identifying compounds within a sample,
mass spectrometers attached to HPLC or GC for precise mass measurements, and
quantitative polymerase chain reaction (qPCR) instrumentation tailored to detect and quantify pathogenic microbial contamination.
It is important to understand the analytical sensitivity of these instruments so appropriate pairing with regulatory detection requirements for limits of detection and limits of quantification can be met. Many startups have unknowingly purchased expensive paperweights or instruments that far exceed their needs and budget.
The design and layout of the cannabis laboratory must accommodate these instruments, ensuring they are strategically placed for optimal functionality and accessibility.
Adequate space should be allocated for sample preparation, analysis, and storage, with attention to minimizing the risk of cross-contamination and maintaining the integrity of samples throughout the testing process. Work with E4 to design a cannabis testing lab that will exceed industry standards.
Step 4: Obtaining a State License
Securing a cannabis laboratory business license is a complex process that requires a thorough understanding of the specific regulations governing cannabis testing in each state. However, it is an essential step in how to start a cannabis testing lab.
The first step involves diligent research to identify and comprehend the details of the regulatory framework that governs the cannabis industry at the state level. This includes staying abreast of any amendments or updates to existing regulations, as the cannabis landscape is subject to constant evolution.
The physical application is a critical component of the licensing process and serves as a formal submission to regulatory authorities. The application must address a wide array of regulatory requirements, covering aspects such as:
security plans,
building zoning requirements,
architect stamped floorplan schematics,
hazardous waste management plan,
quality management plan,
standard operating procedures,
instrumentation/equipment, and
a staffing plan that includes credentialed and trained employees.
Regulatory authorities will thoroughly review each application, evaluating it based on predetermined criteria. Many states use a competitive cannabis testing license application process which may involve scoring systems, interviews, and site visits to assess the applicant's ability to meet regulatory requirements and contribute positively to the cannabis industry.
Applicants may have the opportunity to address deficiencies or appeal decisions during the review process. Clear communication with regulatory authorities and a willingness to address any identified issues promptly are crucial at this stage.
Successful applicants will receive a cannabis business license, enabling them to commence operations within the regulatory framework. Unsuccessful applicants may receive feedback on areas for improvement if they choose to reapply in the future.
E4 provides license application services for cannabis testing labs. We've helped labs apply for and win licenses in dozens of states across the U.S.
Step 5 of How to Start A Cannabis Testing Lab: Recruiting Talent
Establishing a qualified and competent team for a cannabis testing laboratory poses unique challenges due to the specialized nature of the industry and the rapidly evolving regulatory landscape.
One of the primary hurdles is the scarcity of professionals with specific expertise in cannabis testing methodologies. The field demands a nuanced understanding of complex analytical processes, quality assurance protocols, and an awareness of the unique challenges associated with testing cannabis products.
This scarcity is compounded by the fact that cannabis remains federally illegal in many places, limiting the pool of individuals with formal education or experience directly relevant to cannabis testing.
Moreover, cultural fit within a cannabis testing laboratory is crucial for seamless collaboration and adherence to strict protocols. The industry's dynamic nature requires employees who are adaptable, forward-thinking, and committed to staying abreast of evolving regulations.
However, finding individuals who align with the laboratory's culture while also possessing the necessary scientific expertise can be challenging. The cannabis industry often attracts professionals with diverse backgrounds and experiences, and fostering a cohesive culture that promotes compliance, precision, and innovation is essential for the laboratory's success.
Additionally, the competition for top talent in the cannabis testing sector is fierce. As the industry continues to expand, laboratories must contend with other cannabis-related businesses vying for skilled professionals.
Attracting and retaining talent requires offering competitive salaries, benefits, and professional development opportunities. The stigma associated with the cannabis industry may also dissuade some qualified individuals from considering opportunities within cannabis testing, further narrowing the pool of potential candidates.
Successfully addressing these challenges involves a strategic and proactive approach to recruitment, emphasizing the laboratory's commitment to compliance, innovation, and a positive workplace culture.
Without any doubt, E4 Bioscience cannot over-emphasize the importance of beginning recruiting as early as possible and continuing to develop a pipeline of potential new hires that fits the culture of the company. The best-looking lab with the newest equipment cannot run a single test without competent, trained staff!
If you'd like assistance building a rockstar team, check out E4's cannabis talent acquisition services for cannabis testing laboratories.
Step 6: Developing, Optimizing, and Validating Tests
Developing, optimizing, and validating tests in a cannabis testing laboratory is a multifaceted process that demands a significant investment of time, personnel, and resources.
The technical intricacies of cannabis testing, coupled with the evolving nature of regulations, make this undertaking particularly challenging.
It is important not to underestimate the challenge navigating the regulatory landscape to ensure compliance with state and federal requirements further adds to the complexity and cost of validation efforts, as laboratories must align their processes and service offerings with evolving standards.
The initial phase involves the development of testing methodologies tailored to the specific requirements of:
cannabinoids,
terpenes,
residual solvents,
pesticides,
mycotoxins,
heavy metals, and
microbial contaminants.
This process requires a dedicated team of experienced scientists with a background in analytical chemistry, as discussed previously.
Optimizing these tests involves fine-tuning the methodologies to enhance accuracy, precision, and efficiency. This phase requires iterative adjustments and continuous refinement to ensure the reliability of results.
The optimization process may involve troubleshooting instrument parameters, reagent concentrations, and sample preparation techniques. As the cannabis industry evolves, laboratories must stay abreast of emerging testing methodologies and technological advancements to remain at the forefront of accuracy, efficiency, and optimization.
Validation, the final analytical step before commercial use, is a comprehensive process to ensure the accuracy and reliability of testing methods. This involves rigorous testing of the methods across a range of parameters, such as specificity, sensitivity, and reproducibility.
The validation process requires a substantial investment of time and resources, including the careful documentation of procedures, instrument calibrations, and quality control measures.
Many new owners, particularly those without a science background, often staggeringly underestimate the length of time it takes, and the amount of science involved to optimize and validate a test.
In fact, the inability to validate multiple high complexity texts under artificial and arbitrary timelines is the most common reason for a cannabis testing laboratory failing to launch (internal data).
Step 7: ISO 17025 Accreditation
When we're asked how to start a cannabis testing lab, we make it clear that ISO/IEC 17025:2015 accreditation plays a pivotal role in ensuring the reliability and accuracy of testing and calibration activities in various industries, including cannabis laboratories. The accreditation standard sets forth basic requirements that laboratories must comply with to demonstrate competence in producing accurate and reliable results.
In the context of ISO 17025 accreditation for cannabis testing laboratories, among other regulatory requirements, must:
establish and maintain a quality management system,
ensure the competency of personnel,
demonstrate validated methods for testing cannabis products, and
regularly participate in proficiency testing programs.
These requirements collectively contribute to the establishment of a robust framework for quality assurance within cannabis testing laboratories.
The process of obtaining ISO 17025 accreditation for cannabis laboratories is a comprehensive and rigorous journey.
Laboratories need to develop and implement a quality management system that aligns with the standard's requirements. This includes:
document control,
personnel training,
method validation,
equipment calibration, and
internal traceability.
Once the laboratory believes it complies with the international standard, it undergoes an assessment by an accreditation body such as:
This assessment involves a thorough examination of the laboratory's procedures, records, and technical competence. If successful, the laboratory is granted ISO 17025 accreditation, signifying its ability to consistently produce accurate and reliable results in cannabis testing.
E4 Bioscience highly recommends purchasing a copy of the ISOS/ICE 17025:2017 early in the laboratory set up process and highlighting every instance of the word “shall”. If the laboratory cannot address each instance of the word “shall”, they are at risk of non-conformance with the standard and delayed accreditation.
How to Start a Cannabis Testing Lab in specific U.S. States
If you'd like to get further details on how to start a cannabis testing laboratory in specific markets, check out the resources below:
Our cannabis lab consultants will continue to add new links to state specific guides as they become available.
Summary of How to Start a Cannabis Testing Lab
We hope this introductory guide and the additional resources contained within is a helpful resource for individuals and entrepreneurs looking to venture into the cannabis laboratory industry.
Starting a cannabis laboratory requires a strategic blend of scientific expertise, regulatory knowledge, and effective business management. By assembling a skilled team, securing adequate funding, adhering to state regulations, implementing rigorous testing procedures, and obtaining the necessary certifications and accreditations, entrepreneurs can position their laboratories for success in this dynamic and evolving industry.
Schedule a free consultation with our marijuana testing laboratory consultants to get started on your journey of starting a lab in the cannabis industry.
Additional Resources Related to How To Start A Cannabis Laboratory
Did you know that E4 wrote the book on how to start and operate a successful cannabis testing laboratory? The book is called Cannabis Laboratory Fundamentals.
Our cannabis testing laboratory consultants identified chapters of the book that are relevant for each of the steps above. We encourage you to explore the chapters to get a deeper understanding of how to start a marijuana testing lab.
Recommended book chapters for further reading:
Building the Founder and Scientific Team:
Obtaining Funding and Understanding Major Expenses
Obtaining a State License
Recruiting Talent
Developing, Optimizing, and Validating Tests
ISO 17025 Accreditation