With adult-use marijuana legalization becoming wider each day in the United States, a green rush is sweeping the nation. More and more retailers are becoming interested in becoming part of the cannabis business but don’t know how to do it. Here we give you some pointers on how to enter the world of cannabis retail successfully.
According to the Pew Research Center, 91 percent of U.S adults say marijuana should be legal for medical or recreational purposes. And 95 percent of the U.S population lives in an area where marijuana is legal to some degree. We created a state-by-state map that shows where cannabis is legal:
Globe-News Wire reported that cannabis sales for 2021 will be near $31 billion and will increase 41% over 2020 sales. Further, BDSA forecast global cannabis sales to grow from $30,6 billion in 2021 to $62.1 billion in 2026, more than the value amount for any business owner.
The numbers above are why many want to become part of the cannabis business. Opening a retail cannabis or marijuana operation is not so easy. To make it a lighter endeavor, we created a list of points to consider when creating a roadmap for a cannabis retail operation.
Financing a Dispensary
If you are wondering how dispensaries, the leading cannabis retailers in the country, stand in the cannabis world, this is the truth: they do enjoy a healthy profit margin, and most are in the black within their first year of operation, with over 75 percent profitable or being able, at least to cover their operation costs.
With the latter in mind, it is essential that you have a way of funding your operation when putting up a dispensary. Opening up a new Dispensary can cost from $250,000 to $750,000 at least.
In addition, dispensaries often face difficulties getting financial services because of federal banking restrictions regarding the criminal classification of cannabis, so be prepared to fully financially support your business for at least a year.
When creating a budget for your dispensary, have these crucial cost elements in it:
Application and Dispensary Licensing Costs
These payments can go up to $30,000. Application fees start at $5,000 and vary from state to state. Licensing fees are higher than application fees, and you should add different supplemental costs.
This can be the most significant expense. If you are buying or renting a space for your dispensary, you should be prepared for up to $100k in rent and 100k in renovations to give it the style you want.
As said before, not every financial institution wants to help a dispensary due to cannabis regulation laws. To find the support, you should check local credit unions and, in some states, there are private marijuana banks. Such institutions, however, may ask for a monthly holding fee which ranges from 1 to 2k per month.
Ways to get Initial Financial Support
- The first and most common option is to have a self-funding operation. Entrepreneurs often self-fund their businesses. This can be a good option in canna-business due to the hurdles for securing financing from traditional channels.
- The second way of funding is through friends and family. In this scenario, people close to you can help your business with initial funding.
- The third option is to find partners, people who want to break into the cannabis industry, with money available to fund your operation. This is an excellent option because it is a potential source of investment capital and because partners can bring different skills that can supplement yours.
- The fourth option is finding a business loan. The reality of this scenario is that, until cannabis banking reform passes, no U.S bank will loan any money to fund a dispensary. They will, however, give you a loan through a credit union or a cannabis-specific bank.
- The fifth option is finding some cannabis-specific investment groups. These can be found on the private market and are investors looking to support marijuana operations. Typically, these groups lend money at higher interest rates and short periods, so be very careful when signing any debt.
- The sixth and final option is finding capital brokers. There are capital brokers that specialize in the cannabis industry, and their job is to find and qualify potential investors from all around the globe who want to invest in marijuana. This can be a much slower but great option.
You want to start your canna-business strong. To do so, you will need marijuana-specific legal representation and advice, and insurance. Add these costs into your budget; they’ll be worth it.
Have good, trained personnel in your store. You can expect to pay up to $12 per hour for budtenders, $17 for floor managers, and $25 for experienced store managers. Don’t budget on staff; they can make or break your business.
This department should include initial hardware investment and your monthly fee for any dispensary software.
Since you will not grow your cannabis, you will have to consider buying your products from an authorized supplier. Prices for these services vary from $1,300 per libre to $1,500. This is the most critical part of your business, so make sure you buy HIGH-QUALITY products.
Dispensaries can advertise themselves but in a very regulated manner. Marketing activities like radio or TV are minimal for this industry, so you will have to invest heavily in your digital and physical presence. This means investing in a great website, going to trade shows as much as possible, and having a solid social media fan base.
Planning the Basics
If you are aware of the financial demands a cannabis retail operation needs and are okay with it, here are some essential steps to cover before opening:
Find a perfect Location
In most states, before you can even fill the paperwork related to the license application, you will need a prospective location for your dispensary. To find a good place, you should research the municipalities you are thinking of operating in. You should also pay special attention to demographics and possible problems in the different areas you are considering for your store. You should ensure that the municipality you are working in allows cannabis businesses to operate. You should also learn your local zoning code, which will show you the areas designated for specific uses like commercial, industrial, etc. This can help you decide your store location based on where your store can be 100 percent legal. Finally, you should check every single state-specific dispensary location requirement to avoid any unwanted surprises in the future.
Get Your License
To be successful in getting your license, we advise one thing: get an excellent cannabis-specific attorney that can give an in-depth study of every federal, state, and municipal law along with licensing requirements. This will help you establish your dispensary without any legal problem.
Prepare a Business Plan Beforehand
If you are going to apply for financial support or put up your dispensary as a solo venture, you must have a business plan before starting. A step-by-step guide that shows what will happen if things don’t go as planned is necessary, not an option.
Although starting any new business can be challenging, being part of the cannabis industry is worth it since it is an opportunity to operate in an evolving market with possibilities to be discovered. Also, with further legalization in the U.S and the world, it is still a booming market with international capacity.