“There’s a lot of money to be made in the cannabis industry,” said Captain Obvious.
And she’s preaching to the choir. (Yeah. Captain Obvious isn’t always a dude.)
But opening a marijuana dispensary isn’t necessarily the answer to getting in on the action.
There is A LOT involved in doing so. And without knowing full-on the many risks, there’s even more to lose.
Opening a Marijuana Dispensary Is A Huge Undertaking
But among some starry-eyed entrepreneurs, there’s a notion that a cannabis business doesn’t face the same challenges. That the product simply sells itself.
They’d be partially right. But only about the first part. Because running a cannabis business doesn’t face the same challenges. It faces many more.
1. It Is EXPENSIVE to Get a License
Applying for a business license for a dispensary is complex, to say the least. You need to understand all the requirements on the state, city and county levels. And while costs vary to get a license, the final number can tally up to six figures.
Even if you do manage to pull together the funds, you may still not get a license.
The marijuana market is forecasted to be worth more than $31 billion by 2021. That means there are a lot of people wanted to get into the business.
Most states are concerned about over saturating the market, so licenses are handed out gradually. Very gradually.
2. Banks Will Not Rush to Help You
New bills such as the SAFE Banking Act are pushing toward allowing cannabis businesses to have access to bank services – including loans.
But this is still in its infancy.
As of now, there are fewer than 500 banks and 200 credit unions worldwide who offer services to marijuana businesses.
Because marijuana is still federally prohibited in the U.S., most banks are concerned they will be charged with money laundering.
You MAY be able to get an account, but forget about loans or checking. That means you’ll be doing a lot of transactions in cash. And that adds another layer of risk.
3. Taxes Are Sky-High
This isn’t just a run-of-the-mill complaint about high taxes either.
Working solely in cash is a hassle when it comes time to pay your taxes. The IRS doesn’t like it either.
They dislike it so much that federal Tax Code 280E has ensured that all plant-touching businesses — companies that deal directly with the plant, as opposed to those dealing only with accessories and ancillary services — cannot deduct business expenses or use tax credits.
That means that expenses incurred from things like advertising, rent and equipment cannot be deducted – bringing the average taxes paid by cannabis businesses to around a whopping 70 percent.
4. Good Employees Are Rare
Yeah. This is true across all businesses, right?
But what makes working in legal weed unique is that there are very few people with a formal education in cannabis. After all, it’s a young industry.
In many existing dispensaries, the staff are trained only in sales and don’t have enough knowledge to provide advice to patients.
This is huge drawback for patients who are seeking the products best suited for their needs. And if they can’t find it at your dispensary, they’ll go somewhere where they can.
5. Supply Chain Management Sucks
There. We said it.
Just like with opening a restaurant, starting a legal cannabis will require you to follow some pretty stringent laws and health and safety rules.
But unlike with the food and beverage industry, the cannabis industry doesn’t have much access to a workforce who knows how to handle this. (See #4 above).
Plus, protocol for health and safety will vary from state to state and is always changing. So you’ll need to stay out ahead of it.
Do You Have What It Takes?
If you’ve got the chutzpah (and the funding) required for opening a marijuana dispensary, there’s no time like the present.
There’s definitely a need for well-managed cannabis dispensaries that are able to comply with the laws and regulations.
And if you’ve already got a successful cannabis business, it never hurts to review your marketing strategy to ensure you remain competitive in this growing industry.
Reach out to us for a consultation today.