Bud is big business. In 2019, sales of recreational marijuana in the U.S. are projected to reach $12.4 billion dollars.[i] Medical marijuana sales in the U.S. are projected to reach between $4.2 and $5.2 billion dollars[ii].
Perhaps marijuana has recently become legalized in your state. Or maybe you’ve seen the kinds of revenues that can be earned from running a marijuana-based business. Whatever your reason, it’s a good time to open a marijuana dispensary in the U.S.
But before you run out to find a store front to call your own, there are some things you’ll want to consider.
Do Your Homework
Running a marijuana business isn’t the same as running a boutique or other kind of retail business. There are many more rules and regulations that you need to adhere to. While marijuana may be legal in your state, it’s still not legal at the federal level. So, there are going to be hoops that you have to jump through. A lot of them.
You’re going to need the most up-to-date information about processes that are unique to the marijuana industry, such as taxes, security, banking, accounting, legalities, marketing, and more. If you don’t already know this information, you might want to partner with someone who has experience in the industry. At the very least, find yourself a good marijuana business mentor who knows the ropes.
Opening a marijuana dispensary isn’t inexpensive. Most banks will not extend you a loan because marijuana is still illegal on a federal level and banks don’t want to be at risk of violating money laundering laws. So, until federal laws change, you’re likely going to need to secure financing from individuals with a lot of liquidity and a long-term vision to help make your business a success.
Find the Right Property
Whether you want to rent or purchase property for your dispensary, you need to know what the rules are for where you can and cannot do business. Most municipalities have rules about where you can lease or buy property for your dispensary. A lot of times that means that the business must not be located within a certain distance from churches, schools, residential neighborhoods, and possibly other locations.
One way to help navigate this increasingly complex system is to hire a marijuana real estate expert. 420 Property is a large online marijuana real estate marketplace. Their website can help direct you to a marijuana real estate expert in your area.
Obtain a Dispensary License
Getting a license to open a marijuana dispensary isn’t easy. Because of state regulations the application process is conducted in such a way as to make sure that you are going to be a good operator. They will want to see your business plan. They will want to know your security and storage protocols. One thing to note is that your state’s rules on marijuana licensing may be different from your local municipality.
Additionally, be aware that applying for a dispensary license can be expensive. For example, in Colorado it costs $4,500 to submit the application alone. And in California an annual cannabis license will cost you a minimum of $2,500 on up, depending on your gross revenues.
Hiring a lawyer and/or certified public accountant with knowledge of the marijuana industry can significantly help you navigate the red tape and ensure your business is compliant.
Because marijuana is still illegal on the federal level, you’ll need to figure out how you are going to bank. Some states have smaller banks and credit unions that will do business with marijuana businesses. However, they are pretty few and far between. Also, you’ll need to be upfront with these banks what kind of business you are in. Banks will likely drop you like a hot potato if they find out after the fact that you are running a marijuana business. They simply don’t want to run the risk of violating federal money laundering laws.
Until federal laws change, one way that dispensaries get around money issues is by running a cash-only business. That means cash payment to vendors, to employees, and for insurance payments.
It also means cash purchases by customers. Dispensaries are wise to place a dispensary ATM within their store for customers seeking to make a purchase. By providing easy access to cash, customers are more likely to spend more in-store. When working with an ATM company, it is notable that the best dispensary ATMs can be either purchased by the dispensary, leased, or placed in-store at no cost to the dispensary.
One of the most important things you’ll need to do is keep meticulous records. Failing to do so could potentially land you in jail. Track products you’ve ordered and ones you have received. Track expenses and payments. If you choose to cultivate the marijuana you sell, track who has access to the product during the growing and processing stages. Track how much product you have sold and who you’ve sold it to. By keeping precise and transparent records you’ll avoid any suggestion of wrongdoing should questions be raised.
By getting your ducks in a row before you make the first step in opening your business, you are more likely to avoid large and costly mistakes.
[i] New Frontier Data. (August 1, 2018). Sales of legal cannabis in the United States from 2016 to 2025 (in billion U.S. dollars) [Graph]. In Statista. Retrieved November 01, 2019
[ii] Marijuana Business Daily. (May 9, 2019). Medical marijuana retail sales for the U.S. from 2018 to 2023 (in billion U.S. dollars) [Graph]. In Statista. Retrieved November 01, 2019