It’s been stated by ArcView Market research – the leading marketing researcher for cannabis – that retail sales of cannabis are expected to reach $21.8 billion by the year 2020. Though, you probably already had that in mind when considering to start a cannabis business. There’s no need to get into the reasons why people want to join this rapidly growing industry.
The real question is, how much does it cost to get your feet in the water?
There are three separate ways we can answer this question:
- Review your state’s initial capital requirements.
- Develop an understanding of what start-up costs are necessary.
- Further, consider indirect costs.
If you take a closer look at each of these individually, you’ll begin to understand just what number you’re going to need in order to start up a cannabis business.
Review Your State’s Initial Capital Requirements
¨It’s necessary you look into your specific state’s capital requirements before considering anything else. This is due to the fact that if you don’t meet these requirements, you won’t be able to even get to the application process. ¨
In order to know the exact number of your state’s capital requirement, you can expect to have to do a little research. However, no matter where you live, expect it to be a big number. In Nevada alone, you’re going to need, at least, $250,000 before you start the business process. Unlike most businesses, you can’t really go to a bank and ask for a loan for your cannabis business. Banks tend to find it to be too much of a risk. Most cannabis businesses get their initial capital requirements through fundraisers or third-party lenders.
Necessary Start-Up Costs
¨So, you’ve landed you initial start-up capital and you’re ready to layout all the money you’re going to need in order to get a business going. You’ll want to know right off the bat that this is a lengthy and expensive process.¨
Still, there is a reason behind this. One of the biggest time consumers when it comes to starting a cannabis dispensary is the application process. This is due to the fact that the industry is seeing a load of people trying to get their way into the business. Therefore, they’re also seeking out those who’re truly committed to the business.
Furthermore, depending on which state you’re trying to land a business can be complicated. For example, California has had medical dispensaries around for over two decades now and the competition is hot, especially with the recent legalization of recreational. If you’re in a state where medical and recreational has only recently been legalized, you’ll probably have better chances of getting your dispensary going.
However, you shouldn’t overlook the amount of business the state’s looking for. In rural areas where cannabis is legalized, such as Maine, there’s going to be little demand for dispensaries. Especially if one or two have already set up shop. Due to these factors, applying for the cannabis industry can be very tricky. It’ll also probably cost you the non-refundable amount of around $5,000.
Then there are the licensing fees which very much vary from state to state. For example, in Louisiana, you only need about $150 to get your dispensary license. Yet, in New Jersey, you could be paying upwards of $20,000. To top it off, you’ll have to renew your license each year. This can be costly depending on where you live. In Connecticut, the price of a license renewal is $75,000.
Further Considering Indirect Costs
Now that you know the essential of the cannabis industry (the capital requirements, applications fee, and price of a license), it’s time to consider everything any start-up company comes with. For this, you’re going to want to look into the following:
- POS systems
- Marketing and advertising
- Employee salary and wages
According to Marijuana Business News, you’ll be paying anywhere between $43,900 to $135,000 for a store that houses less than 1,000 square feet and has no more than two employees.
Is the Investment Worth It?
This all depends on how enthusiastic you are about this industry. It’s given you’re without a doubt going to need a few hundred grand to get your business on its feet and upwards of $75,000 to maintain it annually. But it can’t be forgotten why so many people are making this kind of investment. ¨Cannabis is a multi-billion dollar industry that’s expected to grow at a rapid rate. For those who have a strong desire to open a dispensary and the motivation to do it, you’re profits hold strong possibility of coming in.¨