How Much Does Opening a Dispensary Cost
The cannabis industry is booming and while the cash cow is fat, why not take your piece of the pie? For a lot of opportunity seeking business folk, this could mean starting your own dispensary. It doesn't look like there is any sign of the cannabis industry slowing down. Then again, it's not like it ever did anyway. This is a good time to take advantage of some possibly lucrative avenues of investment and business. However, what is the real cost of going into business with Mary-Jane.
If you are already business savvy, you might be thinking about the cost of building space, staff, capital and inventory. How do we put a dollar value to this and when we add it all together, do we get the true cost of opening a dispensary. In this article we're going to discuss monetary value incurred with opening a dispensary. Based on the regulatory nature of circumstances surrounding the cannabis industry, we're going to find opening a dispensary is a little more costly than opening you average business. In fact, depending on where you live in you could be looking to spend anywhere between $1.5K - $2 million.
In California, to apply for a dispensary license will cost you $1000. On top of that the licensing fee will range anywhere from $4K to $120K depending on the estimated value of your business. This doesn't include your real estate costs. Year long leases can cost anywhere between $50K-$100K. Again, not including renovations or care-taking work.
Assuming you've obtained your dispensing license and secured a real estate space, you're going to want to find an institution that can finance the initial start-up costs of your dispensary. This may not be necessary if you already have the capital to finance your business from the ground up. However, if you are not poised to do this yourself, you might find it beneficial for an outside institution to incur these costs so you can focus your personal resources into supporting yourself or other aspects of the business you want full control of. For example, if you are in marketing by trade, yo can use a loan to take care of the initial start-up while you focus on heading marketing campaigns. That being said, Marijuana may be tricky business. In the U.S, since cannabis is still illegal at the federal level, banks will not want to get into a partnership with you. To circumvent this issue, the business owner may turn to working with a credit union. Unfortunately, if these organizations know you have no other choice but to work with them, it is possible they may capitalize on the situation by charging holding fees that can range up to $2000 a month. In Canada, since cannabis has been made legal this might necessarily be an issue. However, depending on your province, the government may choose to place restrictions on your business model.
When you're ready to move along, you'll want to switch gears into thinking about lower profile costs that will need to be met in order to run an effective business. This can include: furniture, record keeping systems (ie, filling cabinets, an accountant, lawyers), security systems, inventory, electronics, marketing, utilities.
Electronics, like a POS, computers, phones, for your office, can typically run you around $25,000. Not to mention, the cost of having your electronics formatted with whatever software you are comfortable using. In states where you are not allowed to grow your own product, you could be looking at fees upwards to $1500/lb. In the case you will be growing your own inventory, you'll want to think about costs associated with your growing operation.
Like in any business, you'll want to consider having a lawyer on retainer to help you weed through legal bureaucracies, an accountant to manage your finances and taxes, and insurance policies to cover your back in worst case scenarios. When you add these all up, they could be amounting anywhere near $50,000 - $80,000 annually.
Next to consider, is the costs associated with staffing your business. Like any retail space, the size of your staff depends on the size of your store. A good chemistry of staff would consist of at least a supervisor, a couple counter attendants to man various shifts throughout the week, and a manager to be your eyes and ears when you are not around. At a standard industry rate, pay-roll can cost up to $250,000. As well, it's important to consider in-direct costs like the money it takes to train a new employee or loss that may occur from staff.
Some states, like Pennsylvania might require you to have $2 million in assets, with at least 500K in liquidated cash, before you can prove you have a viable business. Other states may not require you to have any assets at all. However, it's never a bad idea to have some sort of capital to back your business venture.
Again, depending on where you live, the competition in your market, and the overall viability of your proposed dispensary, start up costs are going to vary. The average costs of everything we've mentioned in the article might fall somewhere between $250,000 and $1 million. As well, you can always look to your own imagination and appraise any considerations we may have missed.
So when all is said and done, where does that leave you? Despite the discouraging numbers we have been throwing at you, a dispensary owner can turn a pretty decent profit. Considering your market size and the competitive landscape of the area you are operating in, your yearly revenue will reflect. It has been documented the average dispensary makes $974 per square foot of retail space. To put into perspective, Whole Foods, averages about $930 per square foot.
There are many costs associated with starting up a dispensary. If you are someone who new to business ownership you might find these figures intimidating. However anything is possible through hard-work and thoughtful organization. We hope this article has been useful for you in understanding what kind of financial resource is necessary when looking to open your own dispensary.