Perhaps one of the most common ways to break into the budding business of marijuana is to open a dispensary. For those of you just learning about the sector, a dispensary is a shop where you can purchase marijuana (legally) in various forms. A dispensary offers a variety of products including joints, blunts, oils, edibles, and just about any kind of THC oil product you can think of. This is the candy shop of the cannabis connoisseur. Just talking about a dispensary makes my money glands salivate with opportunity. People love their THC, and a dispensary gives a euphoric feeling of something bad and something good all at the same time. As of now, most dispensaries only cater to those with a medical marijuana card, meaning people with conditions that are treated or eased with cannabis. However the recreational legalization movement has begun, and is now legal in Colorado, Washington, and Oregon. The dispensary “lifestyle” will only continue to increase with legalization, and already we are seeing creative shops open up, catering to different clientele and sub-cultures of the cannabis community.
The Financial Costs
Costs of opening a dispensary can be quite high, and vary from state to state. Though costs may be high, the reward can be very sweet. Many things factor into how much you spend on a dispensary. A general figure on starting a dispensary is between $100,000 and $250,000. Since marijuana laws are set by the state, there are drastic differences in fees and licenses involved for dispensary managers. The disparity of startup costs was a dramatic $40,000 to a whopping $400,000 according to INC. One trick dispensary owners have used is to apply for non-profit status. This way you get around many legal fees and can have significant tax breaks. Don’t worry though, a non-profit status does not mean you cannot make a profit. You are allowed to pay managers and directors a salary. It is also important to know what is involved in starting a dispensary.
Basic Dispensary Startup Checklist With Cost Breakdown
· Application fees: $5,000–$15,000
· Application legal fees: $10,000–$30,000
· Store build-out and remodel: $50,000–$100,000
· Commercial lease/rent: $1,500–$5,000
· Brand and marketing materials: $1,000–$5,000
· Security system: $500–$1000
· Store supplies and labels: $5000–$10,000
· Deals with vendors/growers: Cost varies, and many will let you pay a percentage after their product has sold.
With the above cost breakdown, you can visualize how a dispensary startup may vary. According to these numbers the low end cost startup would be in the $70,000-$75,000 range. The lower range probably means you are in a state with lower application fees and/or lower cost of living and rent. Market saturation may also play into this range. The higher numbers come out to be between $150,000 and $200,000, and can often times be even more. What this tells the venture cannabist, is that they should do their due diligence in their specified state before diving into the business. For a more specific cost breakdown by state, visit the Marijuana Policy Project.
The Profit Potential
Alas, we come to the good part, and the reward for going through what can sometimes be a very painstaking process of opening a dispensary. If there weren’t big money in dispensaries, no one would bother opening them, right? So let me tell you there can be not only big money, but also huge money in the dispensary business. A wise and disciplined dispensary manager can make a killing, and set themselves up for a very rewarding career as a pot shop owner.
So how much does one shop generate, and what is the potential for a dispensary owner/manager? Looking at Harborside Health Center in California, the answer is massive. The shop claims it generates over 22 million dollars annually, making this one of the largest-grossing dispensaries out there. This should not be the standard or expectation, especially for a new owner and shop. A recreational shop in Seattle has reported sales averaging over $10,000 a day, which would result in over 3.5 million dollars a year. A study recently in the Marijuana Business Factbook says about 60% of shop owners take in less than $500,000 a year. Of these, 27% reported sales that were in the $100,000 to $250,000 range. The good news is this is the low range, and an equal 27% reported sales above $1,000,000. The simple answer is that there is money to be made, and often times it can be a large-scale wealth-generator. The study found only 15% of managers brought in less than $100,000 a year.