With cannabis now enjoying legal status in more than half of all U.S. states (and the District of Columbia) despite its continuing classification as a Schedule I drug under federal guidelines, business owners and cannabis enthusiasts throughout the country have expressed interest in capitalizing on the pro-cannabis movement by opening and operating dispensaries in their own cities.
But while launching a dispensary can present a prime opportunity for a savvy entrepreneur, simply having some background knowledge of general business principles and a healthy interest in cannabis often isn't enough to catapult such a business to profitability. Read on to learn what budding cannabis entrepreneurs can expect from the process and some of the factors you'll want to consider when deciding whether starting a cannabis dispensary is the right decision for you.
Can You Start a Cannabis Dispensary?
Although the dispensary approval process is fraught with requirements and bureaucratic red tape, there are actually relatively few restrictions on who can start a cannabis dispensary. As long as you have a source of funding (which may include a small business loan) and the commitment to delve deeply into the regulatory requirements imposed on your "cannabusiness," you should be eligible to apply to your state for a dispensary license.
However, there are a few exceptions, and because most states' dispensary licensing processes are merit based, the approval criteria used can be relatively subjective. If you have a felony conviction on your record, you may need to obtain a co-sponsor (or co-owner) with a clean criminal record to seek approval. By that same token, someone whose business plan is mainly focused on their own appreciation of cannabis isn't likely to be deemed a "good risk" by the relevant licensing authority. Licensing authorities have a vested interest in ensuring that the dispensaries operating within the state (and with the state's approval) are profitable and compliant with all applicable laws and regulations.
Should You Start a Cannabis Dispensary?
If you know that you have the knowledge, financing, business experience, and determination to give your cannabusiness a go, there are still some factors you'll want to consider before taking any irreversible steps.
First, consider your banking and lending needs. Because most banks are insured by the Federal Deposit Insurance Corporation (FDIC) and because cannabis remains illegal at the federal level, it can be tough to get a cannabusiness account at one of the country's big banks—at least if you're honest with the bank about the nature of your business. Having a prospective bank available and funding lined up before you seek licensing can make your path to profitability much easier.
You'll also want to consider the demand and market saturation in your area. In some parts of the country, especially those that have enjoyed the benefits of legalization for a decade or longer, there are more dispensaries than coffee shops. While this is good news for the cannabis enthusiast, it can make it tough for new dispensaries to turn a profit, especially if they're competing with chains or well-established businesses.
Instead, consider launching the first dispensary in an underserved region, or even an online dispensary that allows for door-to-door delivery. This can provide you with a much broader customer base and increase the likelihood that you'll be able to turn a profit in your first few years.
Finally, find a mentor. Even if you're an experienced business owner, cannabis is a whole new world, without the banking and vending options available to more straitlaced business ventures. By working with someone who has been in the industry long enough to see it all, you can avoid the pitfalls that are common to cannabis novices and focus all your energy on building a profitable business.
Contact a cannabis dispensary in your area to learn more.