How Much Does It Really Cost to Open a Dispensary?
August 28th, 2017
If you’re one of the many people looking to get down on the billion-dollar(!) marijuana industry, then opening up a dispensary might be one of the best ways for you to do so.
According to ArcView Market Research—the leading market research company for cannabis, in particular—retail sales from marijuana are likely to reach upwards of $21.8 billion by 2020.
However, in order to reap the benefits of this potentially billion-dollar industry, it’s important to know all of the costs that go into opening and sustaining a marijuana dispensary so that you can be sure you’re equipped to handle them before signing on.
What are the initial capital requirements?
Before you consider the licensing and application costs, you first need to look at whether you have the capital each state requires for you to even begin the application process.
The capital needed to start the process of opening a dispensary varies by state, but it’s never a small number. In Arizona, for example, you need to have at least $150,000 in startup capital if you don’t want your application to be rejected, while Nevada requires that you have $250,000 at the ready before you begin.
Due to these high numbers, the vast majority of people applying for a dispensary will do so through third-party lenders or fundraisers as most mainstream financial institutions AKA big banks still find the marijuana industry to be too risky to approve loans. Hopefully that will change if and when cannabis is rescheduled as a Schedule II drug (rather than its current Schedule I classification), but for now, you’ll likely have to take an alternative route to secure a loan.
What are the start-up costs?
Once you’ve acquired the initial capital, there are substantial start-up costs to consider. It’s important to be aware that the start-up costs of opening a marijuana dispensary are both financial and time-consuming.
For one thing, the application process is complicated and extensive, presumably to weed out (pun intended, sorry) those who aren’t fully committed to the business. And complicating things even further is the fact that the hoops you’ll have to jump through vary depending on the state from where you’re aiming to open your business.
In the states where it’s legal to own and operate a medical marijuana business, the basic upfront cost for an application is $5,000, which, unfortunately, is typically not refundable, regardless of whether or not you’re accepted. Then, in addition to application costs, there are also required licensing fees that can be as much as $20,000, as is the case for folks looking to get licensed in New Jersey, or they can be as low as $150 for someone setting up shop in Louisiana.
Not only do you have to pay an initial licensing fee, but you’ll also need to pay to maintain your license each year, and this is another area that varies greatly in cost depending on your location. In fact, the differences might be substantial enough for some to consider moving. For example, dispensary owners who are residents of Nevada have to pay $3,000 annually to renew their license while those in Connecticut are required to pay a staggering $75,000 for renewal in addition to the $25,000 initial application fee and $75,000 registration fee.
Indirect costs of starting a dispensary
In addition to licensing, registration, and application costs, there are standard costs to consider that come with any startup, regardless of the industry. Among these costs and considerations are rent, POS system subscriptions, marketing and advertising, security, inventories, and, of course, employee salaries and wages. Marijuana Business News estimates these costs to range from $43,900 to $135,000 for a store smaller than 1,000 square feet with two or fewer employees.
Simply put, opening a marijuana dispensary isn’t cheap. You’re likely to need a least a couple hundred grand to get it off the ground, no matter the state you’re living in, and anywhere from $3,000 to $75,000 to keep it running legally each year. However, given that the marijuana industry is expected to reach over $20 billion in sales within the next few years, it might very well be an investment worth making.
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