Starting a new cannabis business can easily cost between $750,000 and $1 million. The legal fees alone can run $50,000 or more, and then there’s inventory, building rentals, marketing and web design, security, employee salaries, and so much more. But those are just the obvious startup expenses. For anyone looking to establish a new canna-business, there are also some lesser-known but nevertheless important expenses that you should be aware of.
Capital
Capital isn’t an “expense” in the traditional sense, but it’s a monetary requirement that many new businesses are unaware of. Even if all of your startup costs are covered, most licensing authorities won’t give you the time of day if you can’t demonstrate considerable capital.
For instance, the average cost of a dispensary license ranges from $5,000 to $25,000. But before you can even get approved for a license, you’ll often have to show $150,000 or more in capital. The exact number will vary by state. While some states don’t impose this requirement at all, others have incredibly stringent demands. For example, Pennsylvania requires $2,000,000 in assets with a minimum of $500,000 in liquid cash. So even if you’ve crunched the numbers and you think you can afford to open up a marijuana business, you may still have a long way to go.
Compliant Point-of-Sale Software
If you run a cannabis retail business, you need a way to process and track all of those sales—and your standard point-of-sale software isn’t going to cut it. You need a custom, industry-friendly POS solution that integrates with your state’s track-and-trace system and complies with all applicable laws.
Options like IndicaOnline, Green Bits, and Flowhub are among the industry standards. Because these systems have complex legal requirements and must work within a high-risk financial framework, they can cost hundreds or even thousands of dollars per month.
Waste Management Solutions
Every cannabis business has waste, whether it’s unsold product, expired bud, or piles of refuse after a cannabinoid extraction. If you think this waste can simply be tossed in the garbage, think again. Cannabis waste is subject to the same track-and-trace requirements as retail sales, and it’s also subject to strict disposal requirements. For example, the unused cannabis products must be mixed with at least 50% non-cannabis waste and rendered “unusable and unrecognizable.” Failure to adhere to these requirements can result in costly fines or even the loss of your license.
The term “unusable and unrecognizable” has never been clearly defined, and the requirements for waste management are beyond the scope of your average canna-business. Because of this, most dispensaries and cultivators are now relying on cannabis waste services like GAIACA. These companies provide businesses with the proper disposal receptacles and then take care of regular waste removal, weighing the garbage on site and then again at the final destination as required by law. The service costs start at a few hundred dollars per month, but it helps to ensure absolute compliance.
Be Mindful of Your Expenses
There are plenty of other expenses to consider, from odor control to online directory advertising—which itself can be shockingly expensive. You need insurance, security guards, and even an emergency fund for fines and penalties (cannabis businesses often receive costly fines for even small infractions).
To get a more accurate idea of what a new business will cost you, speak with seasoned cannabis business owners about their own experiences. Then you can put together a complete business plan that accounts for the true cost of running a marijuana enterprise. Just don’t forget to set some serious capital aside.
