Marijuana is still a brand-new retail market and there are tons of challenges between a profitable marijuana dispensary and a newly established one. There are peculiar laws in each and every state that makes it difficult to establish a single rule in checking the lucrativeness of a marijuana dispensary. But knowing the restrictions and challenges could help us figure out a common stand.
People feel that you just need to throw in some cannabis seeds and grow a few plants and money would come rolling, but that is not the way it works. There are tons of restrictions from state governments. Marijuana dispensaries are not allowed to advertise openly. Therefore, their only way to market is through social media, which is really difficult to do if you are just starting out.
These businesses are in turn retail businesses only. So, they are also governed by the laws of demand and supply. Therefore, the more the dispensaries open, the less profitable this business becomes because of abundance of supply and constant demand.
Then come the banking issues. Many banks won’t work with them as their business isn’t yet properly defined. Therefore, more and more one-on-one customer service providers are needed for the banks, which is technically not feasible.
The product that is needed could cause problems and inventory tracking software can be costly. They would have to hire special accountants and lawyers as this is a brand new business and nobody knows much about it yet. Special locations have to be chosen to set up these businesses.
Then comes the valuation part. The business is not yet properly defined due to which it is hard to put a valuation to the company. Another reason for difficulty in valuation are the states. Each and every state has different rules and regulations for legal pot, which makes it really difficult to get to a common ground.
Coming back to the profit of marijuana dispensaries, the margins of profit are also hard to compare and the above reasons account for that. For example, in Los Angeles the medical marijuana prices have dropped. This is because of a lot of competition. The operations that are already established enjoy profit margins of about 40 to 50%, while brand new shops have a profit margin of about 20%.
As this industry is still uncertain and fickle, it is advised to wait a few more months before putting in investment and setting up infrastructure for a dispensary. Once state laws and economic definitions for this industry are set in stone, we can get into each and every business with ease.