How Much Does it Cost to Open a Dispensary?

Want To Open A Dispensary? Here’s What It Will Cost.

As legalization continues to spread, investors, business people, and entrepreneurs around the country are getting in on the “green rush.” One of the biggest ways to make money in the legal cannabis industry is to open a dispensary.

Like with any other business, there are a variety of startup costs that go into preparing to open a dispensary. But because the cannabis industry has its own unique sets of rules and regulations, there are some extra costs involved in running a weed business. Here’s a breakdown of what it will cost to open a dispensary.

State Proof Of Capital Requirements

 

The biggest challenge to starting a dispensary is meeting the startup capital requirements. These figures change state-to-state, so be sure you check the rules in your state. In general, though, plan on getting together some significant cash before applying to open a dispensary.

To give you a sense of what you will be looking at, here are the startup capital requirements in a few of states:

  • In Nevada, you need $250,000 in capital to start a medical marijuana dispensary.
  • Massachusetts wants to see proof that you have at least $500,000 in liquid capital before you apply for a license.
  • You’ll need to prove that you have access to $150,000 in capital if you want to open a dispensary in Pennsylvania (the state’s medical marijuana program won’t go into full effect until 2018).

Obviously, this is not intended to be a complete list of states. But it does give you a more concrete sense of what capital requirements look like. To be safe, you should plan on having access to somewhere around $200,000 before applying to open a dispensary.

Application and Licensing Fees

 

When you’ve got your startup capital all lined up, you can move on to actually applying for a license to own a dispensary. Once again, the fees required for this step vary based on the state in which you want to operate.

There is a surprisingly wide range of licensing fees. On the low end are states like Louisiana, where you have to pay a $5,000 application fee along with a $150 licensing fee. The upper end includes states like New Jersey, where it costs $20,000 to apply for a license to open a dispensary.

As with other requirements, you need to confirm the specific application and licensing fees in your state. But on average, plan to have around $12,000 or so to cover application and licensing fees.

Operational Costs

 

Beyond the upfront costs of startup capital requirements and licensing fees, there’s also the day-to-day operational costs of running a dispensary. To be successful, you need to have a good idea of what this will cost you, and you should have enough funding before you start to cover at least a few months. Here are some of the primary operational costs to keep in mind.

Rent

Before you can open a dispensary, you need to know how much you will pay for rent. The range of possible rents is too wide to really list here since it changes so much according to the specific location in which you want to run your business. In any case, you should have enough money to pay for the first and last month before opening up shop.

Marketing

To start a successful dispensary you need to invest in marketing and advertising. As a bare minimum, plan on $2,000 to get things started. But obviously, the more you invest in good marketing, the more you increase your chances of success. We suggest having closer to $10,000 for marketing and advertising.

Employees

One of the good things about the legal cannabis industry is that it creates new jobs. To pay your small core of employees, it’s best to have between $4,000 and $10,000 set aside. This will cover at least a couple months’ worth of wages. Of course, this too will vary based on where you’re business is located. Be sure you spend time figuring out what the living wage is in your area and use that as your guide for how much to pay your employees.

Security

Cannabis businesses have to invest more in security than other businesses. This is especially true since most dispensaries operate as cash-only enterprises, given the difficulty they have finding banks and credit companies willing to work with them. Along with an electronic monitoring system, plan on using cameras and security guards. All told, you’re looking at another $15,000-$20,000 on security to get things up and running.

Interior

To open a successful dispensary you need to have a store that looks good. You’ll need display cases that will highlight all that killer bud you’re about to start selling. You’ll also need refrigerators and other places to store your product to keep it all fresh and potent. Plan on $10,000 for all this.

Inventory

 

We’ve covered a lot so far, but we haven’t talked about the most important thing yet: cannabis. If you want to open a dispensary, you’re going to need enough funding to cover the inventory you need to get the business started.

Since you’ll be a retailer, you will be buying weed in bulk. Probably by the pound. To give you a sense of what that will cost, the wholesale price of cannabis fell last year so that at the beginning of 2017, cannabis ran around $1,000 per pound. Market prices will constantly fluctuate, but this is a good starting place.

Figure out how big your dispensary will be, and how much bud you want to have in stock. Keep in mind that cannabis is perishable, so you can’t have too much in backstock that it starts going bad. As you consider how much money you need to get your store stocked, use $1,000 per pound as your baseline.

The Final Hit

 

So far, we’ve covered a lot of the main startup costs involved with opening a dispensary. Obviously, there are a whole variety of miscellaneous costs that will also arise throughout the process. And the primary startup costs outlined here will vary widely depending on your specific location.

But to give you a general sense of what it will cost to open a dispensary, we suggest using $300,000 as a starting place. This will cover most startup capital requirements as well as licensing fees. In most cases, it will also leave enough for you to get your day-to-day operations up and running.

More initial funding lets you build a stronger foundation for your business. Just keep in mind that cannabis business owners face unique struggles when it comes to funding, primarily because banks remain hesitant to work with the cannabis industry. But if you can access the funds you need to open a dispensary, you can get in early on a market that is expected to see explosive growth in the next few years.

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How Much Does it Cost to Open a Dispensary?

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