The cannabis industry is a lucrative market for entrepreneurs in the 21st century. In 2020, the industry was worth $61 billion, up from $51 billion two years prior, and it’s projected to reach $80 billion by 2030.
If you’re interested in becoming the next canna-business tycoon, you might consider opening your own dispensary. Here are a few important keys to making your cannabis dispensary a success.
Choose a Location
As of January 2021, medical marijuana was legal in 34 states and recreational cannabis was legal in 12 states; including growing with provisions for anyone interested in growing marijuana for personal use.. Both of these markets provide favorable opportunities for opening up a new dispensary, but each has specific licensing requirements and caters to different types of consumer needs.
Once you’ve chosen a state to operate in, you’ll need to find a location for sales. Underserved communities are generally the best for small-capital dispensaries, especially if there might be an option to expand. Research your target region thoroughly as well as pending and recent laws to get a feel for what’s required and the opportunities you’ll have in the future.
Establish a Niche
In a market that is growing rapidly, it’s crucial to find a niche within the world of cannabis and exploit this niche as much as you can. While you’ll need to provide products that suit a range of buyers and budgets, developing an area of specialization can help you to become the “go-to” vendor for that specialty.
For example, you could develop your own strain of cannabis that’s especially targeted for a certain ailment or that appeals to the recreational market. Alternatively, you might invest in a rosin press like the type developed by PurePressure and make your own pure, solventless extracts in-house.
You could also draw in consumers with features like a tasting room, unique art installations (similar to AREA15 in Las Vegas), or a white-glove customer experience. Just be sure to heed the laws and licensing requirements in your area.
Create a Budget
Opening a dispensary isn’t cheap, but fortunately, it pays high dividends. According to industry experts, launching a cannabis dispensary could cost you between $250,000 and $1 million. After the initial launch, upkeep costs are also high, so you’ll need to begin with a solid strategy. For a new dispensary with a budget of $500,000, here is a sample breakdown of your startup costs:
- $25,000 marketing
- $25,000 digital and computer systems
- $30,000 legal fees and licensing
- $70,000 inventory and packaging
- $100,000 building lease
- $250,000 payroll for staff and growers
… and that’s not counting furnishings, security, commercial deals, and insurance!
The amount that you should expect to make in sales is around $1,300-$1,800 per square foot with a profit margin of 20-50%. Your profit margin will likely start at the lower end of the spectrum and increase as you develop vendor relations and strategic partnerships.
To make your dispensary sustainable in the long term, you’ll need to:
- Focus on high-turnover, high-profit-margin products
- Make your system as efficient as possible with a quality online shopping platform
- Keep close tabs on your sales data to direct your marketing budget to the avenues that lead to the greatest income
Be Prepared to Educate
Now we’ve reached the most exciting part of running a dispensary — providing the best possible products for your customers and winning their loyalty through customer service. As a new dispensary in an underserved area, your priority will be to attract new cannabis users rather than sell your goods to cannasseurs, as they generally already have a provider.
Because the bulk of your customers will be new, you’ll need to focus first on education, second on influencing, and third on actually making a sale. Be prepared to spend around 20 minutes with a new customer explaining everything from the basics to product suggestions. To lighten your budtenders’ load, digital and print materials can be provided for new customers to browse.
Maintain the Most Profitable Selection
Experienced dispensary owners recommend having a maximum of 250-400 different products in your inventory at any one time, covering a wide range of customer preferences and budgets. As much as possible, you’ll want to choose products that are fast-moving and have high-profit margins so you can ensure a sustainable turnover of inventory.
By keeping track of sales data over time, you’ll be able to identify products that are moving slowly and put these onto a “hit list” for replacement. You will find that new cannabis brands will be pitching products to you constantly, so replacements won’t be difficult to find. The key to choosing replacement products is to involve some of your loyal customers in assessing and selecting the best candidates for replacement.
Reap the Rewards
Once you begin with a solid plan, a realistic budget, and the right attitude toward serving your customers, your dispensary should enjoy resounding success and change countless lives along the way.
As you work with your team, your customers, and your industry partners, remember what you’re all in cannabis for: a clean, natural, holistic product that can transform the health of communities for the better.
Image Source: BigStockPhoto.com (Licensed)
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