3 Big Things You Need to Know Before Charging Into the Legal Marijuana Business
If you’re looking to join the Green Rush, you’re likely interested in getting involved in a profitable and booming new industry. Every time a new industry opens up, it’s an exciting time for anyone with entrepreneurial dreams and little aversion to risk - but with cannabis, things are a bit more complicated than with most other industries. Between legal, social and financial issues, it’s important to understand that opening a dispensary can be an extremely sobering experience.
Opening a dispensary is a hyper-risky venture, and carries with it the need to fully understand paperwork, state and federal laws, and how to market a controversial product without stirring up controversy. If you’re up for the challenge, opening up your dispensary can be a fulfilling and highly lucrative.
Here are the top three things you should know if you’re considering starting a dispensary - or any cannabis business:
1. The laws are complicated.
The first thing to get a handle on is not only your state’s marijuana laws, but the risks that come with federal legislation. Your state laws will vary depending on your location, and it’s important to understand the particulars - including the gray areas that even the government isn’t sure about yet.
For example, Massachusetts, which has legalized recreational marijuana but not the sale of the plant, shut down a business that tried to get around the law by charging a door fee and then giving out marijuana for “free.” Why? The state isn’t even clear on it yet. If you live in this state, it’s in your best interest to wait to open your dispensary until it’s legal in July of 2018.
The federal aspect of running a legal dispensary is more difficult: the drug is still illegal. Because of this, you can't simply open a bank account for normal deposits, much less getting a loan. However, you’ll still need to pay taxes - which opens up a whole new bag of herb.
2. You get no breaks on your taxes.
Because marijuana is still illegal at the federal level, cannabis has a weird tax status. Marijuana businesses are required to file federal income tax returns but can't take routine tax deductions including the cost of rent, advertising and payroll. You will, somewhat hilariously, be able to deduct the cost of growing your product, but that’s one of the few allowances you are made.
If you’re getting ready to start a cannabis business, it’s a good idea to start with a significant financial cushion so that you aren’t put into the red by taxes. This is especially true if you’re investing quite a bit into your business, such as buying real estate, new equipment or advertising aggressively. Which leads to my next point…
3. You need to be really careful with marketing.
While, as with any new business, you may be tempted market your new company as much as possible, there are just as many laws as to how you can do it as there are concerning any other aspect of your business. However, while they can seem complicated, look to your sister industry - liquor - for ideas and guidance, as many of the laws are similar or identical.
The best way to get started is to prioritize making it easier for consumers to find you on their own, both by building a great website (hint: you can build a pretty decent website on your own) with SEO content, and then promoting it through social media and email lists. The key to staying legal is making sure that everyone you market to directly is of legal age. Because social media and email lists are both opt-in marketing features, they’re your best options, especially while laws (both state and federal) are in flux.
While the cannabis industry is quite new and risky, it’s also full of potential. If you run your new business carefully and are motivated enough to sort through the paperwork, opening your dispensary as soon as possible will mean that you’ll have a loyal customer base when your future competitors are still figuring out their equipment