How Much Does It Cost To Start A Dispensary?

Brandon Quan | Founder

Published: April 14, 2023

Ever wondered how much you need to invest to start and keep a dispensary running? I breakdown the costs associated with this so you can plan your opening accordingly!

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Transcript

What’s going on everyone? Brandon back at it again with another video. In this video, I am going to break down how much it costs to open up a dispensary in your area. So without further ado, I’m gonna move myself out the way and let’s get started. So first things first, you need to figure out if cannabis is currently legal in your state in the first place, because if it is not legal, then you can’t open a dispensary either way.

So looking at this chart from NJ Biz Daley,you can get the link right here. They provide an updated,map of the states that have both recreational and medical, medical only and are not legal at all. So we can see in the West Coast, most places have both recreational and medical.and then we can see here as we go east,actually the most east place,you can see they’re also rerecreational medical with medical slowly to the west of them as well.

So we have Colorado, Washington, Alaska, Oregon, Washington dc, California, Maine, Massachusetts, Nevada, Michigan, Vermont, Guam, Illinois, Arizona, Montana, New Jersey, New York, Virginia, New Mexico, Connecticut, Rhode Island, Maryland, and Missouri. All doing recreational and medical as well.

So with knowing all of this, the reason why I wanted to start with this is because a lot of your expenses are gonna be based on location because you have different com competition, you have different tax laws, and I’ve made this really awesome chart. I spent a lot of time going through it.and I hope you’re gonna like it a little bit later on in this video.

Now to touch on the general cost breakdown. So these are the main costs for your dispensary. This isn’t an all encompassing thing on the smallest things that you need to pay for, but in general, these are gonna be the largest startup costs that you have. And this is provided by cova. So the first one is licensing and application cost about $5,000.

Then you have real estate, which is about a hundred thousand dollars annual in rent and $50,000 in renovation. Then you have professional services, which are about $50,000 annually, staffing $250,000 annually. Then you have business equipment at $25,000. Security and surveillance system at $50,000, marketing and advertising at $25,000 product at about $1,500 per pound, and then your overall capital requirements at about $150,000.

Now, to touch on the meanings of all of these things are relatively self-explanatory, but I will touch on them right now. So,first things first are the licensing and application fee. So this is a cost of obtaining a dispensary license, right? And it can vary widely based on state and on local laws. And in some areas fees can range from a few hundred dollars to over $10,000.

And in most, if not all cases, these are non-refundable. So yes, you have to pay the,powers that may be ,thousands of dollars to be able to have the right to just apply. And then sometimes when you apply and then you get,approval, you then have to pay another sum of money. And then you have to pay an annual license every single year to make sure your dispensary can stay up and running.

And the second part is then real estate. You then need to find a suitable location for your, your dispensary.and then again, the prices, just like with any regular real estate, it’s gonna vary based on competition. You’re gonna need to factor in rent, security deposits, and then any necessary renovations as well.

what you would then need to do is look into something called green zone real estate, right?because you are a cannabis based business, you need to make sure that your specific real estate per,property that you buy has the proper compliance and the proper licenses to be able to sell cannabis.

more expenses to touch on are to elaborate on you have your inventory and equipment, so you need to purchase stock including, you know, flour, edibles, concentrates, and other cannabis products. And then you’ll also need to purchase equipment like display cases, scales, packaging materials for the overall ambiance of the store, right? Maybe you need to gut the entire place and put in fancy hardwood and stuff like that.

But overall, these are the things that you’re gonna need to get for the store itself. Then you’ll have the staffing costs. So then you’ll have the bud tenders, managers and drivers. And the drivers are if you decide to do delivery, right? The next thing we’d be marketing and advertising. So to attract customers, you need to invest in marketing and advertising efforts because it doesn’t matter if you have the best store ever.

If nobody knows you exist, then nobody’s gonna come in and purchase from you, right? So you need to create your website, you need to do seo, you need to run your email and SMS campaigns. And then maybe you want to have loyalty programs. Maybe you want to do,direct mail campaigns, maybe you want to do programmatic ads.

There’s so many things in the marketing space that you need to do, but this is another cost that you’re gonna need to take into consideration. Then we have taxes, .so I created this,thistable where I analyze the taxes, and I’m gonna show you on the state by state level, so I won’t go into this in too much detail, but you have your local taxes, you have your federal taxes.

So you need to ensure that you take into consideration how much tax you need to pay,based on what state you’re located in. Then you have your professional services breakdown, . So you have your security, right? So dispensaries required to have strict security measures in place. So we touched on like the surveillance stuff, but then sometimes you’ll need a security team cuz you never know what might happen.

Then you’ll need insurance. You need to get insurance to make sure that, again, you have the security team, but then you’ll need insurance in case you know, some theft ends up happening. Then you have compliance in legal fees. So you know, the accounting,the lawyer, you gotta pay everyone to ensure that you have the proper licensing to ensure that your store can stay up on a legal, from a legal standpoint.

And then down here,accounting and bookkeeping. So keeping accurate records. So,a lot of the businesses are cash .butyou need to ensure that you have proper bookkeeping so that the tax man doesn’t end up coming after you. Now,to talk about tax and to kind of go into that, what I did was, and I couldn’t find this anywhere on the internet, so I manually went and figured out, okay, what are the different taxes based on state? And then what are the retail and applications license fees all in one awesome table for you guys both to seat.

Now I’m not just, just gonna bore you and just read off this and just copy this, but I’m going to touch on the different states and the different types of tax that they do,because it’s not the same for every single state. So you’re gonna have to calculate accordingly. So,to, let’s start on the retail and application and retail application and license fee.

So this one’s relatively straightforward, like I said, you have your application fee and then you typically have your retail store license. So you go, you submit for the application fee and then you go, and then you have to pay some sort of store license every single year after that in order to keep your store up.

But some,states have it the other way where the application is the most expensive and the license fee is a little bit cheaper. So for example, we can see the application fee for Alaska’s a thousand dollars and the annual retail store’s license is $5,000. But on the flip side, in Arizona it’s $25,000 for an application fee and they’re $5,000 for a license fee.

And then in California you have a thousand dollars application fee, but the license fee is based on gross revenue as well.so if you’d like this guide,shoot me a message,send a comment,down in the d in the comments below if you’re looking from YouTube. But,what I can do is I’ll send you over this table, so then you’ll have this for yourself.

And then here I have the links to all the government listings. So these may change, you know, I’m doing this in April of 2023, butthese numbers may change at any given point in time, but in thisgraph I have the,the links to the actual government,the links to the actual government website.

So then you can go ahead and check if to see if this fee is accurate and up to date. But for now, this is the most UpToDate list that I’ve created so far.scrolling down,we have Theit, initial licensures fee. So you have the application fee, which is $3,000 you get accepted for, and then you have to pay $15,000 once you have been accepted.

And then you have to pay a $15,000 renewal fee, right?and this is in Michigan. So you can see here it really varies.Rhode Island has a $30,000 annual fee.so it really depends on what state you’re in and how expensive initially the startup cost might be. So you might be spending tens of thousands of dollars or only a few thousand dollars in order to just get started.

Then on the tax side you have tax side and what I’ve seen is typically based on a tiered model based on percentages or you just have a flat excise tax and then you have your state tax, right? So in Alaska you have weight based excise tax, excise tax. So you have $50 per ounce for flour slash mature buds, 25 per ounce for immature or abnormal buds, and then $15 per ounce for trim.

And then clones are a flat rate of $1 per clone. And then whereas in Arizona it’s just a 16% flat excise rate at tax at retail. And then you have your statesales tax as well.California, again, 15% excise tax on 7.25 state sales tax. And again, you also might have a local tax based on the local area that you’re in, depending, and that may also affect how much you’re going to pay.

In Connecticut, we can see we have a potency based tax. So we have $0.01 per milligram of THC in flour. And then we have a certain amount per THC in edibles and then a certain amount per THC in other cannabis products, right? For Illinois, we have a 10% of purchase price cannabis with THC below at a level of 35%.

and then you can see it’s tiered. So 25% of purchase price for all cannabis infused products. And then 25% of purchase price for cannabis with THC level 35% and above, right? So if you wanna pause the video quickly and I didn’t touch on your state,you can go check it out here. Now I’m gonna go to this one.

so the second spot we can see at main has a per pound tax.let’s see, New Jersey has a social equity excise fee,and then New York has a potency based tax as well. So we can see we have your flat rate excise tax, you have your per pound like per weight excise task, and then for some states you have per potency.

So those are the three main ones that I’m seeing right here. And like I said, feel free to pause a video at any given point in time. So I’m just not, you know, just shooting numbers and percentages at you.for all these different states, right?down here, Oregon, Rhode Island, Vermont, Virginia and Washington,these are all different,types of excise tax, but it looks like they’re all relatively flat.

So I was able to get these tax values from this website right here,ncsl.org. And then here I compile this myself, but I have links to all of the government websites that have all these numbers here. So if you’d like that, shoot me a message in the comments below.and I’ll go and I’ll be able to go ahead and send you that message.

send you this document too. Now, overall, how much will it cost me and is it worth it? So we saw in the above analysis that dispensary costs have tons of variables, right? So it’s gonna be impossible for me to just be like, yes, for you specifically it’s gonna cost this amount of money. But the, if you want a general range of startup costs based on everything that I’m seeing, it’ll cost around $750,000 to $2 million.

And this is based on like, again, location,the cost. So the location, the competition,the size of the operation you wanna start. If you want to have a massive, you know, 10,000 square foot facility, obviously that’s gonna cost a little bit more. Do you wanna operate in different states? So all of this is gonna vary, but between 750,000 to 2 million, because a lot of things that I’m sitting here as well is thatin order to apply you need to have a certain number,a certain net worth as well, right? So that can range from $200,000 to $500,000 of just like cash in the bank or not cash in the bank, but overall net worth, right? So that you can prove that you can apply for these licenses to, to be able to start a dispensary.

But what I would say is that one of the biggest,cost saving measures that will take you time initially would be to get multiple quotes and then try to negotiate everything on that quote. But it’s not about like, okay, how do I pit one person against the other? When you get quotes from multiple people, you then get an idea of how that person is going to benefit your dispensary, right? Because everyone thinks in different ways.

Everyone has their own specific way to get a specific goal achieved, right? So let’s say you speak with the security firm and they give you a quote, but you need an idea of like what exactly are they going to do, right? How many people are they gonna staff? How many people do they recommend they staff? You know, are they gonna haveguns or knives or something like that to stop people? Like what are the expectations of the security firm that you’re hiring in order tokeep your dispensary safe, right? And then you get a better idea and then you can paint a picture and then you can grow and paint this picture and be like, okay, now I have a better idea.

I have the frameworks on how I can build my business. And then not only do you get a better idea of how the overall business is gonna run, not just from a marketing standpoint, not just from a tax standpoint, not just from an accounting standpoint, you get a better idea of the overall vision of the dispensary once you put these little pieces together, right? And the benefit of that is that one, you get a clear picture of what this business is gonna look like, but then two, you can also negotiate and be like, okay, now that I know that these people are doing this and these people are doing this, you can then negotiate to save you more money over time.

Cuz a lot of these expenses are going to be annual expenses or monthly expenses, right? There are very few things now,from a business standpoint where you pay it once and then it’s completely done, right? Staffing, you’re gonna have to continue hiring staff, you’re gonna have to continue doing marketing, you have to continue paying tax, you’re gonna have to continue, you know, doing the real estate, paying these licensing and stuff like that.

So all of these things are gonna play a part in, you know, if you can save a couple thousand dollars on any of these given things, it’s gonna save you hundreds of thousands of dollars in the long run, right? Now last but not least, is it worth it? So if it’s being worth it, this is quite a subjective measure, right? If you’re looking to get into this business to just make money, if you’re looking to get into it, cuz you like cannabis already, if you’re looking into it, cuz you truly believe in cannabis and stuff like that, it really is gonna depend on you, right? But here, the US cannabis retail sales estimates in 2026 is gonna be about 52.6 billion.

And this is just on the cannabis side of things.we’re seeing,a lot of growth in this at Los Ibin space, like in the mushroom space, which may ultimately increase and, and boost sales for dispense piece as well if, if they’re able to to provide this,as a product, right? But I think overall, just like with any business, it’s about how do you do the foundational things at a world class level, right? And what I’m seeing is that the businesses that fail or the dispensaries that fail are looking to just go, you know, ride this wave of cannabis and think that, okay, as soon as I put up a dispensary, I’m gonna make a bunch of money, right? And, and that’s not the case because right now more and more people are opening up dispensaries.

More and more people have access to videos like mine to educate them on how to build better dispensaries. And what ends up happening is that in any kind of growth space,when you’re building a business, then people are seeing a lot of opportunity. You’re gonna see a lot of people entering the space and then you’re gonna see a decrease.

Because what’s gonna happen is that the people that are not very good at running a business, they’re gonna go out of business, right? And then the good owners, the good operators are then going to continue to ride the wave because their business is excellent at the beginning of the space, it used to be able to, and I I saw it myself, you used to be able to start a dispensary and just not do anything else.

You didn’t have to do any advertising. Once you’re put up, everyone is like,this is amazing, this is really new. But then another dispensary came up, so cut your market share in half, then another dispensary came up, a cut your market share in a third, another dispensary came up, cut your market share into 25%, right? So you go from 100% of market share to 25% with only four dispensaries opening up in your area.

But now we have 20 dispensaries opening up in a city, 30 dispensaries opening up in a city, right? So if you’re not willing to look at running this business in the long run and operate it on a very, very high level, like the things that I’m showing you in this video and the other videos that I’ve done, then like there’s no point cuz you’re just gonna go, you’re gonna spend a million dollars, you’re gonna go out of business in a couple years anyways and then you’re gonna be worse off than when you start it.

But if you’re really going in to see how do I provide as much value as I possibly can to my customers, that’s where you need to start.and I encourage you to look at this as a long-term business, not just how can I cash out and make some money very, very quickly. So I hope this,whole video opened up your eyes into how much it costs to open up a dispensary.

but as usual, if you want to double your dispensary sales,and maybe you have a dispensary up right now or maybe you don’t, but if you don’t, what I’d recommend is you download or marketing checklist and guide cuz this would give you a very, very good starting point on, okay, how do I market my dispensary? You paid the money, you paid the licensing, you paid the tax, you got the approval, you got everything going on.

Now how do you get people and how do you generate sales? Right? This is a very good start. But if you’re a little bit later on in your journey and you want to get started immediately, what I’d recommend is you schedule a free one-on-one for faster results and I can give you more custom marketing strategy based on exactly where you are, your location based on your competition, based on what your website looks like already.

And then we can hit the ground running as fast as possible. But that’s it for me today and I’ll talk to you guys later. Thanks. Bye.

Article By

Brandon Quan

About The Author: A digital marketer with over 7 years of experience, Brandon Quan is wildly known as the top marketing expert within the Cannabis Industry.

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