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What Entrepreneurs Need to Know About the Legal Marijuana Industry?

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Marijuana Industry
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A typical marijuana outlet generates about $974 in annual revenue per square foot.

Despite being a topic of debate for years in the United States, marijuana is going through a new kind of observation. Here are some stats you need to consider:

• Over 60% of Americans are in support of the full legalization of marijuana
• A larger percentage of the states allow marijuana consumption in one form or the other
• 12 states are looking to introduce new legislation to push more for legalization

It is evident here that marijuana is on its way to becoming a huge industry. Demand is guaranteed given that 52% of adults have smoked it at least once in their lives. This has been the primary driving force indicating to investors how profitable this business opportunity can be.

The question remains whether or not this marijuana industry is scalable and sustainable. Or is it just a short-term opportunity with limited profit margins. These are some of the things you need to be aware of if you’re looking to do business in this industry:

Supply Chain

It is very important to know the processed marijuana undergoes from seed to sale. So many businesses can position themselves at different stages in this process. In California, businesses are required to use a trace and track database. This system allows stakeholders to see exactly what path a cannabis product takes from planting to sale in a bid to guarantee safe consumption for customers.

Growers nowadays now employ the use of a “micro grow’ approach thus setting up a system where there can be constant harvesting of new products. It takes about four months for a budding plant to mature fully to smoking size, but with this approach, growers can now harvest constantly in periods of 10 days.

At that point, nurseries can keep track of the ‘mother’ plants that have been genetically cloned for the best quality and replant them in smaller rooms optimized for growth. These rooms are designed to be at the right temperature, lighting, and humidity.

Once the plants are fully grown, they are dried and then trimmed manually. Different parts of the plant are separated and packaged for different purposes before being sent off to the stores and companies that require them.

The process is very time consuming due to all the stages that have to be gone through entirely by hand, and this translates into more cost. With all of the challenges surrounding planting more and hiring more hands to help with harvesting, it becomes very difficult to scale up in a manner that will increase the profit margins.

Profits

How much money can be made from the marijuana industry? According to Marijuana Business Daily’s Factbook, the typical marijuana dispensary or store can generate about $974 in yearly revenue per square foot. This figure is level with stores like Whole Foods. It stands to make more money than a department store but far less than a luxury item store like Apple store for instance.

According to the same report, almost 50% of dispensaries and shops rate themselves to be modestly profitable while almost 20% claim to be very profitable. 29% are not making profit nor loss and 11% are outright losing money. The figures are way better for wholesale cultivators with 29% saying they are highly profitable and another 31% saying they are doing okay.

Expectations are high for the future with reports estimating that by 2020, more than $23 billion in sales will be recorded in the marijuana industry.

Shortages

This thought probably flies over the head of many people but there can be shortages shortly, and this will further complicate the industry. California is already forecasting shortages in the next few years after having looked at their dwindling supply chains

When this happens, demand will shoot up, and profits will increase in the short term, but in the long run, if left unchecked, it might become impossible to bring in a new operation.

In conclusion…

How much money you end up making from the marijuana industry depends on what you set out to do and how you do it. This is not going to be a get rich quick scheme like most people to assume. Just as you would any other business, so much dedication and commitment need to be present if you want to make profits.

Wholesale might be more lucrative and easier to run, but there is no aspect of the industry that is going through unprecedented growth so you must fully understand all of the complexities of the business before venturing in.

Advisor to Entrepreneurs | Speaker | Author | Podcaster

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