Medical cannabis is now legal in 40 of 50 states as well as the District of Columbia and 24 states have legalized it for recreational use. The vast majority of the U.S. population, therefore, has access to cannabis legally despite it still being prohibited at the federal level.

With the so-called “green rush” well underway, the opportunities to start cannabis dispensaries have increased many times over in recent years. However, meeting the strict eligibility criteria, obtaining a license, and maintaining regulatory compliance is a constant challenge for investors, entrepreneurs, and others looking to enter the burgeoning cannabis industry.

Local cannabis laws do vary from state to state—and it’s always best to check with a knowledgeable cannabis lawyer before plowing money into your business plan. Following is a step-by-step guide on how to start a cannabis dispensary in the U.S.…

How to Start a Cannabis Dispensary

Step-by-step guide to starting a cannabis dispensary

If you’re looking to set up a cannabis dispensary anywhere in the U.S., there are some basic steps that all entrepreneurs should follow:

  • Spend time crafting a business plan

Successful cannabis businesses start with a solid plan. This sends shivers down many a potential business owner’s spine but there’s nothing to fear. Your business plan should be your guiding light as your ideas come to life and it can be used to attract the right people and the right investment to your project.

Your business plan will also help you decide if your cannabis business idea is viable and, if so, how you will accomplish your goals.

Once you’ve defined your business’s goals, target market, and mission, detail how you intend to get there, answering the following key questions:

  • How will you structure your company?
  • Where will your dispensary be located?
  • What are the main products you’ll be selling?
  • How will you secure a dispensary license?
  • How will you obtain the products (cultivation/suppliers)?
  • Who will buy your products?
  • How will you operate?
  • How will the dispensary be financed?
  • How will you meet the strict environmental, safety, inventory control, security, and social equity requirements? 
  • Who will do what in your dispensary and how will you hire these people?
  • What are the main financial goals for the first year, second year, third year, etc.?
  • How will you market the business?
  • What contingency plans do you have?
  • Address the financials 

You need to “talk turkey” early on in the discussions about setting up a cannabis dispensary. The startup costs are significant and those funding the business will need assurances that they are making a sound investment.

To obtain a license, you’ll need to provide proof of capitalization and enough liquid cash available to run a viable business. A good guideline figure is at least $250,000, bearing in mind that most banks refuse to provide traditional loans to dispensaries.

  • Obtain your cannabis business license and permits

The licensing body you will need to apply to varies from state to state. Find out who issues the cannabis business licenses, research the laws and requirements, prepare the necessary paperwork, and then submit an application for a cannabis retail/dispensary license.

You will need to meet many eligibility criteria and comply with tight regulations surrounding the sale of cannabis in almost every state. Be wary of city and municipal laws as well as state and federal laws. Also, make sure that you have planned for the right tracking software to maintain inventory and report back to the authorities what they need to know—every sale must be recorded.

You’ll likely need an appropriate dispensary license, permits, and insurance before you can open for business. To avoid disappointment, check with a suitably qualified cannabis license lawyer before submitting your application.

  • Source the right location and building for the dispensary

Cannabis dispensaries are no different from other retail businesses in that the location is very important to their success. You might need to address this step before you apply for your license.

Many additional regulations for cannabis dispensaries make finding the right place more challenging than with standard retail businesses. You’ll need to factor in exclusion zones around schools, religious buildings, and community centers and dispensaries cannot usually be located in strip malls or shopping complexes. 

You might decide to buy or lease a standalone building. Leasing may be subject to restrictions on the usage of the property, which is another challenge for cannabis business owners to be aware of.

  • Establish the right type of business entity

Next, you need to register your business name with your local government. Consider trademarking the name with the U.S. Trademark and Patent Office and protect any necessary copyright, such as logos and slogans.

Choose one of the following types of cannabis business entities:

  1. Sole Proprietorship: if a single person owns and operates the business.
  2. Partnership: a business with multiple partners and taxes paid from personal income returns.
  3. LLC: this protects partners from certain financial liabilities.
  4. Corporation: where taxes are paid through the corporation.

You may need to arrange loans and a business bank account. Traditional avenues with banks are usually closed to dispensary owners because cannabis is illegal federally.

Your business must register with the IRS to get an employer identification number so that employees can file taxes correctly. Your dispensary will also need to tax sales through your point-of-sales system.

  • Get the right team of professionals in place

All great businesses rely on having great people. Your cannabis dispensary team must be carefully assembled to provide the right blend of cannabis knowledge, business/financial nous, sales and marketing insight, and retail experience.

In-depth cannabis knowledge alone does not make a great dispensary business. Unless you know the right people from your circle of professionals, you’ll need to take time to carefully hire them. This can be challenging as the industry is competitive and talented people are in short supply. 

Use multiple hiring channels and prepare the interview questions carefully to cover the type of expertise you need.

  • Market your cannabis shop and open for business

How you market your cannabis dispensary will depend on who you’re targeting but you’ll likely want to market online mainly, with a website and listings in the main online directories (Yelp, Facebook, Google My Business, etc.) 

Gathering reviews is important and for most businesses, a strong local online presence is a priority. Shoppers should be able to pre-order items online. However, bear in mind that buying cannabis online using credit cards is not permitted under federal law, rendering ecommerce sites useless for dispensary owners at this stage.

Starting a new cannabis dispensary comes with associated risks as well as considerable benefits. The potential rewards are high (pun intended) but the costs of taking “wrong turns” are also high. Startup costs are significant and it will pay to get the right legal and business guidance from the start to avoid burdensome fines for non-compliance.

For informed advice about setting up a cannabis dispensary anywhere in the U.S., call 866-329-0729 for a consultation at Cannabis Law Solutions.

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