by Lily Ray
The cannabis industry in the USA is growing rapidly. As per IBIS World, the medical and recreational marijuana industry is worth $19 billion. Approximately 25,000 businesses employ over 56,000 individuals throughout the country.
But, of course, dispensaries are limited by individual state laws, with only certain states making the substance legal on a recreational level and in a medical capacity. Despite the restrictive nature of many states, it’s no wonder future business owners want to get in on their slice of the pie – the $19 billion industry.
There are many more factors to consider if you’re looking for the best place to start a weed business in the flourishing cannabis industry. This process requires patience, strategic planning, and proper attention to detail, as per US state law.
As per Cannabis Business Times, the global cannabis sales forecast is $57 billion by 2026; specifically, the growth is expected to be about $42 billion in the USA. But starting a cannabis business is not easy, so you might need some help setting things up, specifically if you are new to this.
Launching a profitable dispensary business is a great idea, but we know you have many questions in your mind like:
- How much does it cost to start a dispensary?
- Which states are the best to open a dispensary?
- What are the market conditions like in that state?
- What licenses are needed to start a dispensary 2023?
- What elements to keep in mind while establishing the dispensary?
- How easy is it to start in the cannabis industry?
- How to get a grant to open a dispensary? and many more crucial questions.
Each US state advances its dispensary business requirements differently; it can be tough to draw direct comparisons between them when starting your hemp business or to expand it to a new state. Also, you must focus on developing an effective website with result-driven cannabis SEO strategies to boost your site traffic & for best outcome. In that case, you need professional website development & CBD SEO services. Check out our affordable plans, to get your business ranking on SERP.
Looking for the right location to start a dispensary? This comprehensive guide on how to open a dispensary will help you know best places to start a cannabis business, costs to start a dispensary, key elements & more information that will help you start a profitable business fast.
Best States to Open a Dispensary
The cannabis industry has grown rapidly in California, one of the most prosperous legal US states. When thinking about opening a cannabis dispensary, this state ought to be your top choice. CannabizTeam reports that since recreational marijuana use became legal in 2016, California has led all other states in cannabis revenue, bringing in $4.4 billion in 2020 alone, an increase of 57% from 2019.
Moreover, the market opportunity is excellent as California has the largest population in the US. The average price per gram in California is almost $12, but it is subject to an excise tax of 15% an ounce. The application fee is also quite affordable, being the nation’s average.
While starting a business in California can be expensive, it is a highly populated area with the right demographic to sell cannabis. Real estate can be expensive in this state, whether buying or renting, and the cost of living is high, which will also increase the cost of payroll, according to CannabizTeam.
Due to tough competition, it is vital to have a perfect business model & an innovative product to make a splash in California. Undoubtedly, creating the right business strategy in advance with the top digital marketing approaches is almost guaranteed success in this state.
In Colorado, recreational marijuana use was made legal in 2012. As of June 2020, there were 2,709 licensed marijuana businesses registered there. Taxes, licenses, and other fees contributed $387 million in overall revenue in 2020, compared to $67 million in 2014. Like California, this state has the ideal population to sell cannabis products.
The market conditions are excellent, and many resources are available to help you get started. Additionally, the tax climate is favorable, and the demand for cannabis products is relatively high. As per CannabizTeam, the application fees are comparatively affordable and getting the necessary licenses are not complicated, making Colorado an attractive place to start a cannabis business.
Moreover, It is essential to consider that Colorado’s price per gram is low, suggesting that the state may suffer from over-saturation and intense competition. To make it enormous, you need to be more creative & come out with innovative cannabis product ideas to differentiate yourself from the competition.
Michigan has the potential for profit because of its low tax rates, which makes it a good location for your marijuana dispensary. Michigan charges a 10% retail excise tax and a 6% state sales tax compared to many other states. The legal environment is favorable, and there are plenty of opportunities for market entry.
With nearly 30 million people, North America is the world’s largest consumer market, making it a lucrative opportunity for enterprising businesses. And Michigan is second on our list in terms of population number. Cannabis was legalized in Michigan in 2018, and the industry has been booming since then. There are currently over 200 dispensaries functioning in the state, which is expected to grow.
However, given that Michigan currently has about 500 retail dispensaries, you should be cautious due to market saturation. Although there is still a high demand for the product, prices are declining due to the nearly daily opening of new dispensaries. The low tax rate on cannabis makes it easy to compete with other states with higher taxes.
The first US state to decriminalize possession of small amounts of cannabis was Oregon in 1973. Oregon is one of the easiest states to open a dispensary. The legal environment is favorable, and there are plenty of opportunities for market entry. Additionally, the tax climate is good, and there is a strong demand for cannabis products.
Moving ahead to the present, Oregon is still a viable choice and one of the cheapest states to open a dispensary. Licensing fees for a dispensary are also reasonable here. It is much lower than any other state’s dispensary license application fees. While the cost of cannabis in Oregon is among the lowest in the country, it is not subject to an excise tax either.
According to Oregon law, dispensaries must be at least 1,000 feet away from the closest daycare or school when locating their business. You should also factor in the costs of stocking your store, setting up a security and surveillance system, paying employees, and other operational costs.
Applications for every hemp business type are open, so it is currently possible to apply for a cannabis business license at a low cost. Considering all the key points to start a business, it is possible to state that this is the cheapest state to open a dispensary. In other words, a favorable business environment helped Oregon appear in first place on our list.
In November 2012, voters in Washington State approved Initiative 502, making it one of the first two states to legalize cannabis for adult use. But unlike most states that have legalized marijuana, Washington still considers it illegal for adults to covertly grow a few plants at home.
Washington is also known as America’s biggest cannabis state. This is one of the main reasons why so many to-be cannabis businessmen consider this state. All cannabis products are in high demand, from oils & creams to edibles, concentrates, and flowers.
The Washington state cannabis market generated $1.8 billion in revenue in 2020, up 21% from 2019. The market continues to grow despite the number of already existing companies. But it is necessary to keep track of the latest news if you choose this state. At the same time, Washington has the highest excise tax rate nationwide. It doesn’t prevent numerous applicants from waiting to open a business here.
The best thing about Nevada is Las Vegas, and cannabis is quite popular around that area. The state legalized the recreational use of marijuana in 2016, and both sales and excise taxes are still relatively low, so it is a great area to start your business without worrying about fierce competition.
This state is often associated with gambling and tourism. However, it also has a lot to offer those interested in the cannabis industry. The legal environment is quite favorable, with a low tax rate. The application fee is also quite affordable. The market opportunity is quite good as the state has a population of over three million people. Considering a favorable tax policy, it is undoubtedly an excellent place for development.
But according to this state law, businesses can only sell cannabis products that do not exceed specific amounts, so review all the rules before you begin your venture. As the market is already quite saturated, finding a niche here might be challenging. Still, if you are determined enough, Nevada can become a great state for your cannabis business.
The state’s most prominent attraction for new dispensary business owners is its easy application process, with many applications approved in less than 90 days. Massachusetts is a very appealing state to start a new cannabis business in, despite having been in the recreational cannabis industry longer than some other states. This is due to its reasonable tax percentage and business-friendly attitude towards licensing.
As per data from the Cannabis Control Commission, this state has a lot to offer to those interested in the cannabis industry. In 2016, Massachusetts legalized marijuana for recreational use, and its first recreational dispensaries opened their doors in 2018. Retailers reported $2.87 billion in sales between November 5, 2018, and April 10, 2022, which is three and a half years after the first marijuana shop opened.
Being a business person in Massachusetts is quite expensive. The license fee will cost you $10,000. It is understandably a significant sum. However, compared to some other states like Illinois and Hawaii, with $200,000 and $100,000, respectively, Massachusetts becomes a much more affordable option. At the same time, it is considered one of the easiest states to open a dispensary in terms of legal regulations.
Arizona, which only recently legalized recreational cannabis use in November 2020, immediately shifted how it distributed recreational licenses and is now positioned to develop into a lucrative cannabis market as more cannabis businesses start up. The cannabis market here is anticipated to grow in popularity and profitability in the years ahead as more cannabis firms begin operations.
But it is a bit difficult to get applications approved since this state just recently started accepting dispensary applications, but only from those who applied back in December of 2021.
CBD sales in Arizona grew by 50 percent in the last couple of years. The cannabis industry is massive here, with plenty of great business opportunities. It is necessary to mention that the market welcomes new businesses. The reason for it is the state’s large population, with only a few businesses currently operating there. In other words, the demand exceeds the supply.
9- New York
While New York can certainly be a high-priced area to invest in a business, it is one of the most recent states on the scene regarding the recreational cannabis market. They have passed one of the country’s most progressive frameworks for legalization.
New York state has individual regulations concerning the dispensary license cost that should be considered at the budgeting stage. Also, It has implemented one of the most advanced approaches to legalization nationwide
New York is a densely populated state chalked full of cannabis consumers & has a population of over 19 million people, making it one of the largest potential markets in the country. That’s why it’ll be quite easy to build a successful cannabis business. Many experts predict the state may be one of the hottest cannabis markets in the United States.
10- New Jersey
New Jersey may earn approximately $1 billion in annual cannabis sales by 2024, according to experts. With demand expected to outpace supply, the state is an excellent location to start a cannabis company in cultivation or extraction.
The application fee for a retail license here is $400, and an additional payment of $1,600 is required if the application is approved. However, the market opportunity is perfect as the state has a population of over nine million people. The legal environment for the marijuana business is also quite favorable, with a low tax rate.
Small companies can access the necessary services, particularly those with five or fewer employees. Considering all the factors, New Jersey is definitely a state worth considering for you if you are interested in the cannabis business industry. It is a perfect opportunity for everyone to compete in the market.
How much does it cost to open a dispensary?
It might be a good idea to estimate how much money you will need for startup costs before applying for a loan to open your dispensary. Of course, you won’t be able to anticipate every possible expense, but it is imperative that you factor in the major costs so that nothing comes as a surprise.
According to sources, cannabis businesses need to budget more money than other businesses for specific services because there aren’t enough qualified workers to meet the demands of businesses. For example, you should consider contracting tax consultant services who could help you navigate the complicated tax environment for your cannabis business, which can be costly.
$ per ounce
Let’s look at some of the significant costs you can expect when opening a dispensary:
1- CBD store licensing fees
You should first know that you’ve to pay both application & licensing fees when your application gets approved. State-by-state variations exist in this price, and some states offer partial refunds for unsuccessful applications.
On the low end of the spectrum, business owners might shell out $250 for a license, as in Oregon. On the other hand, licensing fees in states like Maryland can reach $125,000.
Fees for licenses frequently come in waves. To keep their licenses current, some states demand that business owners pay an application fee, an initial licensing fee, and a renewal fee. The size of the business can sometimes affect the licensing costs within a state.
Furthermore, many states have a cap on the total number of dispensary licenses they can issue at once. Finally, if you want to grow your own cannabis, you will need to buy a separate license. A fully functional business may cost upwards of $2 million, but purchasing a dispensary for sale is possible.
2- Real estate costs of opening a cannabis dispensary
Finding a rental area with good market visibility can prove challenging. Some US states require that you’ve secured the property for your dispensary even before applying for a dispensary license. Depending on the city or state, finding an affordable location for your business can be challenging. On top of that, in more conservative-leaning states, finding a landlord open to housing a cannabis dispensary on their property may be tricky.
Again, the state and city where you want to open your store will determine how much money you will need to set aside for your rented property. Renovating a marijuana dispensary before opening it will be necessary to comply with regulations, express brand identity, and improve store flow. It might cost $50,000 or so. Before you are prepared to accept customers, you should budget extra money if the space needs to be modified to suit your needs.
A business will incur a whole host of variable and fixed expenses throughout the month or year. Fixed expenses are predictable and rarely change without advance notice. Variable expenses often change, sometimes from month to month, and are rarely predictable.
Below are the mandatory expenses that you need to consider:
3- Insurance costs
You know how risky it is to run a CBD business as the legal environment is so complex. You should seriously consider providing your business with adequate cannabis dispensary insurance. In the event of any unforeseen circumstances, it will serve as a financial safety net.
Investing in good insurance is essential for any business owner, and arguably even more so for those in the cannabis industry. That’s because the legal scene around marijuana in the United States is complicated.
Remember to get insurance for your dispensary, so you’re protected if something goes wrong.
Each state has its own regulation on taxation in the cannabis industry. Taxes will impact your sales, which is vital when determining the cheapest state to open a dispensary.
Additionally, some states offer tax breaks or incentives to marijuana-related businesses. Make sure to research the tax regulations in your state to see if you qualify.
requirements Some US states require that prospective owners prove they have enough liquid assets to operate a dispensary. You can’t start a weed business until you show it can stay successful even in tough times. The average capital requirement is $150,000.
In some locations, applicants don’t have to possess any assets. In other states, rules are tough. Pennsylvania has some of the most unfavorable laws: to open a dispensary business, you need at least $2 million as assets, including 25% of liquid cash.
6- Employee wages
The lifeblood of any business is its workforce. How much you must pay your employees depends greatly on your state. In the cannabis industry, providing excellent customer service is crucial because many of your customers will ask the staff for recommendations.
You need to hire candidates who know their stuff & have an experienced budtender for your dispensary. Don’t start a dispensary unless you’re prepared to compensate your personnel fairly. You should consider average wages in your state when evaluating potential business costs. Consider hiring a lawyer because of the volatility of the hemp industry in the US.
Many banks are hesitant to work with marijuana dispensaries. On a federal level, this is still an area of uncertainty. Priorities for enforcement may shift at any time.
The likelihood of local credit unions lending money is higher. On the other hand, they raise client fees to make up for the increased risk. As a result, factor high fees into your budget. Institutions like private marijuana banks impose monthly holding fees of up to $2,000!
8- Inventory Costs
Obviously, before you open your dispensary, you need to have an inventory to sell. Because of laws around cannabis production, growing seasons, and transportation expenses and regulations, inventory costs range from state to state. Some areas allow dispensaries to grow cannabis, while others require sourcing products from certified growers and distributors.
9- Software & tech tools costs
Most businesses need a POS (point of sale) system to run their business. POS is the software that allows you to make sales electronically. You can find POS systems specifically designed for cannabis dispensaries.
Another software cost to consider is a security system. Your store is filled with desirable and expensive products. Protecting it from burglars and other security threats is vital.
10- Marketing & Advertising
To compete with the other dispensaries in your state vying for consumer attention, you’ll want to invest in an excellent marketing strategy like CBD Hemp Live. Some states have more competition than others, which is something to consider when selecting a location for your dispensary.
What key elements to consider when selecting the best states to open a dispensary?
After experiencing the complex process of finding a cannabis business location that makes sense from legal & real estate perspectives, you must ensure it’ll be good. Many of the factors that are taken into consideration by conventional “brick and mortar” retail stores can be used to evaluate the potential business performance.
There are several variables to regard in this fast-paced, evolving sector. We’ve chosen several essential factors when opening a business and strongly influencing its development, expansion, and success. Think about all those meaningful points in advance to know what must be noticed to effortlessly find the easiest state to open a dispensary further on.
1- Local Demographics
Prior to opening a cannabis dispensary, it is a good idea to examine the suburb’s demographics. While attitudes towards cannabis have improved significantly since it was legalized, many people still view it negatively. Therefore, opening a store in an area where cannabis use is not supported by the community could be a bad business decision.
2- Legal Environment
Is the state’s legal framework conducive to a dispensary business? Does it allow for dispensaries to operate legally and without fear of persecution? Indeed, this is the first and foremost thing to consider. It relates almost to all new cannabis businesses in the niche.
3- Market Competition
When selecting a dispensary location, competition is a crucial component to consider. It would probably not be a good idea to invest in a location if there are already five dispensaries on the street where you intend to operate. If you experience this issue, we advise that you wait until you find the ideal solution before moving on.
4- Market Opportunity
What is the potential for growth in the state’s cannabis market? Is the market already saturated, or is there room for new businesses to enter and prosper? Evidently, you’ll want to choose a state with a substantial market opportunity and higher potential sales to start your cannabis business quickly and succeed with it in the future. So, it is essential to consider the price of the product itself. The price ranges from $6 to over $10 per gram.
What is the tax climate like in the state for dispensaries? Are taxes high or low? Does the state offer any tax breaks or incentives for businesses in the cannabis industry? The tax climate is essential when choosing a state for your dispensary business and becoming one among the newbie cannabis entrepreneurs.
6- Market Visibility
Most importantly, you must ensure that your dispensary is visible to people. Even if you successfully obtained a dispensary location in a busy neighborhood, it wouldn’t matter much if customers couldn’t easily find your shop. As a result, you should make several passes by a potential site to see how it appears from the road when evaluating it.
We also recommend that you give other states like Vermont, Maine, and Alaska a shot. These cannabis markets are expanding and present many opportunities for business owners looking to start their cannabis business.
The best states to open a dispensary will likely change as legal marijuana grows in popularity and more states decide to join the movement. While there is no perfect state for opening a Dispensary, some states are more favorable than others.
Oregon, Colorado, and California are three of the most well-known US states to open a dispensary. Still, as marijuana laws continue to change and adapt across the country, it may be wise to check out other less popular states.
The US states listed in the blog are just a few that offer a favorable market environment for those who are interested in the cannabis industry and thought about opening a dispensary. When considering the best place to start a weed business, assess all the above-mentioned factors.
Need more tips & information for your CBD business site ranking, branding, and marketing? Visit our blog section now. There you’ll find a lot of useful tried & tested advice and insights into different areas of the online world – from Dispensary SEO to
eCommerce to cannabis web design & more. Check out our blogs, or get in touch for expert dispensary SEO services and support for ranking your website higher on SERPs
FAQ (Frequently Asked Questions)
Que: What is the cheapest state to open a dispensary?
Ans: Oregon and Colorado are the cheapest states to open a dispensary. We have analyzed various factors like tax landscape, licensing fees, and other business costs and found that both Oregon and Colorado are one of the best states to start a cannabis dispensary.
Que: Is owning a dispensary profitable?
Ans: Yes, In America average cannabis dispensary generates approx $100,000 to $1.2 million in annual profit.
Que: What state has the most dispensary?
Ans: Oklahoma has the most legalized medical cannabis dispensary licenses as of the summer of 2021.
Que: How much does it cost to open a dispensary in Colorado?
Ans: To start a cannabis dispensary in Colorado costs between $150,000 to around $2,000,000, which covers rent, license, and advertising fees.
Que: Why don t banks work with dispensaries?
Ans: Cannabis and CBD are illegal in many states under federal law, and banks refrain from supporting their digital transactions. But dispensary owners can use POS software to manage their business.