How Much Do Dispensary Owners Make?
According to Marijuana Business Daily’s Marijuana Business Factbook, the average marijuana dispensary makes $974 in revenue per square foot of space. For the sake of perspective, this is slightly higher than a Whole Foods and much more profitable than the typical pharmacy.
The Cannabis Industry – Dispensary Profit Margins
There is no doubt in this day and age that cannabis is one of the largest growth industries in the country. According to Marijuana Business Daily’s 2021 Annual Marijuana Business Factbook, sales are expected to climb 31% in 2021 to a total of $48.4 billion across the US, with California and Colorado alone accounting for more than one-sixth of the total sales. Marijuana Business Daily expects that this growth will continue substantially, leading to a total of $84.3 billion in sales by 2025.
With big growth numbers like that, it is no wonder that many people are looking to enter the industry, often by starting a cannabis dispensary. But just how profitable is the average cannabis dispensary? That question can be a little more complex to answer.
Average Dispensary Profitability Survey
Our best figures about the profitability of the average dispensary come from a 2016 survey conducted by Marijuana Business Daily. This survey suggests that 18% of dispensaries would say they are “very profitable,” while 41% would say they are “modestly profitable.” Another 29% reported breaking even, while the remaining 12% said they were losing money.
Assuming these figures are still accurate, that means that most dispensaries are at least modestly profitable, with only about one in eight retail operations actually losing money.
California Market Suggests Long-Term Cannabis Dispensary Profits
But what do these terms mean? That is a bit harder to nail down. On the one hand, we have a 2017 Statista analysis that suggests the average dispensary might generate as much as $1.8 million in profit from around $3 million in revenue. However, this figure subtracts only operating expenses from the revenue column and neglects other key aspects, like taxation. To some extent, this is reasonable as some cannabis markets – especially those that are medical-only – may remain untaxed.
However, perhaps our best sense of the long-term profitability of a cannabis dispensary can be observed from California, where the market has matured since the opening of the first “legal” cannabis dispensary in 1998. In this market, according to a Leafly study, analysis suggests that profitability will be between 10-15%, for which an independent study can confirm, by estimating a long-term profitability of 12% for cannabis dispensaries.
Can You Be Profitable Opening a Cannabis Dispensary Business?
If you are considering entering the cannabis dispensary business, you have to consider the many factors to determine whether you can be profitable in this industry or not which can be challenging, given that the average start-up costs for a dispensary approach $800,000 initially. Additionally, cannabis business loans do not have the best terms, and often include interest with much higher rates than traditional corporate America. Beyond that, you must lease or purchase a location, set up security, hire staff, pay taxes, buy and maintain inventory and more.
Covering these costs requires generating a significant level of revenue in order to be able to become profitable, while simultaneously reducing your operating expenses. While certainly not impossible, this will require a range of expertise for which the American Cannabis Company can provide to you through our comprehensive cannabis consulting service.
First, you have to identify and focus on good opportunities. As many communities relax their restrictions on cannabis businesses, new markets are opening almost daily. Identifying which are the prime markets and how to secure them requires expertise, experience, and access. Our team’s approach helps you secure your operating license in markets that are most likely to be profitable.
You can also save significantly if you can negotiate more favorable terms on your business loans for which operational expertise is critical. We can help guide you to an efficient operation for maximum profitability and provide you and your team the blueprints for designing an appealing, functionable dispensary that will encourage people to buy and return for repeat business.
At the American Cannabis Company, we strategically combine all aspects of our approach to help you establish a profitable cannabis dispensary. If you are planning on starting a new cannabis dispensary, it will be crucial to have guidance from industry professionals who know how to set you up for success.
Please contact American Cannabis Company today
to schedule a consultation about how to open and operate your own cannabis dispensary.