Cannabis is a tricky business.
States have been legalizing medical and recreational marijuana at a steady rate since the 1990s, but growing a cannabis business is still more challenging than running your typical mom and pop shop.
Medical marijuana is legal in 29 states and Washington D.C., and recreational marijuana is legal in eight states and D.C. By the end of 2017, the legal cannabis market is expected to be worth $7.9 billion; by 2025, that number jumps to $24 billion.
This thriving market is showing some substantial economic benefits.
New Frontier Data, a cannabis market research company, predicts state tax revenue from cannabis retail sales to total $745 million in 2017 and $2.3 billion in 2020. The company also estimates that if medical cannabis were available nationally, taxpayers would save $220 million in medicare expenses.
The average medical marijuana consumer purchases cannabis every 10 days and spends $136 per transaction. The average recreational marijuana consumer purchases cannabis every 14 days and spends $49 per transaction. Most cannabis consumers are part of the younger generation, but that majority is getting slimmer: 41% are 21 to 35-year olds, while 26% are 36 to 45, 16% are 46 to 55, and 17% are 56 or older. Men make up 53% of cannabis consumers, but women aren’t far behind at 47%.
Though profits and social acceptance are expanding across the country, federal regulations pose a few unique challenges to the emerging cannabis industry.
Marijuana is still illegal at the federal level, and that means no sales outside legalized states or shipments across state lines. Andthe pool of viable locations shrinks even further as some states offer better storefront opportunities than others.
Two of the best states to start a cannabis business are Colorado and California. Colorado’s licensing laws are so open that Denver boasts twice as many cannabis dispensaries as it does Starbucks. California is predicted to have recreational cannabis businesses licenses available in 2018, opening the way for a variety of dispensaries, cafes, and restaurants.
A couple of the worst states for business? New York, with its harsh regulations and highly competitive licensing, and Minnesota, which only allows eight dispensaries in the state.
Banking & Credit Unions
Banks and credit unions don’t quite know what to do about cannabis businesses.
The Obama administration allowed financial institutions to cater to cannabis businesses with several provisions. The Financial Crimes Enforcement Network (FinCEN) provides detailed guidelines for financial institutions interacting with marijuana businesses. Financial institutions are required to keep an eye on business’s commercial activities and file quarterly Suspicious Activity Reports (SARs).
The added cost of adhering to these extra rules is often transferred to the cannabis business itself—most marijuana business have to pay a financial premium just to open a bank account.
In many cases, financial institutions simply refuse to cater to marijuana businesses when the legal climate is so uncertain, forcing cannabis businesses to operate entirely through cash.
In 2017, just 368 U.S. banks and credit unions served cannabis businesses. This is up from 300 at the start of 2016, but still only a fraction of the 12,000 financial institutions in the U.S.
Even this much progress in the financial system could slow or halt, however, with new challenges to the lenient enforcement practices that were the norm during President Obama’s administration.
Legal and Political Changes
On January 4, 2018, Attorney General Jeff Sessions rescinded Obama-era memos that assured cannabis businesses they would not be subject to federal prosecution as long as they followed their state’s laws. This move caused panic and uncertainty throughout the cannabis industry.
However, don’t think Sessions’ move means Justice Department agents are going to come kicking down your doors. There are plenty of reasons this latest legal threat is unlikely to end the marijuana industry.
Firstly, medical marijuana users should be safe.
Since 2014, Congress has included a policy in the spending bill to prevent the Justice Department from prosecuting users in states where medical marijuana has been legalized.
Recreational cannabis might not be dramatically affected, either. By rescinding the memos, Sessions is merely giving federal attorneys the option to prosecute in their states; no law is requiring prosecution. And according to the Washington Post, several of the 13 U.S. attorneys in the the eight states where recreational pot is legal have said they will only prosecute if a cannabis business has ties to crime or violence.
The change was also met with bipartisan condemnation from Congress, with both Democrats and Republicans claiming Sessions’ decision goes against states’ rights.
Despite these unique challenges to the industry, careers in cannabis look promising. 97% of recreational cannabis stores and 94% of medical cannabis stores make a profit or break even. The cannabis market is set to create almost 300,000 jobs by 2020—more than the projected job growth for Transportation and Warehousing, Mining, and Manufacturing.
Women in particular are benefiting from the booming cannabis business. The portion of women executives in the cannabis industry is 27%; that’s 4% higher than the national average of 23%.
In a survey of cannabis business employees, 30% said the company they worked for was owned entirely by women, while 57% said their company was at least half owned by women.
Before you get in on the action, it’s important to do your research and know what kinds of jobs are available in the industry. On the retail side of the business, there’s need for store managers, cannabis sales reps, and dispensary owners. Other important jobs allow you to get your hands dirty, such as grow masters, extraction technicians, and bud trimmers. With an increasing amount of cannabis restaurants and cafes, edibles chefs are also in high demand.
Cannabis can be a tricky business—but it’s also full of opportunity.
We interviewed some key Cannabis experts and got their opinions about the state of the business.
“For years, Cannabis was taboo, being discussed only in private groups among trusted peers. Today, Cannabis has stepped out of the shadows and into the light. Discussions have moved from privacy to political debate, and more importantly to the family dinner table. Cannabis culture is not undergoing a revolution; it’s a peaceful evolution.” – Bob Ronalter, CEO Classy Joints Classyjoints.co
“2018 will likely see more U.S. states pass medical and recreational cannabis law, as the taboo surrounding cannabis culture diminishes and we enter into the beginning of the end of marijuana prohibition. In terms of price, that means more competition among dispensaries and, in general, falling costs on cannabis and cannabis-related products.”– Mitch Strohm, Co-founder, MarijuanaRates.com
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