- July 10, 2017
- Posted by: admin
- Category: Buying a Business
Marijuana is America’s next big industry boom and, as long as you know where to look, there are huge potential returns to be made. Market forecasts anticipate that overall U.S. sales of legal marijuana will swell threefold to $17 billion by 2021, compared to the current $5.1 billion market now. Observers are noting 25 percent annual growth rates, unheard of in most other industries.
But, with a tangle of bureaucratic interference and a business model that matures a bit more every day, the best investment decisions still remain largely opaque. To help you navigate this complex and ever-changing environment, here are five tips for buying a business in the marijuana industry that can keep you from making risky decisions and pursue avenues with the biggest opportunity for growth.
Avoid Saturated, Slow Markets
There are two types of oversaturated business markets in the U.S. marijuana industry: well-functioning markets like Colorado that have genuine saturation among businesses like dispensaries, and markets hobbled by restrictive laws which can create bottlenecks in revenue generation.
Nevada certainly falls in the latter category. Lines to dispensaries poured out the door on July 1, when recreational sales became legal, and many businesses were left with empty shelves as a result of the overwhelming popularity of legal marijuana. The issue is that the current system is incapable of keeping up with demand because recreational sales licenses were only offered to dispensaries with existing medicinal licenses. New licenses are being issued slowly, and they require tremendous amounts of capital, documentation and individualized municipal approval.
Put simply, at this time there is little room for short-term growth in places like Nevada, where demand for the paltry number of existing dispensary licenses regularly sparks bidding wars. Those who wish to invest in retailing must craft a long-term plan and anticipate delays or setbacks. The returns are there, but prove difficult to achieve. Those who want quicker growth can follow the next tip.
Look Vertically and Laterally for Opportunities
Just because buying a dispensary outright may not be the best option for those looking to lean does not mean that other opportunities aren’t there. Instead, try to look for services that have been created as a result of the booming industry.
Specialized consulting, transport, logistics, pest management, hydroponic supplies, delivery services, security, wholesaling, storage and other peripheral services all present incredible opportunities with far fewer of the logjams and legal hurdles erected against growers and dispensaries. Growth in these supporting industries will boom, especially as the retailers themselves struggle to find ways to keep up with the sky-high demand.
Know How to Structure Your Finances
Federal laws, banking regulations and policies can all make managing cash flow extremely difficult for marijuana businesses. Anyone wishing to enter the market must have an ingenious financial structure in place, or else they will be forced to sit on piles of cash.
Re-investing cash in capital or in unrelated financial products can be the best way to solve this problem, but business owners need to plan rather than improvise. With a business plan that accounts for the difficulty of managing profits, windfall sales can be an opportunity for growth rather than a logistical burden.
Seek Out Innovation
The surge in popularity of marijuana extracts like “dabs” and “shatter” proves that a market persisting for thousands of years can still be subject to disruption. Opportunities for innovation in marijuana abound, including novel extract preparations, new methods of consumption, or concepts that allow for scalability of production for things like edibles and ready-to-consume products. Consumers in the marijuana market are generally open to new experiences, so aspiring business buyers can look for businesses that offer the potential to become “the next big thing.”
Seed and hydroponics laboratories represent tremendous potential in this category since they supply the market from the top down and often drive major shifts in how businesses approach marijuana production and retail.
Try Buying a Business near a Border
With legalized recreational marijuana, there are no barriers for out-of-state tourists to come enjoy products safely and legally. Businesses that can establish themselves within border cities like Laughlin can tap into the potential for huge revenues based on marijuana tourism. These areas represent the highest potential for retail sales growth, and may even be worth the long wait and expense for securing a dispensary or grower’s license.
Work With a Marijuana Business Broker to Find the Best Opportunities
As an extra tip, make sure you recognize the full scope of any potential marijuana business purchase by first working with an experienced marijuana business broker in Nevada. With expertise in marijuana laws, market opportunities and business planning in general, a broker can greatly reduce your risks while helping your new business operate smoothly post-transition.
Contact us now so we can get started today!