7 Steps – How to Start a Dispensary: Building a Cannabis Dispensary in the U.S.

Legalization has signaled the beginning of a green rush that has taken the U.S. and Canada by storm, leading many to ask, “How to start a dispensary.”

Working out how to open a cannabis dispensary is no easy feat and requires stringent compliance with local and state laws. Like starting any business, entering the world of entrepreneurship is a challenge, but if you’re ready for a challenge, here’s what you need to know about starting a dispensary.

How to Start a Dispensary – Eight Steps to Opening Day

The cannabis industry is booming, with an estimated $37 billion in recreational marijuana sales alone projected by 2026.

But you must be prepared to overcome headwinds in the cannabis industry caused by competition and changing regulations. Let’s run through the primary steps required to make opening a dispensary a reality.

Step One – Research Your State’s Licensing Requirements

Every state, county, and city has unique zoning and licensing requirements for opening a cannabis dispensary. The first step of how to start a dispensary is to research these requirements.

But what state is the cheapest to open a cannabis dispensary?

If you’re worried about initial startup costs and bureaucratic headaches, Oregon and Colorado are among the easiest states to open a dispensary. Beware that states may have quirks in the rules.

For example, Washington State limits the number of licenses that can be issued to new dispensary businesses, making the licensing process highly competitive.

Note that practically every state has separate programs for different programs, such as medical vs. recreational or retail vs. cultivation. Conduct your due diligence and visit your state’s licensing page for full details of the documentation you must submit.

Step Two – Learn the Law

All dispensaries in the country must comply with their state’s laws. Even though most states have legalized medical or recreational marijuana, each state can differ in its laws.

Areas to focus on include:

THC concentrations
Purchase limits
Tax laws
Acceptable payment methods
Product tracking
Security requirements

Step Three – Build a Team

Before embarking on this journey, you need the right team around you. Going it alone will make matters far more complicated for you. This initial team should include the following:

Attorney
Accountant
Compliance officer
Retail professional
Security contractor

Each member of your team should have experience within the cannabis industry. If opening a medical dispensary, you’ll also require a medical director. Moreover, if cultivating cannabis, enlist the services of an experienced horticulturalist.

Step Four – Formulate a Business Plan

The next step is to write a formal business plan for your new venture. Like any business, you can find workable business plan templates online to guide you through the process.

Your business plan is your road map to success and will be required if applying for third-party loans. Some of the questions your business plan must answer include:

Who are my customers?
What types of products will I sell?
Who will be responsible for each part of my business?
How will I obtain my product?
How will I address environmental considerations?
What approach will I take to inventory control?
What is my marketing plan for growing organic traffic?

Don’t worry about getting everything perfect at this stage. The principles of entrepreneurship and opportunity dictate that your business plan will likely change several times, especially in the beginning.

Step Five – Secure Financing

Securing sufficient capital is often the most significant hurdle entrepreneurs must overcome when opening a dispensary. Since marijuana remains illegal at the federal level, many traditional funding options may be unavailable. In particular, banks are often hesitant to lend to cannabis dispensaries.

However, plenty of opportunities exist, including angel investors, grants, and loans from independent lenders. Expect to take on considerable debt at this stage to cover your fees.

At a minimum, expect to cover:

Applications
Licensing
Staffing
Inventory
Rent/mortgage
Renovations
Financial services
Professional costs
Security
Equipment
Marketing

It’s not uncommon for costs to run well into six figures when figuring out how to start a dispensary. But it’s well worth checking out grants for black-owned businesses and grants for Asian-owned businesses to see if you can get a leg-up.

Step Six – Choose Your Location

Anyone who has started a business knows that inside the cannabis industry, location is everything. Put your dispensary in the wrong place and risk people not coming or violating zoning restrictions.

For example, it’s not uncommon for some locations to ban dispensaries within a certain distance of parks, schools, churches, community centers, and even residential areas.

Ask these questions when determining suitable locations:

Where is my ideal customer base located?
What rules apply to this retail location?
Is this a weed-friendly community?
Is there ample parking?
How accessible is this location?
How much competition is nearby?

Step Seven – Design the Retail Experience

With your location and licenses secured, you can begin designing the retail experience. This involves designing the dispensary, including signage, customer flow, display cases, and more.

This is where learning platforms for marketing will come in useful because you’re not just creating a store. You’re creating a customer experience.

So, what are your primary considerations when figuring out how to open a dispensary?

Access – Most states require defined limited and restricted access areas. In other words, a clear delineation must divide public and private areas.
Medical vs. Recreational – It’s not uncommon for states to also require medical and recreational marijuana to be kept separate. If you’re selling both types, this may require you to create a divided retail location.
Customer Flow – Visualize how your customers will move through your store. Your design should minimize bottlenecks while giving everyone ample space to browse and buy.
Aesthetic – Finally, think about your aesthetics. Whether you want stereotypical “stoner” décor or a more professional setting, this is based mainly on your customers. It’s why employing someone with a prior job in sales can come in useful.

Step Eight – Hire Your Dream Team

The last step before you start freelancing your new cannabis business to the population is to hire a team.

Note that this is also when you should consider getting an Employer Identification Number (EIN) and how to do your taxes.

Some of the staff you should look into hiring include:

Budtenders (Sales associates)
General manager
Receptionist/greeter
Security
Inventory manager
Purchasing manager
IT manager

Launch Your Next Great Business Idea Today

Deciding how to open a dispensary is far from straightforward, but with a wealth of material available, this could be your next business idea. Other than the licensing and zoning considerations, setting up a dispensary is similar to other retail businesses.

All businesses are an ongoing learning process. At Urban Income, we support minorities in expanding their businesses and growing their income. If you want bespoke news, financial products, and guidance, sign up for Urban Income now.