How to Open a Dispensary

Written by Dave Lavinsky

Dispensary Business Plan Template
Starting a dispensary business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful dispensary business.

Importantly, a critical step in starting a dispensary is to complete your business plan. To help you out, you should download Growthink’s Dispensary Business Plan Template here.

15 Steps To Open a Dispensary Business:

  1. Choose the Name for Your Dispensary Business
  2. Determine the Type of Dispensary Business You Will Launch
  3. Develop Your Dispensary Business Plan
  4. Choose the Legal Structure for Your Dispensary Business
  5. Secure Startup Funding for Your Dispensary Business (If Needed)
  6. Secure a Location for Your Business
  7. Register Your Dispensary Business with the IRS
  8. Open a Business Bank Account
  9. Get a Business Credit Card
  10. Get the Required Business Licenses and Permits
  11. Get Business Insurance for Your Dispensary Business
  12. Buy or Lease the Right Dispensary Business Equipment
  13. Develop Your Dispensary Business Marketing Materials
  14. Purchase and Setup the Software Needed to Run Your Dispensary Business
  15. Open for Business

 

1. Choose the Name for Your Dispensary Business

The first step to starting a dispensary business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your dispensary business:

  1. Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
  2. Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
  3. Think about dispensary marketing. Come up with a name that reflects the desired brand and/or focus of your dispensary business.

 

2. Determine the Type of Dispensary Business You Will Launch

The next step is to determine the type of dispensary business you will launch. The four main types of dispensary businesses are:
 

  1. Retail: A retail dispensary sells cannabis products directly to customers.
  2. Cultivation: A cultivation facility grows cannabis plants for sale to other businesses and dispensaries.
  3. Manufacturing: A manufacturing business produces items such as edibles, tinctures, oils, lotions and concentrates from cannabis plant material.
  4. Medical: A medical dispensary sells cannabis products directly to consumer, but for medical purposes only

 

3. Develop Your Dispensary Business Plan

One of the most important steps in starting a dispensary business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.

To enhance your planning process, incorporating insights from a sample dispensary business plan can be beneficial. This can provide you with a clearer perspective on industry standards and effective strategies, helping to solidify your own business approach.

Your business plan should include the following sections:

  1. Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your dispensary business.
  2. Company Overview – this section tells the reader about the history of your dispensary business and what type of dispensary business you operate. For example, are you a retail dispensary or a cannabis cultivation business.
  3. Industry Analysis – here you will document key information about the dispensary industry. Conduct market research and document how big the industry is and what trends are affecting it.
  4. Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
  5. Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
  6. Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
    • Product: Determine and document what products/services you will offer
    • Prices: Document the prices of your products/services
    • Place: Where will your business be located and how will that location help you increase sales?
    • Promotions: What promotional methods will you use to attract customers to your dispensary business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
  1. Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
  2. Management Team – this section details the background of your company’s management team.
  3. Financial Plan – In this section, you will document the financial projections for your dispensary. This should include your sales and revenue projections, cash flow statement, and your expense budget, detailing the dispensary startup costs.
    • What startup costs will you incur?
    • How will your dispensary business make money?
    • What are your projected sales and expenses for the next five years?
    • Do you need to raise funding to launch your business?

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If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your plan and financial model in hours.

4. Choose the Legal Structure for Your Dispensary Business

Next you need to choose a legal structure for your dispensary business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:

1) Sole proprietorship

A sole proprietorship is a business entity in which the owner of the dispensary business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a dispensary business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a dispensary business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a dispensary business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your dispensary business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
 

5. Secure Startup Funding for Your Dispensary Business (If Needed)

In developing your dispensary business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a dispensary business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a dispensary business that they believe has high potential for growth.
 

6. Secure a Location for Your Business

Having the right space can be important for your dispensary business, particularly if you’d like to meet clients there.
To find the right space, consider:

  • Driving around to find the right areas while looking for “for lease” signs
  • Contacting a commercial real estate agent
  • Doing commercial real estate searches online
  • Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space

 

7. Register Your Dispensary Business with the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
 

8. Open a Business Bank Account

It is important to establish a bank account in your dispensary business’s name. This process is fairly simple and involves the following steps:

  1. Identify and contact the bank you want to use
  2. Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
  3. Complete the bank’s application form and provide all relevant information
  4. Meet with a banker to discuss your business needs and establish a relationship with them
If you’d like to quickly and easily complete your business plan, download Growthink’s Dispensary Business Plan Template and complete your business plan and financial model in hours.

9. Get a Business Credit Card

You should get a business credit card for your dispensary business to help you separate personal and business expenses.

You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
 

10. Get the Required Business Licenses and Permits

Every state, county and city has different business license and permit requirements.
Nearly all states, counties and/or cities have license requirements including:

  • General Business License: getting your Articles of Incorporation as discussed above
  • Sales Tax License or Seller’s Permit: for selling products
  • Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
  • Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
  • Special Business Licenses: some states, counties and/or cities require that you obtain additional special licenses in order to operate a dispensary business

Depending on the type of dispensary business you launch, you will have to obtain the necessary state, county and/or city licenses.
 

11. Get Business Insurance for Your Dispensary Business

When starting a dispensary business, you will need to have business insurance. This will protect your business in the event that something happens, such as a fire or theft.
There are a number of different types of insurance that you may want to consider:

  • Property Insurance: this will protect your dispensary’s property in the event of a fire, theft, or other type of damage
  • General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
  • Business Owner’s Policy (BOP): this is a policy that combines both property and liability insurance into one policy
  • Worker’s Compensation Insurance: this will provide coverage for any injuries or illnesses that your employees may suffer on the job
  • Property Damage Liability Insurance: this covers damage to property caused by your business operations
  • Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.

Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
 

12. Buy or Lease the Right Dispensary Business Equipment

There are a few key pieces of equipment that you will need for your dispensary business. This includes:

  1. Retail dispensary operations software: This will help you manage your dispensary business operations, including patient records, product inventory, and sales transactions.
  2. Point-of-sale system: A point-of-sale system will help you track sales and inventory and manage payments.
  3. Security cameras: You’ll want to install security cameras throughout your dispensary to help keep your business and products safe.
  4. Cash registers: You’ll need a cash register to handle all payments made in your dispensary.
  5. Marijuana packaging supplies: You’ll need to purchase packaging supplies for your marijuana products. This includes containers, labels, and stickers.
  6. Marijuana cultivation supplies: If you plan to cultivate marijuana for sale in your dispensary, you’ll need to purchase the necessary cultivation supplies. This includes grow lights, soil, and fertilizers.

 

13. Develop Your Dispensary Business Marketing Materials

Marketing materials will be required to attract and retain customers to your dispensary business.
The key marketing materials you will need are as follows:

  1. Logo: Spend some time developing a good logo for your dispensary business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
  2. Website: Likewise, a professional dispensary business website provides potential customers with information about the products you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
  3. Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your dispensary business.

 

14. Purchase and Setup the Software Needed to Run Your Dispensary Business

There are a few key pieces of software that you will need for your dispensary business. This includes:

  1. Medical marijuana dispensary software: This will help you manage your dispensary business operations, including patient records, product inventory, and sales transactions.
  2. Accounting software: This type of software will help you track financial data and make sure all your taxes are in order. QuickBooks is a popular accounting software choice for dispensary businesses.
  3. CRM software: A CRM system helps you manage customer relationships, including tracking sales leads, managing contact information, tracking customer orders and follow-ups, and more. Salesforce is a popular CRM software choice for dispensary businesses.

 

15. Open for Business

You are now ready to open your dispensary business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
 

Dispensary Business Plan Example PDF

Download our dispensary business plan pdf here. This is a free dispensary business plan example to help you get started on your own dispensary plan.

 

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How to Start a Dispensary Business FAQs

Starting a dispensary business can be challenging, as it requires considerable capital to start and efforts in marketing and operations. However, with the right skills, knowledge, and resources, it is possible to open a successful dispensary business.

The best way to start a dispensary business with no experience is to start small. You can offer your products to friends and family members, or to local businesses. Once you have a few clients, you can then start marketing your business more aggressively.

The most profitable type of dispensary business will depend on the local market and how much competition there is. Generally speaking, businesses that offer a wide variety of products and services tend to be more successful than those that focus on a few specific items. Additionally, businesses that specialize in rare or hard-to-find products often do well in competitive markets.

The total cost of starting a dispensary business will vary depending on how large the business is and how many products and services it offers. Generally, start-up costs range from $10,000 to over $100,000. The exact amount necessary to open your dispensary business will depend on local regulations, how much inventory you need to purchase upfront, how large your store needs to be, and how much advertising you need to do.

Ongoing expenses for a dispensary business can include rent, salaries and wages, utilities, inventory costs, advertising expenses, legal fees, and taxes. Additionally, you may need to purchase additional software or technology in order to keep up with industry trends and regulations.

A dispensary business makes money by selling products and services to its customers. This may include medical marijuana, edibles, concentrates, apparel, and accessories. Additionally, many dispensaries provide educational resources to help their customers make informed decisions about their healthcare needs. Depending on the state regulations in place where the dispensary is located, some businesses may also offer on-site cannabis consumption services, such as lounges or cannabis cafes.

Yes, owning a dispensary business can be very profitable. 

However, profitability is heavily dependent on how well you can manage your expenses and how successful you are at marketing your business. Additionally, the local market where the dispensary is located will also play a role in how profitable the business is. 

Some of the key things you can do to make your dispensary business more profitable include: 

  1. Establishing relationships with suppliers 
  2. Developing an effective marketing strategy
  3. Staying up to date on the latest industry trends and regulations 
  4. Offering high quality products and services 
  5. Building a strong customer base through word of mouth marketing 
  6. Creating loyalty programs to reward your customers
  7. Finding ways to increase efficiency and reduce costs 
  8. Establishing a niche for your business
  9. Offer add-on products or services that complement the products you already sell
  10. Create an online presence through digital marketing strategies
  11. Use cost-saving measures to keep costs low

Dispensary businesses can fail for a variety of reasons. Some common causes of failure include:

  • Not having enough capital to cover start-up costs and operational expenses.
  • Lack of planning, resulting in inadequate market research or an incorrect pricing strategy. 
  • Not understanding the local regulations around operating a dispensary business. 
  • Not having a strong marketing strategy in place to get the word out about your business. 
  • Failing to anticipate changes in customer demand and how this will affect your bottom line. 
  • Lack of focus on customer service, resulting in dissatisfied customers who don't return for repeat business or recommend you to their friends.

The dispensary market is made up of a variety of different players, including dispensary owners, vendors, suppliers, and customers.

Some of the key players in the market include:

  • Green Thumb Industries
  • MedMen
  • Harborside Health Center
  • The Apothecarium
  • Native Roots Dispensary

However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.

Dispensary fees can vary depending on the type of dispensary products being offered.

However, some common dispensary fees include:

  • Flower: $5 to $15 per gram
  • Edibles: $2 to $10 per piece 
  • Concentrates: $25 to $75 per gram 
  • Vape Cartridges: $20 to $50 per cartridge
  • Clones/Seeds: $3 to $10 per pack

The best way to determine the right fee for your dispensary products is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.

You can download our dispensary business plan PDF template here. This is a business plan template you can use in PDF format.


 

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