Should You Apply For a Cannabis License or Buy a Licensed Cannabis Business?

by Roger Tower on June 13, 2020

Venturing into the legal marijuana industry has plenty of benefits but also comes at a pretty high cost and there are many risks involved as is the case with investing in any business. 

There are many ways of entering the legal cannabis industry. You can apply for a commercial cannabis license and submit yourself to the application process and start from the beginning or you can purchase a licensed cannabis business. Either method has its advantages and its costs and it really just depends on your individual goals. 

Applying For a Commercial Cannabis License Vs. Purchasing a Cannabis Business 

Applying for a commercial cannabis license is basically starting from scratch. When you obtain a cannabis license you’re getting approval to open a legitimate business. You have the green light from your local and state authorities to operate, but it’s then up to you to buy or lease a location, bring in customers, and generate revenue. 

The first thing you need to do is figure out what kind of cannabis license you need for the kind of business you have or plan to have. There are three cannabis licensing authorities in California:

• the Bureau of Cannabis Control
• CalCannabis Cultivation Licensing
• Manufactured Cannabis Safety Branch. 

Each one in charge of regulating a different sector of the cannabis industry. 

You can also purchase a cannabis license that’s already established and ready to become operational. In some cases this can save you time and lower your risks. Keep in mind that both processes can hold high costs and as is with any business venture, there are risks involved in both cases. Consulting with an industry expert can save you a lot of time and money in either scenario. 

Market Research 

If you’re set on applying for a cannabis license or purchasing a cannabis business, doing market research is vital. It’s imperative you know which cities can house a profitable marijuana business. Specifically, look into demographics, average household income for the area, and the number of cannabis licenses allowed within that jurisdiction.  

For example, if you find a city with a low number of cannabis licenses available and a high level of tourism, your business will probably turn a profit. You would have less competition with a high demand. It’s also a good idea to look into market trends. 

The legal cannabis market is consistently growing and shows signs of great potential for the next coming years. Do your research, calculate the time and costs of obtaining a cannabis license and starting a cannabis business and compare that to your predicted profits to determine whether this is a valuable investment for you. 

Budgeting is Key 

There are a lot of costs involved in starting any business and the cannabis industry is no exception. According to Forbes, cannabis licensing costs can be as high as $200,000. Fees vary by state. Buyers should also consider day-to-day operating costs. Knowing how much cash you’ll have to shell out to start your cannabis business will help you make an informed financial decision. 

Another thing you want to consider when buying a cannabis business or applying for commercial cannabis licenses is the tax rate for where you’ll be operating. 

Depending on your budget your options might be limited. If you’re working with a higher budget, you have a lot more options. Consider buying an existing cannabis business versus starting from zero. 

If you’re looking for commercial cannabis real estate in California, purchasing a cannabis license, or applying for a license in California, visit our listings page for available properties for sale or lease and reach out to us for a consultation. Our team of industry experts can help you make the best decision.