The million-dollar question at the moment, literally is: How much money does a weed dispensary make? When you outwardly look at the annual average dispensary profits you can almost see dollar signs in entrepreneurs’ and investors’ eyes. As the growth of the industry continues to take off and communities learn to understand and appreciate the plant, all signs point to YES, starting a canna-business is absolutely profitable! This article explores the ins and outs of how to increase profitability in a dispensary and the business operations and strategies that will take your dispensary to the next level, financially.
Some topics we will casually cover:
• Business Planning and Strategy
• Vertical Integration With Quality Products
• Building A Brand
• Cutting and Controlling Costs Where It Counts
• Marketing and Customer Loyalty
• Production Efficiency
A recent article in Leafly states that dispensary profit margins can range from 15% and 21%, but factors such as opening a dispensary in a state with lower operating costs and taxes or in a new market all together can make a dispensaries net profit skyrocket. Sometimes it is the small decisions at the beginning that can really put you ahead of the game in the long run. That said, once you access capital and determine your budget you will need to focus on wholesalers in your area to find out the cost of products.
Whether you own a cultivation facility, a dispensary, or both – growing or obtaining legal high-quality products (affordably) is essential in running a successful dispensary. Some states actually require dispensaries to grow their own product, but regardless of that fact buying quality wholesale product IS A MUST, and cultivating your own cannabis is highly recommended. Vertically integrating these two processes will decrease risk and costs of goods while increasing that’s right you guessed it…. Overall Profit!
Getting it right…
The learning curve in the cannabis industry can be a tough one, full of expensive mistakes and shoulda, woulda, couldas. To avoid the “better luck next year” thought process you have to get it right the first time. After all, in a dynamic industry such as this one, there really isn’t much room for error. Your customer base and loyalty are everything, so get to know how to “read the crowd”. Cannabis consumers want high-quality products that they know are safe, and worth the price. Dispensaries can’t afford to lose long-term clients over a bad batch or low-grade product, which is why dispensaries usually grow their own cannabis. That said, dispensaries need to draw their focus toward these three attributes if you want to maintain a profitable business: quality cannabis products, customer loyalty, and production efficiency.
So you have your product and you know it is good s***. Why? Because you ride alongside the cultivation process and are able to show your customers you have a reliable source of locally grown one-of-a-kind product. The next step is knowing how to start a successful cannabis brand . Focusing on your cannabis packaging designs and building a full-proof high-quality product that consumers can’t get anywhere else, is a game changer for long-term dispensaries. This is because having a product line that is exclusive to your shop holds a significant amount of appeal and is a key ingredient to building a long-term fan base.
Building a brand also opens up an immense amount of opportunity to cut costs, remain compliant, and leaves the door open to increase profit profoundly. You don’t need to go full-blown Walmart to be an extremely profitable dispensary, but you do need to be extremely efficient and purchase custom wholesale products. That said, cater to your customers using packaging psychology techniques and invest in compliant custom packaging.
Focus on your audience and speak to their needs through sustainable cannabis packaging with unique custom colors, styles, and eco-friendly design techniques. Staying focused on building a brand sold solely in your dispensary while cutting your costs of goods on custom-compliant wholesale packaging is key to consistently increasing profit margins.
So, We’ve learned a little bit about sourcing and cultivating quality products using business strategy and building lifetime customer loyalty while simultaneously cutting your cost of goods to consistently increase profit. Your next focus is production efficiency. Building a canna-business and brand can seem like a lot all at once, which is why strategic planning and production efficiency are key to long-term success and profit.
Research shows that “Dispensary owners make an average of $500,000 annually from running a dispensary. This is one great reason why a lot of investors and entrepreneurs are taking a second look at the business.” This annual average correlates directly with the efficiency of production and cutting overhead costs.
Dispensaries need to be reducing operating expenses while simultaneously generating a significant amount of revenue. When you cultivate and source your own cannabis and products for your dispensary you are given the freedom of versatility with both your production methods and end products. Investing in machines for pre-rolled cones will increase productivity, keep your product consistent in style, and lower workforce and overhead expenses.
Mastering the versatility of high-quality products that truly cater to customer demands builds a fan base, so don’t be afraid to get creative. Secure a sector of your business for production methods whether it be leaning into cannabis concentrates and curating one-of-a-kind vapes using a vape cart filler machine.
Want to produce the most mouth-watering CBD gummies and edibles on “this side of the Mississippi”? Invest your time and focus on the production and customized weed bags that speak to the local cannabis community! Combating costs and overhead is best done with consistency, efficiency, and a sprinkle of creativity to go along with it. These adjustments set your dispensary apart and bring in revenue from the right sources.
Many canna businesses have resorted to the “go big or go home” way of thinking in terms of growing, investing, and building businesses. Truth is, the smaller boutique businesses have been able to carry much success and profit by honing in on local customer loyalty, proper business planning and strategies, cutting costs where it counts, and production efficiency. Yes, the cannabis industry is growing rapidly, but the importance of customer loyalty and locally sourced product run deep.
Honoring your audience and building a brand while focusing on the main tactics: product quality, customer loyalty, and production efficiency is a challenge that takes heart not just capital. Sometimes thinking small can bring success in a big way. Like growing cannabis, success is in the details. Invest in quality custom cannabis jars, marketing that caters to existing clients, and these strategic methods to increase production efficiency and watch your dispensary become an important part of the cannabis community.