I remember when medical cannabis first started spreading among the states. It was a novelty back then. More than one entrepreneur figured state-legal cannabis would be the golden ticket. Some found that to be true, but others did not. Operating a cannabis business is not all fun and games. It might not even be profitable.
Take the medical cannabis pharmacy. Of all cannabis-related businesses, it is the one with the smallest customer base and the most risks. It takes a lot to succeed as a pharmacy operator. If you haven’t got what it takes, pick another line of business to get into.
Here are the most challenging aspects of opening a medical cannabis pharmacy:
1. State Licensing
A medical cannabis pharmacy must be licensed by the state in which it operates. Licenses cost money. And in some states, licensing fees are prohibitively expensive specifically to weed out those entrepreneurs who do not have enough financial backing to make a real go of it.
Licensing opportunities are also limited in most states. Utah is among the most restrictive. According to Beehive Farmacy, an operation that runs pharmacies in Salt Lake City and Brigham City, state law only allows for a total of fifteen pharmacy licenses. All fifteen are currently held. So even if you wanted to open a new pharmacy in the Beehive State, you couldn’t.
2. Investment Capital
Second only to licensing in difficulty is raising enough investment capital. Just to get the doors open, you need enough money to cover:
- Licensing and insurance
- Facility rental or purchase
- Several months of inventory
- Business equipment
- Retail accouterments
- Marketing
- Recruiting and hiring
To do things right, you would have to be prepared to serve a large number of customers from day one. You will not make it as a single employee operating from your garage. Opening a licensed medical cannabis pharmacy requires a significant financial investment.
3. Regulatory Compliance
The states strictly regulate medical cannabis pharmacies. Some states have more regulations than others. Regardless, compliance is not voluntary. Pharmacy owners must comply with the law every step of the way. A lack of compliance could lead to violations and fines, at the very least. Serious violations could potentially lead to the loss of a license.
4. Local Competition
Next up on the list of challenges is local competition. There are a lot of entrepreneurs looking to make it big in the cannabis industry. So much so that many states are currently experiencing the effects of an over-saturated market. Competition is so fierce that pharmacy owners are struggling to stay afloat. In state after state, once-thriving pharmacies are closing.
Utah is the exception. Because the state licenses so few pharmacies, owners do not face the same level of competition. There is enough business to keep them all happy.
5. Banking and Taxes
Rounding out the list are banking and taxes. I put them together because they are somewhat related thanks to federal law. From a banking standpoint, medical cannabis pharmacies do not have access to traditional banking services. Banks won’t service them because cannabis is still federally illegal. So that means no bank accounts, no credit card transactions, etc.
From a tax standpoint, cannabis businesses cannot write off their operating expenses. So even though cannabis is federally illegal, business owners still need to pay income taxes without the right to claim expenses. They pay taxes on their total revenue rather than just their profit.
An entrepreneur can make good money operating a medical cannabis pharmacy. But it is not easy. Running a cannabis business is not for the faint of heart.