Like any kind of retail business, medical marijuana companies struggle with a variety of challenges that come with creating and selling inventory. However, cannabis companies are faced with several unique challenges of their own. This is because they are ultimately dealing with a product that is still recognized by the government as an illegal substance and an archaic tax law that limits what they can write off for their business.
As you might be able to guess, this poses a few hardships for medical marijuana companies who are trying to grow high-quality products and make a profit from their inventory. While many people believe that selling marijuana is a great way to make mountains of money, in reality that is not always the case. Especially with the new recreational transition in California.
There are several key difficulties for medical marijuana companies that most other retailers and manufacturers don’t have to deal with. So, how do these businesses work under the federal radar while still providing legitimate goods and services while turning a profit?
Usually, it isn’t easy.
Below are some of the biggest challenges that medical marijuana businesses face.
Dispensaries Cannot Pay for Traditional Advertising
If you reside in a state where pot is legal, such as California or Colorado, then you may grow accustomed to seeing the occasional billboard advertising a local dispensary. However, even in states where marijuana is legal, you won’t see much more than that. Medical marijuana companies have to be careful when it comes to advertising.
Most advertising for local dispensaries is promoted through social media platforms, email blasts, and text messages. This is one of the very few ways that these businesses can promote their products and offer deals while still operating in a legal way.
It is Difficult to Find a Bank for Investment
Most banks won’t work with medical marijuana dispensaries, for the sole reason that pot is not quite legal under federal standards. This can make it difficult to find good payment solutions for medical cannabis, especially in a state where marijuana is not yet legalized.
Most dispensaries will have to find special lawyers and accountants to help them with their business expenditures and requirements. Many dispensaries have to operate out of unnamed building locations across town as well. Because of all of these special loopholes that medical marijuana companies have to jump through to run a legitimate business, the turnout is not always as profitable as people like to imagine.
It is Hard to Determine Selling Price
Since most medical marijuana companies can’t exactly calculate their exact business value, and since the cost of running the business can be somewhat unpredictable, it can be hard to determine what the right selling price should be.
Some dispensaries are only valued at a few thousand dollars, while others range in the millions. It can be impossible to predict, which is why the product must be carefully monitored and analyzed to ensure it’s being sold at a fair yet profitable price. Profit margins vary from location to location, making it even more difficult to track the overall success of medical marijuana companies nationwide.
The Bottom Line: Running a Dispensary is No Walk in the Park!
Medical Marijuana businesses must jump through a lot of hoops and face a lot of unique challenges that other retail stores do not have to deal with. Since the product is so low key, and growers have to go through a variety of measures to ensure that the product is good, it can be difficult to determine its value or price.
In summation, between the inability to get bank investments and the difficulties faced with advertising and sales, it can be safely determined that medical cannabis companies do not profit as highly as one may think. However, the industry is certainly growing, and there is room to adjust to potential changes in legal standards in the future.