The pipe dream has come to pass: Weed is legal. Fifteen states plus the District of Columbia have adopted medical marijuana laws and 20 more states may soon follow suit. And a slew of entrepreneurs may find themselves seriously considering what they never thought would be a legitimate business opportunity.
To help them consider their next moves, See Change Strategy (of which I’m a principal) has just produced the first-ever business analysis of the legal marijuana market. The report hits the streets next month, but here’s a preview of the top-level numbers. It turns out, people are making real money. Here’s an infographic to help tell the story.
But before you become a ganja-preneur, you might want to digest a few other bits of research our report uncovered:
Not all Markets are Created Equal. Alaska’s weed has been legal for 10 years, but before you open a dispensary in downtown Anchorage, consider this: There’s no state law governing retail marijuana businesses. Compare that to Colorado where you can plunk down $7,500 at the Department of Revenue and apply for a Type 1 MMC license, permitting you to operate a medical marijuana center serving up to 300 patients. Prison or paperwork? You make the call.
Don’t Hold Out for Free Checking. That first buyer may come easily, but don’t assume the same goes for processing his credit card. National banks like Wells Fargo have turned away marijuana businesses, which are still considered illegal under federal law. That makes simple business processes like a checking account, corporate credit cards or a merchant services account costly, time-consuming challenges. Lucky for you, there are smaller, local banks eager to win business in a growing industry.
Tax Laws. When tax time comes around, you’ll have to skip all of those normal business expenses. The bean-counters at the Internal Revenue Service will be following guidance under Section 280E of the tax code: No business deductions for trafficking in controlled substances. That means medical marijuana operations can expect to pay 50% to 200% more in taxes than other businesses (but don’t worry too much: the fat margins the report uncovered, especially on the grow side, should help ease the blow.)
The report also conducted the first-ever survey of medical marijuana business owners. Apparently, 90% are confident that the market will grow over the next three years.
Of course, you know what they’ve been smoking.
[Homepage image by Flickr user Dank Depot]