How Profitable is a Dispensary?
Very. Even with the amount of regulation and challenges entrepreneurs have to deal with in the cannabis industry, nearly 90% of operating dispensaries, wholesalers cultivations, and infused product companies report that they are profitable or breaking even. The multitude of variables including location, overhead, and size of operation can leave your head spinning when trying to come up with a reliable formula for profit . So, EXACTLY how profitable is a dispensary? Here are the 3 key metrics for fine-tuning optimal margins.
1. Revenue: $974 Per Square Foot
With average dispensary income reported to be $3 million per year or an average of $974 per square foot of retail space, you can easily see why entrepreneurs are eager to enter the cannabis industry. Keep this in mind when searching for real estate, although a larger space does not automatically guarantee higher revenues. You’ll have to balance location, store size, and closeness of competition when creating projections.
For example, a 3500 square-foot space can expect around 3.4 million in revenue. These are incredible figures, especially since only 9% of all small-business across the United States report more than $1 million in annual revenue. (Statista)
With average dispensary income reported to be $3 million per year or an average of $974 per square foot of retail space, you can easily see why entrepreneurs are eager to enter the cannabis industry. Keep this in mind when searching for real estate, although a larger space does not automatically guarantee higher revenues. You’ll have to balance location, store size, and closeness of competition when creating projections.
For example, a 3500 square-foot space can expect around 3.4 million in revenue. These are incredible figures, especially since only 9% of all small-business across the United States report more than $1 million in annual revenue. (Statista)
2. Overhead: 2/3 Revenue
Before you go counting your bankroll, remember that high gross revenues don’t necessarily point to high net profits. There are significant costs associated with running a dispensary. According to Statista, the annual operating costs for a dispensary amount to $1.92 million. This means you need just shy of $2 million every year in order to break even. Of course, you should sit down and create a detailed budget for your business plan, but setting aside 2/3 of revenue for operating costs is a good rule of thumb when doing quick calculations.
3. Net Proft Margin: 12-21%
The average dispensary net profit margin ranges between 12% and 21% after tax. However, if you are opening a dispensary in a new state where the market is fresh you could do significantly better. Operating costs may be lower and competition will be light. Right now there are several new cannabis markets where first -mover advantages will lead to phenomenal profit margins. Finding them and digging in before it’s too late is going to be the key to success for small business owners.
Need advice getting your cannabis business started? We can help. Click here to schedule a FREE consultation with one of our expert cannabis business consultants.
