Opinion: Bringing Equal Opportunity to the Cannabis Industry, It's Time Lawmakers Start Supporting Small Businesses
By Howard Lee, CEO and Co-Founder of SōRSE Technology.
Cannabis is an essential business in most legal states, yet many small dispensaries are struggling and actually bleeding revenue. During an alleged cannabis business boom, why are dispensaries losing money?
It's because the cost to own a dispensary adds up. The cost for a license can go into the millions in some legal states, and this doesn’t account for the restrictions and qualifications many regions have for cannabis businesses. Plus, in some legal states such as California, taxation on products becomes too high for legal sellers to compete with the illicit market.
On top of that, most small cannabis businesses need to find investors, lawyers and distribution tech to start operations and streamline processes. In an industry that’s heavily regulated and stigmatized, this can be incredibly difficult for most established companies, let alone small to mid-sized emerging businesses.
For the cannabis industry to better serve small and mid-sized businesses, advocates and lawmakers alike can change the path of this quickly growing industry by doing the following:
Make grow licenses affordable, and limit vertical integration
Grow licenses in some states are prohibitively expensive, and there are about a dozen “t’s” to cross and “i’s” to dot before you can even imagine selling your product to a dispensary. Although regulations for legal cannabis businesses are meant to keep citizens safe, often it limits accessibility to consumers and hurts smaller businesses.
For small dispensaries to flourish, cannabis businesses shouldn’t be vertically integrated. Instead, businesses should choose to be a grower, distributor or retailer rather than run every step of the supply chain. States such as California and Washington are already successfully putting limitations into place; this way, smaller businesses aren’t overcome by larger companies that are vertically integrated.
Ensure taxes on cannabis products are affordable for the consumer
Tax revenue stemming from the sale of cannabis products is a substantial benefit for states that have legalized. In regions such as Washington State, legalization saw over a $5.2 million increase in tax revenue from cannabis products. This revenue was distributed to a variety of public industries such as basic healthcare, education and research.
Yet, if taxation on products is too high, consumers will start buying more affordable product from the illicit market, avoiding trips to legal dispensaries altogether. Over taxation in California hurt small businesses throughout the state significantly.
Like in any other industry, cannabis businesses need to be capable of offering affordable products to consumers. Lawmakers must ensure taxation on products isn’t too high so that small dispensaries can survive.
Encourage affordable, specialized cross-industry services for cannabis businesses
When an aspiring entrepreneur wants to start a business, as long as they have good credit and equity, it’s generally easy to gain footing. Not so for cannabis businesses.
Given cannabis is a relatively new industry, there aren’t as many lawyers, investors or developers who can help consult and work with aspiring cannabis businesses. Since cannabis is such a complicated, heavily regulated industry state by state, educational resources and de-stigmatization by advocates is essential to bring these professionals into the cannabis marketplace.
To make starting a cannabis business easier for any person, not just those at the top, cross-industry awareness and normalization is crucial. This way, anyone in any profession can begin a career in cannabis and help others looking to start a business.
The future of cannabis is based on diversity and opportunity
This pandemic has changed many industries; for cannabis, it has revealed just how essential this plant really is, both medicinally and recreationally.
Numerous changes in cannabis need to be made to even out the playing field between small and large cannabis companies. While off to a bumpy start in 2020, there’s still a chance to make cannabis a truly diverse industry that’s ahead of its time.
Howard Lee is the CEO and Co-Founder of SōRSE Technology, the leading CBD, hemp and terpene water-soluble emulsion supplier.
Lead image by Ilona Szentivanyi. Copyright: Benzinga.
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