There are any number of challenges to entrepreneurs looking to make their mark in the cannabis industry. For starters, the product is illegal at the federal level, which puts limits on the prospective business owner, depending on the state in which they are working. Also depending on the state, there could be competition from established businesses, whether it is those who already have a foothold in the industry due to the previous legalization of medicinal marijuana, or illegal operations working without proper licensing.
For social equity business owners looking to gain a foothold, it can seem like the deck is especially stacked against them. Here are some of the biggest issues facing new cannabis businesses, and how analytics can help address those issues.
Overall cost
Opening a dispensary can cost into the millions of dollars. There are application fees, and once approved, licensing fees. Depending on whether a space is being rented or owned, there are building costs to consider, as well as the many other costs that crop up in any business.
Taxes
Because cannabis is not legal at the federal level, businesses in the industry are not eligible for federal tax deductions. That means they can’t write off the types of business expenses that are common tax breaks for organizations.
Banking
Similarly, banking is affected by cannabis’ status under federal law as a Schedule I substance. Many banks are reluctant to work with cannabis companies and risk activity that could be viewed as criminal. Just as there has been talk in Congress about changing the legal status of cannabis, there have also been movements to reform this aspect of banking, but nothing has been changed yet.
Varying state laws
The inconsistencies between states can be a barrier to those starting out because different businesses can be playing under different rules. Some states offer incentives to try to help social equity business owners, but there is no one model that everyone can follow for success. If an organization in one state is trying to follow what looks like an exemplary path taken by an organization in another state, it might find that there are regulations in place where it has opened its business that could stand in its way.
Any one of these obstacles by themselves would be a lot for a business to contend with. Consider them all together, and it can seem even more daunting. Business intelligence software can be a difference maker, not only helping organizations navigate and keep track of the details involved with all the elements mentioned above, but also providing the analytics that can help make decisions that allow the business to thrive.
The reality, though, is that a solution capable of helping an organization make these types of decisions won’t come cheaply. This is where some states or businesses can go further if they truly want to help social equity entrepreneurs get started. Naiomy Guerrero, who received one of New York’s first licenses for the sale of recreational weed as someone who had a family member with a marijuana-related conviction, spoke to The New Yorker recently about the challenges that come with that license.
“Social equity is not about plucking an opportunity out of the sky and giving it to someone who hasn’t had it,” she said. “It’s about supporting that entity and setting them up for success. The real work is that in-between.”
Some of that “in-between” work is being done by technology companies offering their product on a sliding price scale, where important data analytics is provided at a reduced rate until the cannabis company reaches certain levels of success, when the price increases towards normal rates.
Some advocates say that organizations looking to get off the ground in cannabis should be granted a tax-free status for a period, allowing the business an opportunity to find its footing before it must pay. In many states there are grants available that can provide much-needed funds to address some of these needs.
The ideas are easy to come up with. Putting them into action is the hard part, even with lawmakers who see the benefits and want to work to make the road easier for these business owners. Sometimes it’s other lawmakers with opposing views on cannabis that stand in the way, while in other cases the restrictions in state regulations make certain changes impossible. What is certain is the fact that analytics can give a business an edge in an industry where often it seems like everyone else has the advantage.
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