How to open a cannabis delivery in Los Angeles

How to Start a Cannabis Dispensary Business in 2021

California is the largest cannabis market in the United States, and since California also has the fifth highest Gross Domestic Product ranking, slightly higher than Great Britain, it could easily be the largest marketplace in the World.  As such, it serves as a good resource for entrepreneurs planning to open a cannabis dispensary business. 

Get fully involved and familiar with your state’s Cannabis Retail Dispensary laws.

In California, the best place to start is the California Cannabis Portal where you can find the latest news, regulations, and requirements for opening a medical marijuana or recreational weed dispensary.

The California Cannabis Portal suggests that you first decide whether you want to incorporate, which is probably a good idea. Go to a reputable legal site like LegalZoom or FindLaw that will advise you and handle all the incorporation paperwork, name selection, and trademark. They will also tell you how to get your Employer Identification Number (EIN) from the IRS. Your EIN is your taxpayer identification number. There are other taxes and a visit to the California Tax Service Center is recommended before you begin planning your store.

You will find this warning on the CCP site: “Every corporation and limited liability company is required to file a Statement of Information with the California Secretary of State within the first 90 days of registering with the California Secretary of State and annually thereafter for California stock corporations (including cannabis cooperative associations)” It is important. 

Next, get a retail license and a business license where you intend to locate your dispensary. Make sure to check out the zoning laws and pay a visit to City Hall to talk with the Mayor’s office and Zoning Department about what they like to see in a cannabis dispensary application.

There are other requirements such as having to deposit a $5,000 bond with the State of California, how far your dispensary must be from schools, and the hours you may be open, and how to set up a delivery service. 

Planning Your Cannabis Business

Your Business Plan should contain the following sections:

  1. Executive Summary – A brief (one paragraph to no longer than one page) summary of the key points of your business model. You might want to wait until you have finished your Business Plan to write the Executive Summary.
  2. Description of the Business Model – What are the basics such as hours of operation, location, size of sales floor, offices, supervision?
    1. Will your dispensary sell medical marijuana, recreational weed, or both? 
    2. Will you sell edibles? Pipes, and what else? 
    3. What will differentiate your dispensary from all the others? 
    4. Do you have retail experience, and how will you apply that to your cannabis dispensary? 
    5. Do you have expert knowledge of cannabis strains and their different uses? If not, how will you provide such knowledge to your customers?
    6. What services such as delivery, cannabis education classes, promotional events? 
    7. How will you handle customer information, particularly your medical marijuana patients? (This is extremely important.)
    8. How will you determine pricing? 
    9. If you have chosen a location, what are its benefits and drawbacks?
    10. How many employees do you anticipate needing and what will they do?
    11. What are your plans for security? This is mostly a cash business, as well as a place where pot is available in many forms, so you can expect everything from shoplifting to armed robbery.
  3. Vendors and Inventory Management – Do you have vendors or are you looking for vendors to supply your inventory? How do you plan to find vendors?
  4. Financials – If you don’t have experience in creating a Business Plan with Financial Projections, you might want to get business planning software. Palo Alto Software does an excellent job of helping you prepare your Plan, and it also produces excellent financial plan spreadsheets that are easy to create. Your Profit & Loss (P&L) or Income Statement is the most important part of your Financial Projection section. The P&L includes the following:
    1. Revenues
      1. Sales of goods
      2. Sales of services
      3. Other income
    2. Cost of Goods Sold (COGS)
      1. Wholesale cost of inventory
      2. Cost to provide services
      3. Other costs of sales
    3. Gross Margin – This is the money that is left for administrative expenses such as:
      1. Rent
      2. Utilities
      3. Telephone & Internet
      4. Advertising/Marketing/Website
      5. Store Furnishings
      6. Legal
      7. Accounting
      8. Administrative Employees
      9. Sales Staff
      10. General Office Expense
      11. Insurance
      12. Security
      13. Etc.
    4. Total Administrative Expense
    5. Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA)

If you are uncomfortable figuring out your financial projections, take time to sit with a consultant, an accountant or someone who knows about bookkeeping and accounting. Your financial projections are not only important for raising money, they are also excellent in helping you to avoid over-spending.

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George Boyadjian

Founder of 420 College.

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