Tips For Cannabis Business Owners Facing Sky-high Real Estate Costs
There are several steps you must take to start a cannabis business, and some of them are legal and/or regulated. Read on to learn about the licensing fees and application process. Also, learn about cannabis taxation and other costs involved in legalizing a cannabis business including the cultivation of Tropicana cookies seeds, and other breeds of cannabis. These costs will make the initial startup process more difficult. Thankfully, there are some ways to make the process go smoother.
Marijuana businesses are experiencing sky-high real estate costs, especially in the most mature markets. While wholesale cannabis prices have decreased significantly, real estate costs have been increasing for many marijuana businesses, making it difficult to keep up with the lease payments. According to Tim Cullen, CEO of Colorado Harvest Co., who leases all of his properties, marijuana businesses are experiencing a serious financial problem. Landlords are happy to accept the increased cost of letting marijuana businesses lease space.
As a result, most cannabis businesses will face sky-high real estate costs. But the problem is not just real estate. Other barriers to entry will come into play. One of these barriers is the zoning rules. Cannabis businesses must meet zoning regulations. Real estate costs are extremely expensive in marijuana states, which makes them less attractive to investors. The high real estate costs of California make locating a cannabis business difficult, particularly for small businesses.
If you are a cannabis business owner facing sky-high real estate costs, you’re not alone. The cannabis industry is a high-risk industry, with the cost of capital being a significant issue. In fact, companies with open licenses face higher costs of capital and lower product prices than their limited-license counterparts. To help mitigate these risks, consider adopting a data strategy.
If the cost of renting a building is keeping you from growing cannabis, you might want to consider partnering with another cannabis business. This can help you weather booming and unfavorable markets. If you have a partner in the cannabis industry, you can split the costs and share the responsibility. Cannabis cultivators can also benefit from the partnership. “Partnerships are a key part of success, and they can help us weather an economic downturn,” says Skip Motsenbocker, CEO of Pacific Stone.
Obtaining a CUP
Obtaining a CUP for cannabis businesses is critical in this fast-growing, politically sensitive industry. This permits your business to operate in an area where it won’t be a hindrance to others. While you might be tempted to buy a property for the most attractive prices, you should consider the financial risks associated with this approach. For one thing, cannabis business owners must avoid areas with sensitive neighborhoods, such as daycares, schools, and youth centers. Not to mention the significant upfront costs involved, this approach can tie up your cash during a critical time for your business.
Despite the benefits of obtaining a CUP, most cannabis business owners can’t afford to buy commercial property. Because marijuana remains illegal at the federal level, banks are hesitant to give cannabis businesses a loan. And these loans tend to have high-interest rates. Moreover, as a result, property prices tend to skyrocket in areas with legalized marijuana.
Application and licensing fees
The cost of a marijuana business location can drive even the most seasoned entrepreneur crazy. Not only are the application and licensing fees sky-high, but the real estate prices have skyrocketed as well. In fact, the average rent per square foot for a cannabis business has skyrocketed to more than $4,000! In order to avoid sky-high real estate costs, cannabis business owners should think outside the box.
Although the legalization of recreational marijuana is just beginning in New York State, startup costs for marijuana businesses are higher than those of traditional businesses. First, cannabis businesses must pay an application and licensing fee that can easily reach six figures. This doesn’t even account for other expenses, such as staffing, security, inventory, and a POS system. These fees are non-refundable, and the fees can add up fast.
Payroll tax fraud
For a long time, marijuana industry business owners have been hounded by accusations of payroll tax fraud. However, with California’s new laws, the industry is finally starting to come down in price. The state’s high real estate costs have made the cost of operating a cannabis business prohibitively expensive. So, how can these entrepreneurs survive? The answer lies in good bookkeeping and compliance.
The first step is establishing strong checks and balances within your business. Cannabis business owners are responsible for both income and employment tax. Whether you’re using the money for personal use or for your cannabis company, you need to have strong internal controls in place to avoid paying the government for unnecessary expenses. If you’re facing such sky-high costs, you may be tempted to cut corners elsewhere.