As the cannabis industry continues to grow, more people are making career moves and applying their skills in the legal cannabis market. If you’ve got retail experience, you may have wondered just how lucrative owning a dispensary might be. Dispensary profit margins vary greatly depending on where you’re doing business, whether you’re selling medical or recreational cannabis, and other considerations we’ll discuss in this blog. We’ll also cover how much it costs to open and operate a dispensary, which states and regions may have higher prospects, and how much money dispensary owners and cannabis retail employees can make.
How Much Does a Dispensary Owner Make?
Based on a 2024 MJBizDaily survey and Cova’s internal data, the average dispensary owner makes a gross profit of between $200,000 and $500,000 per year, which is between $18,000 and $40,000 per month (before taxes).
How much you’ll make as a dispensary owner depends greatly on your location, the competitive landscape, and most importantly, how much revenue your dispensary is generating per year. For example, if your dispensary is generating an annual revenue of $5 million-plus a year, you could easily make an annual salary of $500,000 or more.
A lot of dispensary owners pay themselves an annual salary of about 10% of their store’s revenue. But there are a lot of responsibilities that come with owning a dispensary – like navigating legal hurdles, ensuring compliance with regulations, and avoiding tax and licensing violations. If that’s not your cup of tea, you can still work in cannabis retail as a budtender and make decent money.
How Much Do Dispensary Employees Make?
There are positions within cannabis retail outside of dispensary ownership that can still provide a healthy income. Budtenders can easily make more than $20 an hour, while store managers or inventory managers can earn more than $30 an hour.
How Much Does it Cost to Operate a Dispensary?
Before you can open and sell cannabis at your dispensary, you’ll have to obtain a legal license and pay the associated fees. These can include application, licensing, and annual fees, which can total anywhere from a few thousand to $100,000-plus in some states. Subsequently, you’ll need to acquire real estate for your dispensary premises, make any needed renovations, purchase equipment, negotiate with suppliers, and hire and train your staff. All this can add up to $1 million or more in initial capital requirements. Dispensary operating expenses, including employee wages, marketing costs, and other professional services, typically range between $10,000 and $20,000 a month, depending on your location and space.
Costs Per State
Covering your dispensary opening and operating costs requires generating a significant amount of revenue. Efficient operations and smart decisions will help increase profits while simultaneously reducing your expenses. Costs can vary depending on the state you are operating in. If you open a dispensary in California, you can expect to pay the fees listed in the “High” column in the table below, while Colorado would fall in the “Medium” category. While initial license fees in New York and New Jersey are quite low, other operating costs will range between medium and high. On the other hand, dispensary operating costs in states like Missouri, Mississippi, and New Mexico would be “Low.”
Before launch, don’t forget that you’ll need a compliant POS system to tender sales, a security system, and a sufficient supply of cannabis inventory to sell. Our comprehensive blog on the true cost of opening a dispensary paints a more complete picture.
What Is the Average Dispensary Profit Margin?
Dispensaries across North America have been making an average net profit margin of 10% to 20%. According to MJBizDaily’s annual survey, 60% of cannabis retailers reported they were profitable in 2023. Naturally, your store’s profitability potential depends greatly on your specific location. For instance, you tend to see higher profit margins in states with a more limited supply of retail licenses, like Illinois and Missouri. Similarly, in states where the legal cannabis industry is younger, like New Jersey and New York, you can see higher profits simply because the market isn’t as saturated.
Factors Limiting Dispensary Profitability
One 2023 survey found that across the entire legal industry, less than 25% of cannabis operators in the U.S. are profitable. In the survey, operators pointed to factors like rising wholesale costs, restrictive state regulations, persistently high tax rates, and oversaturation due to too many licenses being issued as having the biggest impacts on profitability. For instance, in Denver, local and state taxes on cannabis businesses can total 29%. And thanks to Section 280E of the IRS’s code, cannabis growers and retailers are extremely limited in what business expenses they can deduct.
Despite its challenges, running a dispensary can still be quite lucrative. As we’ve seen, profit margins vary depending on which state you’re operating in – but most cannabis retailers are generally more profitable than other retail sectors, including pharmacies.
Tips for Maximizing Dispensary Profit Margins and Earnings
Recreational stores and retailers that sell both adult-use and medical cannabis typically see the highest profit margins. If you’re only licensed for one or the other, diversifying your product offering can help increase profits. For instance, profits on edibles are consistently higher than other products. You should also understand your local market and have an eye on your competition, offer competitive prices and compelling promotions, and streamline your operations and inventory in order to maximize your dispensary’s profit margins.
Owning a dispensary can be very profitable if you follow best practices and avoid the most common mistakes. Listening to what your customers want and having the tech to support your business’s growth should be part of your strategy. With Cova as your dispensary technology partner, you’ll always be a step ahead of the competition. For more tips and guidance on cannabis retail success, book a free demo today at the button below.
