The cannabis retail environment varies by country and state, and if you plan to open your own cannabis dispensary, you must comply with the laws of your particular location. Therefore, while most businesses start on the financial side, a cannabis business should always start on the legal side. After researching the legal side of the issue, it’s time to think about business. In short, opening a cannabis dispensary requires a retailer license, a great location, a high-quality cannabis product, a solid team, and a special tracking system.

Let’s start with startup expenses to estimate the amount of investment that should cover capital and operating expenses until the dispensary’s revenue is sufficient to generate a positive cash flow.

Cannabis Dispensary Startup Costs

Startup costs for a dispensary can vary widely depending on the size, location, and level of investment. In addition to the costs of obtaining a license, you will need to purchase or rent premises for your dispensary, do renovations, install a security system, purchase equipment, negotiate with producers and distributors, hire and train staff, etc. Most dispensaries typically range in size from 2,500 to 5,000 sq. feet. According to industry estimates, the average setting up costs for a dispensary is around $750,000 or $200 per sq. foot. Our example is a small brick-and-mortar cannabis dispensary of approximately 2,500 sq. feet.

= required investment approximately $600,000

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Cannabis Dispensary Ongoing Costs

Profit margins in the retail side of the cannabis industry are more modest than for other types of cannabis business due in part to the fact that average startup costs for cannabis stores and dispensaries are higher than other sectors of the cannabis business. Median operational costs for retailers are also the highest in the industry, at around $600,000 annually, not including supplying your dispensary. Purchasing retail space can cost from $150/sq. feet up to $500 per sq. feet, and rental costs can range from $4.5 per sq. feet up to $10 per sq. Ongoing operational expenses such as employee salaries, lease or mortgage payments, building and equipment maintenance costs, administrative expenses, professional services and insurance costs, license renewal costs, etc. will average around $40,000 to $60,000 per month, depending on your location and space. To complete a budget, your will need to include the costs for a sufficient supply of cannabis inventory to sell.

The Economics of Cannabis Dispensary

Average sales per square foot for a cannabis dispensary is about $1,100-$1,300. More established operations boast 20-40% profit margins, while newer shops may only see 10% due to their lack of strategic partnerships and vendor relations.

Sample of a revenue model for a cannabis retail shop:
Revenue = $3,300,000 (100%)
-Direct Costs = $1,419,355 (43%)
Gross Profit = $1,880,645 (57%)
– Operating Expenses = $606,773 (18%)
Operating Income = $1,273,872 (39%)

Cannabis Retail Taxes and Net Income

Cannabis companies paid more than $1.8 billion in federal taxes in 2022 compared to non-cannabis businesses, under Section 280E of the Federal Tax Code, which states that cannabis businesses cannot deduct most business expenses, other than cost of goods sold, from their federal taxes or receive tax credits as traditional businesses do because the plant is listed as a Schedule 1 drug under the federal Controlled Substances Act. Many states simply mirror federal tax policy in their own tax codes, but some states have already approved state-level tax deductions. Check which states have approved 280E deductions, which allow cannabis companies to deduct business expenses from their state income taxes:

280E Deductions

Additionally, many states impose a special retail sales excise tax, which is typically applied to your gross profit and can further reduce your net income, depending on the rate. Thus dispensaries have a net profit margin ranging from 12% to 21% after taxes.

Cannabis Dispensary Financial Model Sample

Calculate the costs and profits of your retail cannabis business with our pre-populated cannabis dispensary financial models. All you have to do to get started is enter your monthly sales target and dispensary size. The model will help you estimate how much it costs to open and operate your own cannabis dispensary, plot all income and expense items monthly over a flexible seven-year period, and then summarize the monthly results by quarter and year for easy viewing.

cannabis dispensary financial model


Cannabis Dispensary FAQs

How much does it cost to get a dispensary license?

Non-refundable dispensary application fees range from $1,000 to $15,000, with registration or annual fees typically ranging from $5,000 to $20,000 but can be as high as $100,000.

What is the startup cost of a marijuana dispensary?

Start-up costs can range from $250,000 to over $2 million, including licensing fees, premises, inventory, staffing, marketing and ongoing operating expenses.

Are dispensaries profitable?

Cannabis is a lucrative industry, and dispensaries’ net profit margins can range from 12% to 21% after taxes, while new markets and states with lower taxes and operating costs offer opportunities for even greater profits. 

'70% ready to go' business plan templates

We also offer Word document and PowerPoint pitch deck templates for your cannabis dispensary business.

Should you have any questions, please do not hesitate to contact us

Cannabis Dispensary Business Plan Sample

Cannabis Dispensary Business Plan Template

Cannabis Dispensary Pitch Deck Sample

Cannabis Dispensary Investor Pitch Deck Template


CBD Products Retail/Online Store Business Plan Templates are available at hempcbdbusinessplans.com.