Putting together an award-worthy application for cannabis licensing requires a lot of time, hard work, and capital. Industry hopefuls must understand the true cost of winning a cannabis license, as well as the potential revenue streams that license could make possible.
From there, you can determine whether you want to work directly in cannabis or an ancillary industry. In the case of the latter, our Pivot Program can help! If you plan to go right into cannabis, though, your state directly impacts the cost of the application.
The bottom line is knowing what you’re getting into. Follow along, and we’ll guide you through all of the costs associated with your licensing application.
Seek Out Expert Consultants
The first and most important investment any applicant can make is in a consultant. In fact, your choice of consultant can make or break both your budget and your application. More often than not, you’re better off with a consulting firm with a history of helping clients submit winning cannabis licensing applications.
As opposed to lawyers, consultants offer the most thorough and affordable full application support. But before you hire one, be crystal clear on exactly what you’re getting. Some consultants aren’t clear as to what is and is not included, which essentially forces you to spend more money later on in the process.
As Emily Seelman, our Senior Technical Writer put it, at Higher Yields, “We pride ourselves on making it straightforward. We tell you ‘Here is what we include in our full coverage, and here’s what we don’t.’”
Consider 280E Structuring & Cannabis Licensing Fees
As is the case with any business, you want to stay on the IRS’s good side. In cannabis, that means structuring your business to be compliant with Section 280E of the Internal Revenue Code, which stipulates that cannabuisinesses cannot write off expenses because cannabis is still federally illegal.
Or, in the words of our Founder and CEO Cory Waggoner, “You can’t write off your mileage on your way to a bank robbery.”
Depending on the company’s size, it costs $5,000 to $10,000, plus state fees, to structure as a 280E business. That being said, it comes with plenty of benefits — like making you a more credible cannabis licensing applicant. If needed, the CPA who sets up your 280E compliance can even serve as the interim CFO on your application.
When it comes to the application itself, fees will largely be determined by the market in your state. If you apply in a state with high competition — like New York, Florida, Virginia, or Arizona — then the cost will surely be higher (think five to six figures).
On the other hand, low competition states offer a more affordable option with licenses being available for mere thousands. While these states — like Oklahoma or Massachusetts — make it less expensive to get in, their licenses are inevitably less valuable.
Other states, still, offer an option in the middle. Rather than charging a straight cannabis licensing fee, they make a portion of it refundable if you don’t win. This lowers the risk while maintaining the value of awarded licenses.
Work With Experienced Attorneys & CPAs
Cannabis-specific attorneys and CPAs play key roles in the application process as well, but not immediately. Although they both can do a lot, they tend to be expensive and lack expertise outside of their focus areas — legalese and accounting.
Conversely, an experienced consultant will be able to tell you, “You should have an attorney review this,” or “This is something a CPA needs to set up.” That way you get everything you need without unnecessary costs.
Secure Real Estate
Another crucial component of your application will be securing real estate. In fact, it turns out to be one of the biggest upfront costs for new operators. For this reason, carefully mapping out and choosing cannabis real estate is one of the most important steps you’ll take.
As far as the cost of real estate goes, it varies. The size, geographical location, and number of potential buyers or tenants all impact the final price of the property.
Even then, Seelman explains, “In competitive states, landlords or property owners will sometimes charge a deposit to engage in a letter of intent or a contingent purchase or lease agreement.”
Mapping Out Floor & Security Plans
With a location secured, you’ll need to map out a functional and profitable floor plan. In some cases, this task will be included in your consulting fees. If not, you’ll have to outsource it to an architect or engineer.
However, they don’t need to be stamped, official drawings. The floor plan is mostly for the state to see that your layout is designed for both safety and compliance.
Additionally, you’ll need an outline of your security plan. Like the floor plan, this may be included in your consulting fees, but overlays can cost an additional few thousand dollars., otherwise.
Licensing boards usually require cannabis security plans to be detailed and specific. All the way down to camera placement, window tint, and even your landscaping. Shrubbery, for instance, could be used as cover by would-be burglars, and you can be sure that the cannabis licensing board will point this out.
Assemble the Right Team Members & Operators
An expert team is the core of your operation, so you should assemble your team carefully and deliberately. Work closely with your consultant to assess the value of each candidate — especially the ones who charge to be on the application.
Also, be sure to thoroughly vet their history. Cannabis experience is a must, but an unclean record can sink your entire application. The same goes for any companies you work with. Always know what exactly they bring to the table and how it will improve your own operation.
Furthermore, Seelman warns “Some companies will charge for a letter of support. While there are some good reasons, you probably won’t need it. If this comes up, talk to your consultant to see if it strengthens your application.”
In addition to your official team members, you’ll want to hire lobbyists. Their connections will add merit to your cannabis licensing application and boost your credibility. Although this system is far from ideal, cannabis is a highly politicized industry that’s fueled by a network of social connections.
Whether you have a single lobbyist or in excess of ten, Seelman explains that they should either have cannabis experience, tobacco experience, or a vast network of connections — preferably all three. Together, you and your consultant can weigh their expertise with their fees and make a decision.
The True Cost of Cannabis Licensing
From consulting fees to real estate, applying for and winning a cannabis license gets expensive. If you do it thoughtfully and with intent, you can maximize your chances of winning while keeping your expenses reasonable.
Certainly, though, the most important aspect is knowing what you’re getting into. Otherwise, the costs will keep adding up, which can quickly leave you overwhelmed.
Are you ready to invest in your cannabis operation? Book a consultation today, and learn more about what’s included in our consulting packages!