The cannabis industry is in a serious boom time. As state after state continues to open up regulated cannabis markets, the opportunity for new businesses to enter the cannabis space is huge – and only growing. Still for many just starting the process of applying for cannabis licensing, there is one big question to consider: should you be applying for a medical or a recreational cannabis license?
While many states make this choice easy, by allowing for only medical cannabis, states with recreational cannabis often offer both options. This gives applicants an important choice between becoming a medical or recreational cannabis business. Whether you are building a dispensary, a grow facility, an extraction lab, or an edible brand, your status as a medical or recreational cannabis business can affect your success in the long term. So it’s important to consider the options carefully and make sure that you are making the best decision for your brand.
Trying to decide for yourself? To help with your decision, we’ve outlined some of the main factors that smart cannabis businesses use when determining which license type to go for. Read on to see what considerations might apply to your cannabis business.
Thinking about applying for a recreational cannabis license? You aren’t the only one. In states where there is an option, most businesses go with the recreational license. In fact, it is such a big trend that in states with recreational licenses, medical cannabis businesses seem to be dying out almost entirely. Why? Well there are a few reasons that businesses overwhelmingly choose recreational:
One of the main reasons that businesses prefer to apply for recreational licenses, is the broader audience that recreational cannabis can bring. While medical cannabis can only be purchased by someone who has had it recommended by a doctor, recreational cannabis can be purchased by anyone of age. This expands the potential reach of your brand considerably, and removes an obstacle your customers would have to navigate in order to purchase from you. As a cannabis business plan, it just makes sense.
Similarly, recreational businesses also don’t have to deal with the paperwork and business processes associated with medical cannabis. With medical cannabis businesses, all clients have to have up-to-date doctor’s recommendations for medical marijuana. Making sure each customer has their paperwork in order can be a big logistical headache. Recreational makes things simpler by eliminating these requirements.
Ultimately though, the real reason that businesses choose recreational is simple – recreational cannabis businesses have more income potential. With a much broader audience, that can include recreational and medical cannabis users, the recreational space offers more potential for growth and success.
If you can apply for recreational cannabis – you probably should. From a financial standpoint, recreational cannabis is the almost always the best choice.
While a recreational cannabis license is an obvious first choice for those who have the option, there are also sometimes good reasons why people choose to apply for a medical cannabis licenses. Even in states with both, in some cases, medical could be the right option for the particular business applying. Here are some of the main factors that lead people to choose medical:
Likely the biggest reason to apply for a medical license is simply lack of options. In states or towns with only medical licenses available, businesses will have to apply for medical in order to become licensed at all.
Still, even if your eventual goal is to become a recreational cannabis business, applying for a medical license can be a crucial step in the right direction. “Generally you want to get the first medical license because the people who get the medical licenses will have the first chance to convert into recreational states,” explains Cory Waggoner, Founder and CEO of Higher Yields Cannabis Consulting. In competitive states, such as on the east coast where there’s only 5-10 licenses they are handing out, getting one of those first medical licenses can put you in the best position to go recreational when it eventually opens up in your state. As a cannabis businesses that’s already functioning and operating, and has been through the cannabis permitting and licensing process, you will be in a great position to apply for a recreational license.
Another reason to go medical is because you are targeting a specific demographic that is more likely to choose a medical brand. There are still a lot of people who want medical cannabis, specifically. If you are target marketing medical patients, it may make sense to go with a medical license. Take California, for example, where cannabis is taxed at a higher rate for recreational users than it is for medical patients. In states with this kind of tax difference, many patients don’t want to pay the extra taxes, and so may be more loyal to medical businesses. As more and more businesses target the recreational sector of cannabis, smart entrepreneurs may be able to make a strong niche for themselves outside of the adult-use market.
A final consideration that might push some businesses towards medical is the differing regulations for medical and recreational products. While you might think that cannabis compliance would be stricter for medical, in some cases it is just the opposite. For example, in Colorado, you didn’t even have to test medical marijuana until a recent change in the regulations. While recreational cannabis had to be tested for contaminants like mold and pesticides, medical was allowed to go to market untested. These more relaxed regulations may have worked better for some brands. Medical markets also sometimes allow for edibles to be sold with higher dosing. In California, for example, edible dosing for recreational cannabis products are capped at 100mg per package. However medical cannabis businesses can offer products with dosing as high 2,000mg per package. If you are a brand who focuses on high potency edibles, a medical license may work better for your product line.
Of course another option is to simply apply for both medical and recreational licenses. This move may be your best option, if you can afford it. For one thing, it lets you serve everyone – which increases your income potential considerably. On the down-side you will have to pay fees for each individual license, and may need separate locations and cannabis tracking systems for each side of your business. Still, this option hedges your bets in a big way, especially if your local government seems likely to waver on recreational cannabis. “If they have a moratorium for a few years and then they decide they don’t want cannabis anymore, they’re probably going to start with recreational” explains Waggoner. Having both medical and recreational could help your business survive even if recreational cannabis businesses are shut down.
So which option should you go with – a medical or recreational cannabis license?
“I think it really just comes down to opportunity,” says Waggoner. “Where’s the opportunity to make money?” The answer really depends on your particular cannabis business plan, and the regulatory landscape in your state and city. The opportunities available to you makes all the difference in answering this question.
Need some help deciding? At Higher Yields Consulting, our knowledgeable staff has helped over a 100 cannabis businesses through the process of cannabis permitting, licensing, and achieving full cannabis compliance. Our clients have achieved licensing success in more than 13 merit-based states and 7 countries, and we are happy to assist your business navigate the complexities of cannabis licensing.
Schedule a Free initial consultation
Whether you’d like to schedule a free initial consultation or you have questions, we’d love to hear from you.