by Evan Kaden
The real trick to growing your business is through sales, and ever since the pandemic, the name of the sales game is delivery. A cannabis delivery service offers an opportunity to make a lot of money, so this is your sign to add this to your business.
Even though you may want to immediately jump on the bandwagon, the competition out there is rough, so you have to do it right. If you are looking for some advice on how to transition your dispensary to a delivery model, here are three tips:
First, Answer The Question of Profitability
Before you start, you will want to answer this question: Is it profitable? You need a business plan, and there are many different factors, so here are the basics:
Do your homework around local laws, because regulations around marijuana delivery can vary even between towns. You do not want to go hiring and training new employees just to get shut down.
Assess potential profits. Look at your in-store and online sales data. Do you see a lot of online orders? These customers will likely use your new delivery service.
Now it is time to look at in-store sales’ most popular products. What are the profit margins on these? Expect these margins to decrease when you have to deliver the merchandise, so ask yourself if the profits outweigh the costs of delivery.
Time to consider your customer demographics. Millennials and Gen Z tend to prefer delivery to brick-and-mortar stores. Elderly and disabled consumers also prefer having their medicine delivered. If this is already your existing customer base, you are in a good spot.
Now you need to consider costs. Offering a delivery service costs money, and you will likely need more employees, some new working tools, and more products. Consider how the overhead will impact the bottom line.
Put it all together and write up your business plan. Include all associated costs; add up costs of vehicle, gas, employees, and new tools; and put that against the potential revenue.
After you complete these steps, you will have a better idea of whether this business venture has the potential for profit. Delivery is not the right model for all dispensaries, so do not be upset if the numbers do not work out in your favor. You can always come back to this idea at another time.
Second, Determine the Delivery Area
Now that you have written up your business strategy, you are going to want to select your delivery radius. First, go back to Step 1 and look up your local laws. Your radius may be limited by regulations.
When it comes to delivery radius, you need to find a balance. A wide radius catches more customers, but overhead costs increase. A tighter radius keeps delivery costs low, but a lot of consumers cannot access it. It can be hard to figure out the “sweet spot” for delivery radius. Generally speaking, cities have smaller delivery radiuses, while remote areas have larger ones. You can gauge it by looking at local restaurants that offer delivery. Seeing how far they deliver out to is a good starting point.
Third, Choose a Delivery Model
Now that you have determined profitability and delivery area, it is time to get into the nitty-gritty of delivery. Again, it is important to look into both state and local laws. Some states and counties have laws that can impact your business model. When it comes to delivery, we can look at two common business models: the take-out restaurant and the food truck.
At a take-out restaurant, deliverables are prepared and dispatched from the brick-and-mortar location. This means you are generally limited to one delivery at a time. You can wait for multiple orders before dispatching, but preparation must occur at the shop.
In a food truck, the inventory is all on wheels. This means you can make more deliveries in a quicker amount of time. However, some laws restrict the amount of cannabis that is allowed in a vehicle. Food truck style delivery also poses additional security risks.
Cannabis delivery can greatly expand your dispensaries revenue, but it can also cost a lot of money, so it is important to assess profitability before taking the business venture. Even if it can increase revenue, you want to be smart about setting up since there is a lot of competition. With these tips, you can get some great returns on your investment.
Evan Kaden is a freelance writer and marijuana activist. He currently works as a content creator for Badass Glass, a popular online headshop.