Best States to Start a Cannabis Business

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cannabis state map of the US

With the proposed Marijuana Legalization Bill on the horizon, this could unlock many opportunities for small business owners. In order to help aspiring entrepreneurs maximize their chances for long-term prosperity, we analyzed the pros and cons of starting a cannabis business in multiple different cities across the U.S. Here are the top cities based on location and rental prices:

California

California is one of the most successful legal US states, with the most prominent cannabis business growth. This state should be your number one option when considering opening a cannabis dispensary. Recreational cannabis became legal in 2016, and since then California has led all other states in cannabis revenue, generating $4.4 billion in 2020 alone, up 57 percent from 2019, according to CannabizTeam

  • Pros: While starting your own business in California can be pretty costly, it is a highly populated area with the right demographic to be selling cannabis. With the right marketing, it is an almost guaranteed success in this state. 
  • Cons: Real estate can be expensive in the state, whether renting or buying, and the cost of living is high, which will also raise the cost of payroll, according to CannabizTeam. The market is crowded and the state is a known cannabis destination, even before the legal market began, so it is critical to have an airtight business model and an innovative product in order to make a splash in California.

Colorado

Recreational marijuana was legalized in Colorado back in 2012, and as of June 2020, 2,709 licensed marijuana businesses were registered in the state. Total revenue from taxes, licenses, and fees increased from $67 million in 2014 to $387 million in 2020. Just like California, this state is filled with the perfect demographic to sell your products. 

  • Pros: CannabizTeam states that the application fees are comparatively reasonable and the necessary licenses are not overly difficult to obtain, making Colorado an attractive place to start a cannabis business. 
  • Cons: Just like California, Colorado is highly populated with cannabis users, making it an overly saturated marketplace to start a business. In order to make it big, business owners need to get creative and come out with innovative cannabis products to differentiate themselves from the competition. 

Washington

Washington state became one of the first two states to legalize adult-use cannabis in November 2012, when voters approved I-502. However, unlike the vast majority of states that have legalized cannabis, Washington continues to criminalize adults for discreetly growing a few plants at home. 

  • Pros: Washington is also known under a different name – America’s biggest cannabis state. This is one of the reasons why so many to-be cannabis entrepreneurs consider this state. All cannabis products are high on demand here, from oils and creams to edibles, concentrates, and flowers. 
  • Cons: The main drawback to Washington is its high tax rate (37%), the highest amongst states with legalized recreational cannabis.  Commercial real estate can also be expensive, particularly in the Seattle area, though prices are more reasonable the further you get from the major metropolitan areas. It has also been known to be a difficult place to get your cultivation license. 

Oregon

In 1973, Oregon was the first state in the U.S. to decriminalize cannabis possession. The state kind of gets lost in the mix of the first three mentioned for legally being able to sell cannabis, but marijuana is in fact legal for adults and is taxed and regulated similarly to alcohol. Oregon also has a medical marijuana law. 

  • Pros: One of the perks of choosing this place is that starting and running a cannabis dispensary in Oregon is more affordable than in California and Washington. Applications for every cannabis business type are open, meaning it is currently possible to apply for a cannabis business license, with the nation’s lowest application fee of just $250. 
  • Cons: Entrepreneurs must think long and hard about where to open their business, since Oregon is not quite as populous as California or Washington. It is important to go where consumers are, so check out some populous cities before renting a space. 

Nevada

The best thing about Nevada is Las Vegas, and cannabis is quite popular around that area. The state legalized the recreational use of marijuana in 2016, and both sales and excise taxes are still relatively low, so it is a great area to start your business without having to worry about fierce competition. 

  • Pros: If you open a store close to Las Vegas, you can benefit from tourists coming to the area. There is also an average $5,000 application fee. 
  • Cons: According to state law, businesses can only sell cannabis products that do not exceed certain amounts, so be sure to review all of the laws before you begin your venture. 

New York

While New York can certainly be an expensive area to invest in a new business, it is one of the newest states on the scene when it comes to the recreational cannabis market, and they have passed one of the most progressive frameworks for legalization in the country. 

  • Pros: New York is already a densely populated state chalked full of cannabis consumers, so it will be quite easy to build a successful cannabis business. Many experts are predicting the state may be one of the hottest cannabis markets in the United States.
  • Cons: Even though recreational cannabis was fully legalized in 2021, recreational dispensaries are not able to operate until summer 2023 at the latest. The cost of applying for a cannabis dispensary license is also a hefty $210,000.

Massachusetts

Massachusetts legalized recreational cannabis in 2016, and opened its first recreational dispensaries in 2018. Three-and-a-half years after the first pot shop opened, Retailers reported $2.87 billion in sales between November 5, 2018 and April 10, 2022, according to data from the Cannabis Control Commission

  • Pros: The state’s biggest attraction for new cannabis business owners is its easy application process, with many applications approved in less than 90 days. Despite having been around in the recreational cannabis game longer than some other states, its reasonable tax percentage and its business-friendly attitude toward licensing makes Massachusetts a very appealing state in which to start a new cannabis business.
  • Cons: The cannabis market in Massachusetts is very saturated, so it can be difficult to stand out from other brands, especially in larger cities such as Boston. 

Arizona

Having just passed legalized recreational cannabis use in November of 2020, Arizona executed a quick turnaround in its distribution of recreational licenses, and is poised to become a lucrative cannabis market in the years to come as more cannabis businesses open up. 

  • Pros: In the last couple of years, cannabis sales in Arizona grew by 50%. The cannabis industry is huge here, with plenty of great business opportunities.
  • Cons: It is slightly difficult to get your application approved, since the state just recently started accepting applications in the spring, but only from those who applied back in December of 2021. If you apply now, there may be a decent wait time.

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