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What are the requirements to start a dispensary

published on March 30, 2021
by James Hammer

The cannabis industry has become an increasingly hot topic in recent years. With more and more states legalizing the use of recreational and medical marijuana, an entirely new industry has managed to make itself possible. That has led many ambitious entrepreneurs to take advantage of this situation and open up their own businesses.

For entrepreneurs who are not afraid of dealing with the massive load of bureaucratic red tape, and hanging over some cash upfront, opening a dispensary is a great opportunity. If you are one of the many upcoming entrepreneurs who are interested in starting a cannabis dispensary, this article will help you know what steps you need to take.

Research laws and eligibility

Even with the increasing number of states that have legalized recreational and medical marijuana use, there are still risks you need to be aware of. Marijuana is still considered illegal on a federal level.

Medical cannabis is labeled as a Schedule 1 drug under the federal Controlled Substance Act, which means that it is classified as a drug use product, and it can only be suggested by a doctor, not prescribed. However, there are not that many case laws for this topic. That makes the legal status of dispensaries a bit foggy.

It can make things challenging for a dispensary to know how they can remain within the legal zone, which in turn can expose a dispensary owner to legal risks. If possible, consider consulting a lawyer that is well-versed in these types of ventures.

Financial risks

Opening up a new business venture takes a substantial amount of financial investment. When considering a dispensary, there are some additional challenges for acquiring the financial backing you require.

Securing funding for the cannabis industry has proven to be challenging through traditional means, and because of the risks, most banks are unwilling to allow you to transact your cannabis business through them. That means having to operate the business on a cash basis, which increases the risk of theft.

It will come down to some creativity on your end and perhaps the entire content of your saving to get everything started. The capital needed to start your dispensary can be somewhere between $250,000 to $750,000.



The local governments have a series of must-haves to apply to become a dispensary owner, as well as red flags that could disqualify you from becoming one. A comprehensive resource to look up marijuana laws and license requirements by the state would be NORML. They have the information you need to get a full understanding of whether you are eligible and what you will need.

Generally speaking, there are some standard requirements such as:

  • Owners, investors, and license holders cannot have any felony convictions on their record.
  • Dispensary location needs to be more than 500-1000 feet away from churches, schools, and any other restricted location (varied by state).
  • Need to have an entire business plan with an outline of property ownership, costs, business license, etc.
  • Compliance with every safety regulation.


Write a business plan

With the cannabis industry increasingly becoming a popular business sector for many upcoming entrepreneurs, it’s become vastly critical that you appear professional and prepared with a well-made business plan. Studies have shown that entrepreneurs who take the time to write down their business plans are more likely to follow through and get their business off the ground.

There are tons of people who get involved with the dispensary business who don’t take it seriously enough. Writing a good business plan guides you through each phase of starting and managing your business. If you are looking for some guidance on how to pull this off, check out the Legally Rooted comprehensive business plan for marijuana dispensaries.


Gain funding

Acquiring the finances you need to start a business can be troublesome. Funding dispensaries further complicate matters for entrepreneurs.

Since marijuana is still not legal on a federal level, it is incredibly challenging for owners of dispensaries to apply for loans, merchant accounts, or receive any other type of financing to cover operating expenses.

The amount of cash you need to start a dispensary varies on the country, city, and state requirements. The average startup investment for a dispensary is between $250,000 to $750,000. That amount of cash includes everything from securing insurance, hiring employees, and renting a storefront.

The barriers for dispensaries continue to increase each year. The amount of money has gone up over time due to regulations and competition. Due to the federal illegality of marijuana, you can’t get a bank loan for a dispensary. The best way for you to acquire money is by focusing on angel investors, friends, or family to get yourself to the point where you can acquire the property to open a dispensary.

Most investors are not going to be interested in talking to you until you have a lot of the majority of your business plan set up. If you have complaint property, then it becomes a possibility.

Opening a cannabis dispensary can be a very lucrative business, but the financial side of it can be a really troubling issue. However, as the industry continues to grow, the possibility of getting funding increases, with investors willing to see that growth benefit them.


Determine your budget

Another thing you need to keep in mind for your business plan is a clear, concise budget.

Business owners will need to build a budget and take 280E into account. They will not be able to do it on a shoestring. They must prepare for it to expand slowly. Consulting with wholesalers in your area can help you discover the cost of products. The business plan requires you to know your cost as far as what it will cost to obtain the products.

Here are some other things you need to take into consideration;

  • Cost of license
  • Employee salary
  • Licensing application fee
  • Rent of property
  • Security
  • Storage of products
  • Transportation


Get licensed

Receiving a license for opening a marijuana dispensary can be really expensive and challenging. Depending on the location, you could pay a few thousand dollars in legal expenses to get your license. For example, the application for Colorado for a medical marijuana dispensary can cost up to $15,000.

Entrepreneurs need to be prepared to spend a ton of time on compliance and having the required resources ready for that. Tons of consolidation have occurred because of smaller operations incapable of keeping up with compliance. It’s something you will need to remain on top of the entire time.


Getting your products

Getting your hands on quality products for your marijuana dispensary and making sure you do it legally needs to become the central part of opening a successful dispensary. Plenty of dispensaries grow their own marijuana, and in some states, that is mandatory.

However, as an owner, you need to concentrate on your retail facility first before you can start your own cultivation facility. Getting your retail off the ground with wholesale products is usually recommended for new business owners.

Just because you opened up a dispensary does not mean you need to sell marijuana in its usual form. Plenty of patients usually prefer oils, dabs, edibles, and concentrates. Finding sellers of these types of marijuana is easy to contact and do business with.

When it comes to acquiring edibles and concentrations, the companies that provide them have a sales force. Reaching out to them is quite easy and much cheaper during the start of your business.



As the cannabis industry continues to expand quickly, it can seem overwhelming to remain up-to-date with the constantly changing federal and state regulations. Advertising regulations are harshly strict. Plenty of marketing platforms restrict or outright ban any form of cannabis advertisements due to its federal status.

Leafly has managed to put together a state-by-state guide for cannabis advertising regulations that can help any upcoming dispensary owner remain compliant to the guidelines set forth by the state they operate along with any state they wish to advertise in.


Remain informed

With the information you have been provided, you have a great chance at opening a successful dispensary. With legislation for marijuana changing constantly, dispensary owners must remain abreast of new information even after they successfully opened their doors.

As a business owner, you need to ensure you are operating within safe and legal limits. Of course, something like this can be difficult for most people, especially if they are busy running a business. There are ways to make sure you not only run your business smoothly but also remain compliant with state and federal regulations.



Technology has managed to make the retail industry a lot easier to handle for even the most modest business operation. Fortunately for the cannabis industry, plenty of people have stepped up to make

Point of Sales systems is some of the most significant software a retail business owner can get their hands on. They not only help you run your business but also ensure your business operates smoothly. Solutions like FlowHub are used by plenty of dispensaries and offer all sorts of features that make running the business easier.

Making a profit is something every business owner wants when they start a business. Carrot is a great solution that can help you increase your dispensary revenue. It comes packed with all sorts of features, such as increasing ticket orders, configurable loyalty rewards, and more.



The dispensary business can be a challenging yet rewarding business to become a part of. As an entrepreneur, you need to be ready to deal with these challenges head one. The information we provided here should help you figure out what you need to do to start a dispensary in your state. Just remember to conduct the appropriate research into your state regulations.