…it turns out that trying to make a profit in this business is harder than expected. When grown and sold legally, marijuana can be an expensive proposition, with high startup costs, a host of operational headaches and state regulations that a beet farmer could never imagine. In Colorado, for example, managers must submit to background checks that include revealing tattoos. The state also requires cameras in every room that has plants; Mr. Klug relies on 48 of them. Prices for pot, meanwhile, have plummeted, in large part because of growing competition. And bank financing is out of the question: Federal law doesn’t allow these businesses, and agents sometimes raid growers even in states where it is legal…Another outfit, La Conte’s Clone Bar & Dispensary, formed a partnership with another marijuana firm to share some costs. But it produced a profit margin of only 6% on revenues of $4.2 million last year, according to Chief Financial Officer Jeremy Heidl, who says he considers that an unacceptable return given the financial and legal risks. To expand the business, the firm has branched out to sell everything from smoke-free dispensers to body salves and brownies infused with pot. Still, he says, “the economics of cannabis are so difficult.” [WSJ]

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Comments (16)

  1. Posted by guest | April 22, 2013 at 6:56 PM

    Dude, credits and debits totally almost rhyme man. How can you expect me to keep track of all of them

    -CFO candidate #2

  2. Posted by Fire Jon Shazar | April 22, 2013 at 6:57 PM

    Pot is a dopey business?

  3. Posted by guest | April 22, 2013 at 7:06 PM

    I just wish there was some way to reduce the stress of an executive job in this business…

    -CFO Candidate #3

  4. Posted by Geoffrey Giraffe | April 22, 2013 at 7:33 PM

    Maybe chocolate covered portabello mushrooms?

  5. Posted by Danker_Banker | April 22, 2013 at 8:28 PM

    Competition in the industry is high so it's important to lock up suppliers with joint ventures.

  6. Posted by Danker_Banker | April 22, 2013 at 8:43 PM

    If you don't keep a lid on expenses, profits can vaporize.

  7. Posted by Quant me maybe... | April 22, 2013 at 8:48 PM

    I really don't give a fuck. I just want in. It's an emotional thing. Hate away bitches, but even if you don't smoke, wouldn't it be nice to make a few thousand extra a year doing something agricultural? I mean like in my office — grow lights. Convert a conference room that nothing productive happens in anyway into a grow operation. Imagine the team building opportunities. I can see it now. Me yelling, 'take a break from that P&L model Jenkins! The weed needs to get watered!' Fuck, I'm getting hungry just thinking about it.

  8. Posted by Danker_Banker | April 22, 2013 at 8:50 PM

    Rolling average profit margins are dropping, so the blunt message to most company owners is to pack it up and leave the industry.

  9. Posted by Sergio Ermotti | April 22, 2013 at 9:07 PM

    What about converting a whole trading floor?

  10. Posted by Too High To Bail | April 22, 2013 at 9:08 PM

    Industry analysts hungry for information are trying to glean useful nuggets from earnings calls, but some continue to view the industry as nothing but smoke and mirrors.

  11. Posted by Quant me maybe... | April 22, 2013 at 9:18 PM

    Now you're talking. Doesn't UBS have that massive soon-to-be-vacant floor in Stamford? Figure 4sf for a plant yielding $1000.00 per plant, maybe 4 crops per year. Hell, the numbers work; bet that's more per square foot than is made there now. Shit, the Honda dealer would be gone overnight — Lexus all around — It's the Christmas thank-you to all 'traders' from 'Ur Buds Supplier' of Stamford! Hell, I bet you could even keep that nifty tax write off they get.

  12. Posted by UBS Compliance | April 23, 2013 at 6:17 AM

    Ok, we're comfortable with everything until you started talking about taxes, we've had some issues there in the past, but the first part sounds great!

  13. Posted by Snoop Lion | April 23, 2013 at 1:04 PM

    Puff Puff Pass Niggah

  14. Posted by Jay | April 23, 2013 at 4:02 PM

    The problem is that owners are too puffed up and full of themselves to recognize this, they need to dare themselves to quit while they're ahead.

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