…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]
- 22 Apr 2013 at 6:46 PM
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