NEW YORK (MainStreet) — There are few opportunities in life to get in on the ground floor of an all-new, exploding industry. The "Green Rush" of the legal cannabis business certainly fits that bill.
"These are exciting times, and new millionaires and possibly billionaires are about to be made, while simultaneously society will become safer and freer," says Troy Dayton, CEO of The ArcView Group, an Oakland-based cannabis market research and investment company, in the firm's annual industry overview.
The ArcView report says the U.S. legal cannabis market grew from $1.5 billion in 2013 to $2.7 billion in 2014. That's 74% growth. Patrick Rea, the executive editor of the report and the co-founder of CanopyBoulder, a mentorship-driven business accelerator for the cannabis industry, says there are plenty of opportunities. However, it's not quite a matter of simply staking a cannabis claim and watching the profits roll in. Especially if you dream of going the retail route.
Look out for the stiff taxes and obstacles-to-entry
"The tax burden on dispensaries because of IRS tax code 280e is quite high," Rea told MainStreet. "So people who launch dispensaries, I wish them all the best of luck, but it's a tough row to hoe."
He cites high overhead -- so to speak -- and declining wholesale prices, which triggers fierce price competition and pressures profit margins.
"And you know, retail isn't the greatest business in general," he adds. "There's more money in the growing of the plant than retail."
Rea says the real opportunities may lie in ancillary products and services.
"I see opportunities in market research and product testing," he said. "I see opportunities for people to work with sales data that come from dispensaries to guide the rest of the industry." He also points to apps and software platforms that help people run their businesses more effectively.