Why New Dispensaries Fail
The cannabis industry has become one of the most attractive industries for entrepreneurs since the Dot Com Bubble of the early 2000s. Many publications predict the cannabis industry to accrue upwards of $250 billion by the end of the decade. Furthermore, more states and locales are easing up on outdated cannabis prohibition. As of Q3 2021, nearly ¾ of the United States has pro-cannabis legislation. With so many positive metrics surrounding the cannabis industry, the appeal is evident. However, many entrepreneurs jump the gun and ultimately fail within their first fiscal year. Entrepreneurs are bright-eyed and bushy-tailed in many industries. However, the entrepreneurs of the cannabis industry can suffer significantly from initial failures. Here are a few common reasons why new dispensaries crumble within a few years of their existence.
Compliance & Regulations
One of the biggest reasons dispensaries fail within their first year of operation is due to losing the battle of compliance and regulations. States and municipalities often implement compliance mandates and regulations that are not uniform. The result is that a state with pro-cannabis legislation does not necessarily govern the weed laws within a particular city or locale. There is a strong chance your business could comply with the regulations outlined by the state, but not the town your dispensary serves. This is merely a microcosm of the compliance failure faced by owners and operators in the cannabis industry. Contextually, it is more of an ‘ignorance of compliance’ than a ‘failure to comply.’
Many understand the broad concept of entering the cannabis industry: to obtain a license to grow and distribute cannabis. Prospective owners and operators quickly learn that getting a license to perform the above actions is easier said than done. Similar to liquor licenses, there are only so many to go around per locale. With this revelation, owners and operators quickly kick it into high gear; chasing the proper cannabis licenses is a journey all within itself. Once achieved, a significant burden is lifted from our entrepreneurs (and rightfully so.) With the lifting of this burden, the parties in question get complacent. Many believe funds and real estate after being awarded a license are directly affected by the problems of complacency.
Crummy Company Culture
Another reason dispensaries fail is due to the lack of inclusive and uplifting company culture. This reason is not exclusive to businesses operating in the cannabis industry. New companies fail to establish and maintain a vibrant company culture. If management does not understand the concept of company culture, then they have already failed their team. Healthy company culture is the establishment and embodiment of core values outlined by the company. Many new businesses lose sight of this in their quest to formalize their business. Subpar culture plays a primary role in turnover rates in the cannabis industry.
Product Tunnel Vision
One of the biggest reasons why dispensaries do not succeed is putting too much stock into their product and not much else. Sure, it is possible to stock your dispensaries with world-renowned, top-shelf cannabis products. However, nothing ‘sells itself.’ Products in the cannabis industry must be partnered with a consistent, effective marketing strategy.
For instance, content marketing can breathe new life into products. Content marketing provides the product with substance and stability. Content marketing also allows future customers to interact with YOUR products and YOUR brand around the clock. Content marketing is one of the most effective ways to keep your customers engaged.
Abysmal onboarding and employee training
Another reason dispensaries fail is found during the onboarding and employee training. Here is another reason why the turnover rates are high in the industry: companies don’t train employees properly. In Q2 2018, Headset, a cannabis analytics firm, reported that nearly 60% of dispensary workers quit within 60 days of employment while 40% didn’t even stay with the dispensary for 30 days. These rates are just as abysmal as the gas station/ convenience store industry (which is recognized as the industry with one of the worst turnover rates ever.) Owners tend to neglect many aspects of onboarding and employee training. Many point out that the problems with onboarding and turnover can be appropriately addressed with a consulting firm (which is typically neglected after the early stages of development.)