Into the Unknown: Pricing Recreational Cannabis

Posted on January 7, 2014 by admin

On January 1^st recreational marijuana became available for retail purchase in the state of Colorado. From a business standpoint, this is uncharted territory. Recreational marijuana is a completely new sector leaving business owners interesting decisions to make regarding pricing. With a limited supply a massive demand expected, how cannabis is priced can make or break a marijuana dispensary in under a month’s time.

Setting a price for an uncharted market is difficult enough, yet with the peculiarities of supply and demand for this industry in Colorado business owners are navigating truly uncharted waters. All indications seem to forecast a massive demand and a very limited supply. This means that marijuana dispensaries have to walk a knife’s edge on pricing. Price cannabis too high and you will send potential long-term customers into the arms of competitors. Price cannabis too low and you can run out of inventory in the blink of an eye and be forced to close or ration your product.

Pricing strategies are pivotal, especially in the early months before businesses can begin pumping out their own production of cannabis. There are three basic pricing strategies dispensaries can take in the early months once recreational marijuana is open for retail:

1) Begin by taking the prices from medical cannabis and increasing them slightly. This will serve as your baseline that you can tweak depending on the market which may be shifting and changing on a daily basis. Customers then pay the hefty taxes on top of the retail price, taxes that come out to substantial 36%.

2) Bank on a huge demand and low supply and double or triple the price of medical cannabis. This will create early positive cash flow and may protect your inventory. Yet, price too high and you can bottleneck sales and send potential customers to competitors or back to the black market.

3) Absorb some of the taxes to create a competitive advantage. The idea here is to make deals for your customers to create loyalty. By absorbing some of the fees from the heavy 36% tax you can modulate pricing freely while still cutting your customers a break.

Marijuana dispensaries don’t have anyway to forecast the pricing storm that will engulf the market during the early months. While the opening of recreational marijuana will make for a fascinating case study in supply and demand for economists, that will offer little comfort to business owners. Market fluctuations on a daily basis and a severely limited supply will govern prices and the reactions of customer demographics will be critical to monitor regarding their preferences in price, tax duty, or whether they return to the black market until prices stabilize and supply becomes regular.

Get your Marijuana Merchant Account Approved by contacting us TODAY!

US Treasury to Discuss Marijuana Dispensaries and Banking Practices

Posted on December 17, 2013 by admin

Basic business practices in a credit-dependent economy mandate the necessity for a merchant account. Opening a merchant account allows for your small business to accept credit and/or debit transactions. In an economy and society that’s increasingly cashless, this is a must-have for any business. For a marijuana dispensary merchant accounts can be exceptionally difficult to open. Banks will not grant applications and open merchant accounts for marijuana dispensaries for fear of prosecution by the federal government as complicit in money laundering.

The Department of Justice released a memo on August 13, 2013 which promised deference to state laws and regulations regarding marijuana dispensaries. Marijuana has been legalized recreationally in two states, Colorado and Washington, and is permissible for medicinal purposes in 18 other states and the District of Columbia. The marijuana industry is estimated as a 1.7 billion dollar industry; an industry that is highly lucrative for high-risk entrepreneurs.

The US Treasury will discuss with banks about federal plans regarding the DOJ’s new deference to state regularization. The federal government remains active prosecuting marijuana dispensaries that advertise to children, carry marijuana across state lines, are associated with criminal organizations, and other areas that pertain to marijuana’s federal status as a controlled substance. Yet, lawyers for the American Bankers Association maintain that, in reality, the status quo for banks refusing to open accounts for marijuana dispensaries will remain as it is at present.

For investors and entrepreneurs involved in the marijuana industry and dispensaries, the complications from banks and opening merchant accounts will remain for the short term. Until the US Treasury and Department of Justice solidify a firm stance on whether banks can be prosecuted for money laundering by handling proceeds from illegal activities, banks will not risk opening accounts for marijuana dispensaries. Dispensary owners will be forced to continue to pursue alternative means such as online merchant account brokerage companies that can offer the services they require.

55% Favor Marijuana Legalization in California

Posted on December 10, 2013 by admin

Marijuana Business Daily – December 5th, 2013

The majority of Californians now favor legalizing marijuana for the first time ever, according to a new Field Poll.

The survey, which includes responses from 1,002 registered Californian voters between Nov. 14 and Dec. 5, found that 55% now favor legalization.

Just 31% said they support strict enforcement of the current laws or the passing of tougher laws governing marijuana. Another 12% said they support the current ban on recreational cannabis but believe the government should ease penalties.

New York Revives Medical Marijuana Discussions

Posted on December 10, 2013 by admin

Marijuana Business Daily – December 5th, 2013

The New York State Assembly Health Committee has begun hearings on the benefits of medical marijuana, which could pave the way for legalization next year.

The first meeting – held Wednesday in Buffalo – included testimony from medical marijuana patients from Colorado. The hearings continue today, with more patients and advocates set to testify.

Mark Kleiman, pot’s go-to guy

Posted on December 10, 2013 by admin

Los Angeles Times – December 4th, 2013

Come New Year’s Day, in Washington state and Colorado, marijuana will be legit, courtesy of two ballot initiatives. How do you create a legal business out of an illegal one? After 13 years of Prohibition, the country at least had an earlier legal liquor market to refer to. That’s where Mark Kleiman comes in, the go-to expert on these matters. A UCLA professor of public policy and author and coauthor of books like “Marijuana Legalization,” he’s heard all the jokes about “hemperor” and “your serene high-ness.” He was consulted by Washington state’s liquor control board, which has to come up with the nuts and bolts for the new law and which asked him for, well, the straight dope.

Has your Marijuana Dispensary been discriminated against?

Posted on November 22, 2013 by admin

There is something that screams trouble when it comes to the stories of Marijuana and the dispensaries that process the payments. Mary Jane, as it has affectionately become known over the years, has made great headway into the headlines over the last few months. 17 of our 50 states now have legalized the medical form of the herb mostly for those suffering ailments that we don’t always understand. The herb has been made into paper, clothing, medicine and even a stomach ailment. Helping those that can’t eat to maintain a steady diet and calm their stomach.

If you have a medical marijuana merchant account and you got shut down, it was from Federal Fear that that was grown from. Not too long ago, the Department of Justice came after the herb growers and the dispensaries. They threatened the merchant account servicers, Visa, MasterCard, Discover and American Express with thoughts of loss and arrest if they were involved in any shape or form with marijuana accounts. Well who in their right mind is going to fight with that strategy? They have bigger guns and prosecutors that yell very loud.

As time has passed

Since then, new laws have come into effect and State and Federal Senators, among others, are changing the laws. They have backed off the dispensaries and allowed them to do some good rather than be fraught with evil and uncertainty.

Up front

For customers you have to be in the dispensary with a pin based system to purchase the product, and only a few of the merchant account servicers have come back out of the wood work. Much like the fairytales with the wicked witch, they are tiny rabbits shivering behind whatever they can find to stay safe. Do you blame them?

Specifically

In order to find the marijuana merchant account servicers you need to do a specific search for their services. They might even be a bit skittish, but they were brave enough to try and it’s that attempt at some normalcy that they are reaching for.

Since this is a high risk merchant account, your services may cost a little more than most, but under the circumstances, it is understandable. You will just have to adjust to the cost and pass it on. With the advance of debit and credit card processing, it can only make things a little easier than they were.

Here’s hoping

For those scared rabbits out there, the tunnel is slowly clearing. Dispensaries are coming out of the wood work to do business above ground again. They don’t want to have those large sums of cash on them and would prefer to have the ability to process the debit/credit card amounts over the wires. They want to be secure like everyone else in the merchant account servicer processing arena. So, everyone take a deep breath and try this again.

The Department of Justice has promised that if a dispensary is running within the law, they will be left alone. Let’s hope they get a chance to do that very thing.

Spread the word…

Posted on November 15, 2013 by admin

How to get a Medical Marijuana Dispensary Merchant Account

Posted on November 8, 2013 by admin

According to ‘The Green Sheet’ the Department of Justice is backing away from regulations governing medical marijuana dispensaries. In a statement in August 2013 they stated that as long as they continue to follow the laws governed by the states, they would no longer harass them and close them down.

Twenty one states have legalized marijuana for medical purposes and sixteen states have legalized small amounts in possession. No one knows for certain how the laws will continue to change, but know, if you are on the lookout for a medical marijuana merchant account, now is as good a time as any.

Kayvan Khalatbari

Kayvan is a part owner in a medical marijuana dispensary and was still having difficulty in May of this year getting his merchant account approved. With the new statement released this fall, he should be taken off the TMF file, or black list, as it is affectionately called, and be able to get his new merchant account for whatever business he has open.

Go shopping

It’s a lot easier now. The government has backed off on the merchant account servicers as well. Their threats of shutting down the merchant account servicers, because of their association with the dispensaries has gone away, at least for the most part.

Go online and find merchant accounts that have a specific knowledge about marijuana dispensaries and their needs. They will be advertising such a notion, and your account will have a bigger pull with them, than any other. They are the one’s waiting for your business.

No longer

I wouldn’t pull those ATM’s off your lot, but know that you have another option with the merchant services. Now your customers can pay online, if you have a website. If not, you can process their debit and credit cards right there and having that ATM on site gives them one more option. If they need some extra cash for later, you have the ATM to process that request for them.

Wireless

If your business is in an area that you can get cell service, you have the option of processing payments from your smart phone. Many new pieces of technology have adjusted to the growing demand of payments on the fly. Hair stylists have opted to have their customers pay with the little ‘Square’ and its applications for adapting to their cell phones. A quick signature and the customer receives a receipt in their email, with all the pertinent information.

As an on the go type business, a dispensary can do the same thing. Processing customers as you find the right product for them without seeking out the cash register. On the spot payments speed up transactions and help the customer get on with their day without waiting in lines.

All in All

Look for the professionals that are seeking out your business. The medical marijuana merchant account will still be in the high risk category, but a few extra pennies to help with the production of sales, is a small price to pay for the convenience. Ask a lot of questions and know how that merchant account servicer feels about your account before you sign up. You want to feel comfortable about where your money is. Good luck with your merchant account.

The road is clearing up for marijuana dispensaries

Posted on November 8, 2013 by admin

After so many years of hiding in the corners and sneaking their product to cancer patients that suffered, the marijuana business is becoming a little more respected. As people suffer the effects of long recoveries and painful cancers, they are reaching out for something that makes life a little more bearable.

Some of the businesses have waded through all the bureaucratic red tape and have come out on the other side a lot stronger. Even merchant account servicers were terrified to be their money processor for fear that the Federal Government would take down their business because of their association with a Marijuana dispensary.

That was then

The Department of Justice has clarified that if the dispensaries are within the correct operating procedures and doing everything legally, to leave them alone. This will allow them to hunt for banking opportunities as well as merchant account servicers and have little to no fear for those institutions and reprisals by the government.

Opportunity knocks

Finding merchant account servicers that will process a marijuana merchant account is still far and few between, but they are out there. They are brave little merchant account servicers that have watched all the new laws being passed and are very aware of the risk. As long as the dispensary continues to follow the rules and, stays out of their own product, they will have a fine business to work.

On the go

Many dispensaries are on the go businesses, and technology has heard the cry for convenience. Look up all the card processor machines and find the one that works the best for you. From the Square on top of your cell phone to the top of an iPad, the correct answer is out there for the type of marijuana account you work.

High Risk

This is still a high risk business, and you will pay a little more for your merchant account. Don’t fret; the merchant account servicer will take good care of you, making sure that all your credit cards and debit transactions are safe and secure. You will be run through the Gateway that encrypts all transactions. As a customer of a merchant account servicer you also are protected from fraudulent transactions. Your fees might be a little more than you expect, but at least your options for payments have grown.

Now you know

History has taken some twists and turns with the little herb we call Marijuana. Now times have changed and people are relying on it for pain relief and suffering of cancer patients. It helps them eat and not suffer the consequences, and they can gain some weight back. It’s too late for some, but with the diligent work of others, many will not fall off the radar and make it through their treatments.

Look for a Marijuana merchant account servicer that can help you if you are in this type of business. As long as you are working through the rules vetted by the Government and on the right side of the fence, all should be good. Look for the right account and keep your nose clean. Good luck!

How to finance your medical marijuana business

Posted on November 8, 2013 by admin

With more and more states emerging as potential cannabis markets, many entrepreneurs are now interested in starting their own medical marijuana business. As the industry is growing rapidly, many new small business owners who are looking to capitalize with the new market are asking the same key question, how much capital they need and how to finance their medical marijuana business?

According to a few estimates, you may need $15k to $100k to start a medical marijuana business application which will grant you the license to legally do so. Consultants and law firms are charging more and more money as more people become interested in getting a license and starting their own Marijuana business. This indicates that obtaining a license, setting up a website, getting a marijuana merchant account, a shop and going through documentation and legal complications may require a good amount of capital for starting.

So how can you raise funds to finance your medical marijuana business when the banking sector is turning more hostile towards medical marijuana industry due to legalities involved as medical marijuana is still illegal under federal law?

Options for funding your Medical Marijuana Business

Private Investors

With absence of the banking sector, private investors are a great source for funding your business, but it can come at a high cost. With no other alternates available, private investors are charging as high as 25% in interest rate. This rate is often not healthy for sustainable business especially for the medical marijuana industry that also has to pay unusual high federal taxes.

Angel Investing and Venture Capitalist

The other option to get funds is finding an angel investor. In this case, a rich doctor or a successful entrepreneur who agrees to invest in your business by sharing the equity of your business.

Finding a venture capitalist who can invest money in a promising business by sharing the profits is another option. This way, merchants can save the high interest rate, but they need to share the percentage of their business with their investors. The medical marijuana business is doing excellent in terms of profits and growth in states where it is legal, so finding a good angel or venture capitalist is not difficult if you know how to connect with them. A good option is to visit your local business chamber and connect with some of the angel organizations.

According to Adam Bierman, CEO of popular dispensary consulting firm, one pound of pharmaceutical grade marijuana costs $1000 to produce but it sells at $7,500 retail price. This indicates that the huge margin of profit in the medical marijuana industry can lure in big investors easily if you know how to sell your business plan. According to estimates, the $1.5 billion industry in 2013 will expand to $3.3 billion within next two years. With more than 100% promising growth in just next two years, investors are rushing in but you need to make sure that you are finding the right investor with affordable interest rates or favorable equity sharing.

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Author Archives: admin

Into the Unknown: Pricing Recreational Cannabis

US Treasury to Discuss Marijuana Dispensaries and Banking Practices

55% Favor Marijuana Legalization in California

New York Revives Medical Marijuana Discussions

Mark Kleiman, pot’s go-to guy

Has your Marijuana Dispensary been discriminated against?

Spread the word…

How to get a Medical Marijuana Dispensary Merchant Account

The road is clearing up for marijuana dispensaries

How to finance your medical marijuana business

Get Approved!