Approximately three years ago Adam Weiss and a few friends scrounged a few hundred thousand dollars in capital from friends and family members and purchased a medical marijuana dispensary, now called Breckenridge Organic Therapy.
There were no traditional startup resources available to them, their credit union would eventually drop the business and their credit card company never followed up on a reapplication. Then there were layers of local, state and federal regulations and taxes to navigate.
“It was really difficult,” Weiss said. “With that regulation comes a lot of cost. You’re trying to do everything right, but if they keep digging too hard, they’re going to take all the profits and leave nothing for the company to actually survive on.”
Starting and operating any small business is difficult, but in the marijuana industry, the process is fraught with risk, high costs and a labyrinth of legal, financial and regulatory pitfalls, local retailers say. And though current marijuana retailers will get the first shot at breaking into recreational sales, brewing tax measures, a likely spike in demand and a general lack of precedent promise new challenges ahead for those that take the plunge.
To start with, there are no federally insured banks willing to do business with an industry that is still illegal nationally.
“Imagine trying to run a business without a checking account,” said Charlie Williams, owner of Alpenglow Botanicals in Breckenridge. “It really makes every aspect of your job more difficult and that will be worse after the first of the year.”
And with a pool of potential customers that will climb from 100,000 to more than 500,000 when retail marijuana hits store shelves, local business owners — who under state policies grow 70 percent of the products they sell — also know they’ll need capital to expand production. But traditional loans and investors aren’t an option.
“The money’s out there, it just depends on how badly you want to swim with sharks,” Williams said. “You’re not going to go through normal banking channels.”
Then there are compliance obstacles: Local marijuana retailers say the municipalities where they grow continue to change regulations for “gardens,” costing business owners time and money as they try to expand production.
Williams says he also worries proposed excise and sales taxes on recreational marijuana, if approved by voters, will make a legal business model less likely to succeed against untaxed black market products.
The industry is rife with personal risk as well. In addition to the legal liability, earnings from medical marijuana centers aren’t recognized as income, preventing some owners from obtaining mortgages.
But local retailers say they’re willing to take on the challenge. At least three existing medical marijuana businesses plan to pursue recreational licenses in the near future and the first pot shops are expected to be up and running by Jan. 1, 2014.
Weiss and others like him see themselves as pioneers, taking a tough road that they hope will prove legalization can be successful. Weiss said he appreciates regulations and adheres to them strictly, intent on keeping marijuana controlled and out of the hands of minors. He sees what started as an uphill climb in Colorado someday becoming a model for a future nationwide marijuana industry.
“If we can make it work here then technically we should be able to make it work everywhere,” Weiss said.