How to Calculate Cannabis Business Start-up Costs

When starting up a cannabis business, you must consider the cost involved. Any start-up company must calculate costs, and the complicated and growing cannabis industry is no exception. The benefits that businesses can derive from calculating their costs include:

• Estimate profits
• Secure loans
• Develop a Business Plan
• Efficiently conduct a break-even analysis
• Estimate money saved from tax deductions
• Attract investors

Like any other business, calculating start-up costs is very intricate. The steps below will help business start-ups navigate and calculate initial costs.

Identify Your Start-up Expenses

Depending on the type of cannabis business you want to start, you will face different start-up expenses. There are four major niches in the cannabis industry: Agriculture, Manufacturing, Distribution, and Retail. Your focus will help determine your estimated start-up expenses.

Once you have decided, you can compile a list of general and specific business needs for your operations. This will help you determine fixed and variable costs, including:

• Equipment
• Rent or mortgage for facilities
• Insurance
• Inventory
• Registration fees, licenses, and permits
• Marketing costs
• Payroll
• Research expenses
• Supplies
• Taxes
• Technology and services
• Utilities
• Consultant fees
• Professional services (i.e., legal and accounting services)

Determine Estimate of Expenses

It is crucial to determine an accurate estimate of expenses, especially after compiling your list. Processes will differ for each expense. Some will be well-defined costs like licensing fees and insurance, while others will be estimated, such as employee salaries. It helps to engage experts in the cannabis industry to estimate expenses better.

Get a Full Financial Picture

After identifying expenses, organize them into one-time expenses and monthly expenses. Adding them up will give you a good picture of how much capital you will need to start your cannabis business and when you will need funding.

One-time expenses refer to the capital you will need to start your business initially. Monthly expenses include bills like rent, salary, and utilities. Be diligent when tracking your expenses and always talk to your accountant when necessary.

Once you have a ballpark figure for your estimated start-up costs, add more funding to help you through unforeseen setbacks and delays.

Starting a cannabis business is complex. Working with experts familiar with the industry will help you navigate options and develop a thorough estimate of your start-up costs.