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The Business of Marijuana ... What is it Worth? What is the Return on Investment? (Just the facts please, don't blow smoke)

Posted on July 4, 2014 at 12:05 AM

July 7 2014 is an important date for many in Washington, including the State of Washington which expects to reap some tax revenue from the recreational users and the dispensaries that are about to expand or open and cater to the recreational crowd .... once regulatory approaval is received.  The pizza shops business will be booming! (Having fun here)  The first few weeks and perhaps months will be hectic for the new entrepreneurs, landlords, and state, city regulators.   In the interim, I will be taking note of the many developments.  While there may be some "coolness" or a hip factor being this type of entrepreneur, that will wear quickly once the compliance and tax paperwork and issues need to be addressed.  Add payroll and tax reporting requirements to the mix it then becomes readily apparent that this is a business and the ones that will prosper, acquire others, and eventually are sold for a premium are those that kept good records, had a good board of advisors (they were not just blowing smoke :)) and were proactive.

This being said, I will be co-writing an article with two other professionals on the valuation of CO and WA marijuana dispensaries.  This means that you may see me at these shops; I will be asking questions, looking at the products and getting a better handle on customer demand and choices.  Really?  Yes, really!  

One thing that we (he authors have noted) is that the initial investors and founders jumped in based on a gut feeling.  It is not quite like the 49'rs or GoldRush, but it is close.  I have asked for business plans and Return on Investment analysis and ... not succeeded. One thing that will eventually have to be dealt with is valuation of minority and majority interests in these establishments.  These are issues that arise in connection with divorces, death, disability and burn-out or lifestyle changes.  Outright saes will occur in CO and WA assuming the status does not change.  

Owners, of course, can choose to come up with their own values on their own. They did so when they filed their applications for the WA lottery and those that got the call, got many friends, family members and future former friends to invest.  While the business and financial analysis part has largely gone missing, courts will eventually get involved in disputes between the investors, founders and former friends and they may want to know more.  Investors may want to know more if they are being asked for serious $$ for land, security, stocking inventory or buying competitors.  

In short, these are legal businesses in WA (perhaps they will become legal in OR too) and expert knowledge will serve the many interested stakeholders.

If you are in this industry and are open to having one or some of us interview you, watch or ask you questions, let me know so I can share that with my co-writers!

Categories: Business Valuation, Personal Development and Ideas Shaping Society, Continuing Education

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