Texas is the second-largest medical marijuana market in America. This article will tell you how to get a license to grow and sell medical marijuana in Texas and what that means for your business.
After being one of the most staid states on medical marijuana legalization, Texas has changed its tune dramatically over the past few years. As part of Governor Greg Abbott’s push toward “pro-business” policies, he signed House Bill 562 (HB562), which legalized the production, sale, and possession of recreational and medicinal marijuana in January 2016.
This bill was followed by Senate Bill 712 (SB712), legalizing the same in September 2017. With these two bills passed, it only makes sense that Texans would want access to their supply — especially considering the number of people who already use or have used THC products.
Texas currently produces more than $1 billion in annual revenue from alcohol sales alone, but if successful with medical marijuana, it could be up as high as $3.5 billion within five years. That’s why entrepreneurs must understand how they can benefit from getting involved.
While you should consider many other factors when deciding whether to move forward with an investment in pot-growing operations, here at 420 Investor, we’re particularly interested in learning everything we can about obtaining a medical marijuana license to help those just starting. In addition, we hope this information will provide some insight for seasoned investors looking to expand into new markets.
So today, we’re going to cover three basic questions any company seeking a Texas medical marijuana license must answer before moving forward: What does it cost to obtain such a license? How much money do you need to make off of selling weed?
And finally, once you’ve received a permit, what steps are required to start cultivating plants? These topics are complicated and require specific knowledge, experience, and expertise, so let us explain each process step below.
How To Get A Medical Marijuana License
First things first, if you’d like to possess marijuana in Texas legally, you’re going to need a permit from the government. Several different types of licenses are available in Texas, ranging from general retail stores to specialized agricultural operations. However, regardless of your business model, you’ll still need to go through very similar processes.
While anyone 18+ years old may apply for a retail store license, someone under 21 needs to secure either a caregiver license or a producer license depending on the type of operation they plan to operate.
You’ll need to complete a formal application to qualify for a special license. These applications are found online via the Office of Alcohol and Tobacco Taxation & Enforcement (OATTE). These forms include zoning requirements, security measures, product offerings, etc., but the biggest hurdle in applying is ensuring compliance with various laws and regulations.
Most importantly, OATTE requires every applicant to prove they meet specific criteria related to criminal history, health, location, education, finances, and other areas. Failure to comply with these guidelines usually results in rejection.
Additionally, since marijuana is considered illegal according to federal law, you cannot purchase anything directly from OATTE until you receive approval to produce cannabis. So even though you might think you’re ready to roll after filling out an application, you’ll probably wait months before receiving a final verdict.
Once approved, however, the next challenge is finding suitable land. Like any real estate deal, you must decide where to build based on local demand, potential growth projections, property value, and proximity to major population centers.
Once you’ve determined this, you’ll need to contact municipal officials to discuss building permits and possibly variances. Depending on your area, this could take anywhere between 1 week and three months. Unfortunately, I had not received my official notice when writing this article, but I expect to hear back soon.
Finally, once you’ve secured the proper licenses, you’ll need to develop operations around them. Unlike retail dispensaries, growers don’t need to worry about stocking inventory because they won’t ever put anything on shelves.
Instead, they focus primarily on planting seeds and harvesting crops yearly. Although this sounds simple enough, numerous complexities are associated with growing marijuana, including choosing the correct strain and timing for harvest, pest control methods, water usage, CO2 levels, temperature regulation, etc.
It takes extensive training, equipment maintenance, and management skills to cultivate cannabis successfully and a dedicated team of employees to oversee daily operations.
Obtaining a medical marijuana license in Austin, TX, costs approximately $7,500 per person plus another $4,000 for non-residential construction fees. However, if you’re serious about entering the industry, you shouldn’t skip out on hiring professionals who know what they’re doing.
Experts typically charge less, but they can significantly reduce turnaround times and avoid costly mistakes. But if you want to save some cash, look no further than our sister site High Times, whose excellent editors regularly source the best deals on doctors, lawyers, consultants, labs, packaging supplies, shipping services, and more across dozens of cities nationwide.
What Is The Cost Of Growing Cannabis?
Now that you know how expensive it is to become a legal marijuana farmer, you may wonder what return you can reasonably count on making. After all, unlike traditional businesses, crop yield isn’t something you can easily predict during the planning stages.
Unfortunately, there aren’t many reliable estimates, mainly due to significant variations in climate conditions. Some farmers report yields upwards of 50 pounds per square foot, but others claim that products vary wildly monthly, sometimes hitting 200 pounds per square foot high! This inconsistency doesn’t allow companies to estimate profits since they can never guarantee output accurately.
However, since prices tend to remain relatively stable throughout the year, it’s possible to calculate average expenses and revenues for a typical season. Accordingly, if you plant 10 feet by 10 feet plots, you’d spend roughly $800 (or 320 days) cultivating the total amount.
Assuming a 45-day flowering cycle, you’d get approximately 40 ounces of buds (at an estimated price of $50 per ounce), which comes to an approximate gross margin of $20 per pound. Of course, this figure varies greatly depending on your region, weather patterns, soil quality, lighting setup, etc.
Furthermore, keep in mind that this calculation doesn’t account for labor, taxes, licensing, marketing, transportation, insurance, utilities, office space, depreciation, interest payments, or other fixed operating costs.
Although many operators prefer to avoid estimating numbers, it’s often easier to project costs than earnings. For example, if you pay a contractor $15 per hour to maintain your greenhouse, it’s easy to determine that you’ll earn $10 per hour for the rest of the workweek.
Similarly, if you anticipate spending $1000 on electricity, pesticides, fertilizer, gas, labor, and other operational costs, assuming you’ll break even after 30 months is safe. From there, you can adjust your calculations accordingly.
Is Your Company Ready For The Biggest Industry Move Since Pot Was Decriminalized?
Many big players in the marijuana sector believe that now is the perfect moment to enter the field. Even though producers face significant competition from black market sources, the future looks bright. According to recent reports, marijuana consumption increased by 13 percent in 2015 compared to 2014, and experts predict continued growth rates throughout 2016.
By 2021, annual sales could reach $14 billion worldwide. Considering that the U.S. has been producing roughly 2 million pounds of marijuana annually, it seems likely that Texas will continue increasing its overall market share.
Considering all these statistics, it’s hard not to see why so many investors are jumping on board. However, if you’re hoping to profit from the booming trend, hiring experienced staff members and investing wisely is smart.
If you’re unsure of the ins and outs of the industry, check out our free guide outlining key considerations when investing in medical marijuana startups.