The budding cannabis industry is steadily growing across the United States, with more states than ever legalizing recreational and medical marijuana for public use. To meet this demand, businesses are expanding to offer cannabis products, and dispensaries are opening specifically to cater to the popular market.
However, the laws surrounding operating a cannabis business remain patchy and unclear as the new niche finds its footing in the local, state, and federal levels. This makes remaining in compliance challenging, even for businesses dedicating time and effort to achieve perfect compliance scores.
How Cannabis Organizations Can Best Mitigate Costly Risks
The cannabis industry also faces additional risks that most other business sectors do not, such as higher than average theft. Here is what dispensary owners should know about how to mitigate risks in the cannabis industry so that their business can thrive safely and comply with the law.
Carefully Review Laws To Remain Compliant
As mentioned previously, the laws governing how a dispensary may operate, the process of obtaining a license, and even what types of payments they can accept may vary significantly among states or even municipalities.
There is yet to be a broad standard of consistency that clarifies this issue across states, which means that properly submitting documentation for a license and performing other critical business tasks can prove to be an opaque and confusing process.
The best place to start is with a legal team that is versed in local and state laws surrounding the operation of a dispensary. For instance, in California, the cost to obtain a license depends on the projected value of the operation, which is proven through in-depth financial reports submitted along with an application and proof of a bond payable to the state.
However, in Michigan, dispensaries are limited to those complying with documentation requirements and location. Some communities have opted out of permitting any cannabis-related businesses, regardless of compliance efforts.
Because the laws change so significantly between locations, even within the same state, the most significant immediate risk to new cannabis businesses is failure to comply with the legalities of the practice.
Manage Money Securely
Another major risk for the cannabis industry is its focus on cash payments due to ease or a mismatch between businesses and processors. Many banks and credit card processors will choose not to work with cannabis businesses due to higher risk and unclear guidelines. However, seeking a financial partner who focuses on how they can assist marijuana dispensaries will prove invaluable in mitigating the business’s risk.
Not only does an increased reliance on credit reduce the cash transactions that a business must accept—thus decreasing the chance of theft—it also improves the security of the funds. Credit processors are much more able to insure against financial loss while simultaneously making products more accessible to customers with various payment types.
Invest In Theft Deterrents
Pursuing a credit partner is not the only way to mitigate the risk of theft in a cannabis dispensary. Invest in security cameras, secure locks, or even gates when the business is closed.
Some states will outline the minimum security requirements necessary to achieve a license, and others do not disclose this information, leaving it up to the owner’s discretion. Because theft is one of the most common risks the cannabis industry faces, this should be an area of substantial investment and strategy.
Choose Comprehensive Insurance Coverage
Even the most carefully crafted plans can still go awry, and dispensaries should not ignore insurance coverage for when this happens. Many insurers explicitly exclude marijuana businesses from utilizing common insurance policies, so dispensary owners must partner with an insurer specializing in cannabis insurance products.
This typically includes not only general liability but also product liability, the latter of which is especially important due to the home-grown nature of cannabis products. Dispensaries would also benefit from investing in crop & inventory or finished stock insurance, which covers asset loss during the growth and harvesting phase of cannabis cultivation, not just when it is already on store shelves.
Speak With The Experienced Cannabis Insurance Agents At MFE Today
The cannabis industry is growing at an impressive rate, drawing more business-minded people than ever to open their own dispensaries. They can find success in the long term by mitigating the risks unique to this industry: insurance challenges, licensing confusion, and higher than-average risk of theft and loss.
The experts at MFE Insurance work with dispensaries to create a comprehensive blend of insurance that safeguards their business and sets them on the road to success despite the risks. Contact us to discuss our cannabis-focused products.