Winning a coveted dispensary license is your golden ticket into the competitive cannabis market. The license application process is more demanding than ever, and it can be tricky to navigate all the nuances—especially if you’ve never done it before. But there are a few secrets to creating an application that stands out.

Cannabis Dispensary spoke with five licensing consultants, attorneys and operators who have secured licenses in competitive cannabis markets:

Jonathan Havens, co-chair of the Cannabis Law Practice at Saul Ewing Arnstein & Lehr LLP, resident in the firm’s Baltimore and Washington, D.C., offices.

Erin Alexander, associate general counsel for Cresco Labs, a Chicago-based cannabis grower, processor and retailer operating in seven states.

Sara Gullickson, CEO of Item 9 Labs Corp., a publicly traded cannabis company specializing in the development of cannabis products and proprietary delivery platforms. Gullickson also owns the Strive Life of North Dakota dispensary, and Strive Wellness of Nevada LLC, a medical cannabis cultivation and processing facility with distribution rights. Gullickson previously served as the CEO and founder of Dispensary Permits, a nationally recognized cannabis consulting firm that won multiple cannabis licenses across more than a dozen competitive state markets.

John Darwin, founder and president of ONE Cannabis Group, a vertically integrated cannabis operator and franchisor based in Denver.

Armen Yemenidjian, co-founder and CEO of Integral Associates LLC, a retail and wholesale cannabis operator that has been awarded licenses in Nevada and California. Integral Associates operates Essence Cannabis Dispensary on the Las Vegas strip, as well as Desert Grown Farms and Cannabiotix NV, its cultivation and processing facilities.

Here are their tips on how to create a winning dispensary license application.

1. Understand your state’s application quirks.

Sara Gullickson: “This industry, specifically the licensing process, is still very new. Each state has its idiosyncrasies, and the application process in Pennsylvania was much different than in Hawaii or Arizona. In some states, specifically California and Michigan, you have to get local jurisdiction support in addition to the state’s blessing. In those situations, the municipality’s application process is more rigorous than the state’s.”

2. Secure real estate with the appropriate zoning.

Erin Alexander: “The first step is looking at the regulations to figure out the setback requirements—where can you be, where can’t you be: 1,000 feet from a church, 500 feet from a school? Finding real estate is the most difficult and challenging part of the process; finding places that meet the setback requirements, but also meet your requirements to be able to operate the business. Have Plan A, Plan B and Plan C, because everything ends up being more complicated than you anticipated.”

Jonathan Havens: “Make sure you can put your dispensary where you want to put it. In some states, the siting process is part of the application process, but sometimes you’ll get a pre-award from the state and then you need to go to the town, and that’s where people get tripped up. Having zoning approval from the local [municipality] is critical.”

3. Establish security protocols.

Havens: “Remember that the product you’re dealing with is federally illegal, so security is very important. Even though these states say you can sell it in a dispensary, they want to make sure you have a very tight control over what you’re selling. If you can’t control your product and it’s getting into people’s hands who are underage or don’t have a medical card, that’s the quickest way to lose your license. States are very focused on that, so you can’t overlook having a strong plan in your application to address security.”

4. Build a strong team with experience.

John Darwin: “Assemble a great team. Licenses are getting more and more competitive, so someone with a strong pharmaceutical background [for medical dispensaries] or a good government relations background is a great addition to your team. Make sure your team has operating experience. A lot of these licenses are merit-based, so being able to reference a track record of compliance and operational excellence in another state is huge. Also do background checks on all of your team members, because there are key items that can come up and derail the whole process.”

Havens: “Having an accountant who has worked with clients in the cannabis space is critical. You don’t want to be their guinea pig while they learn the accounting and tax rules. Also have strong legal support, whether that’s an in-house attorney and/or an outside law firm with experience, because questions are going to come up that need quick answers, and you want to have them in your contact list when those questions come up.”

5. Get involved with the local community.

Alexander: “I think the best piece of advice is: Be connected to the community where you want to locate. That can be the secret sauce to winning an application. A lot of people know how to run a dispensary, but you have to spend the time attending city council meetings and engaging with local elected officials so they trust you and so they understand what you can bring to the community. Part of that is also engaging with civic and charitable organizations, finding out what the local priorities are, so you can be a good neighbor and a good steward of the community values.”

Havens: “A lot of people overlook an aspect of the application that I'm always quick to tell clients to focus on, which is community engagement and education. You can understand the opposition if you take the time to get out and have educational events that show that you’re not just trying to make money, but you really do care about the community. If you have events that are open to the community, not just people who are purchasing your product, you might win people over and you might ward off potential opposition down the road.”

Gullickson: “Research the specific town or jurisdiction and figure out: ‘Is it red or blue? What are the pain points in the community; are they environmental or are they opiate-related?’ Then pull in some community leaders who focus on those pain points, to make sure you’re hyper-focused on the community. We put together sophisticated community benefits programs that address how we’re going to give back. We build parks, we build sidewalks, we’ve funded little league teams and hosted clothing drives—whatever the area needs. When you contribute to your communities, they’re so much more welcoming.”

6. Budget more capital than you think you’ll need.

Alexander: “It can get expensive. You’re obviously going to need application fees and license fees, which can range from a $500 application fee to a $30,000 license fee that you might get refunded if you don’t win. But then you’ve got property hold fees. You’re going to be paying attorneys to review documents. You’re going to be paying planners and architects to design your site. You might be paying both a planner and a zoning attorney to help you through the zoning process. From soup to nuts, I think a fair budget for a good-quality application is probably half a million dollars—which is crazy, but that’s what it takes. There’s a lot of moving pieces to making this successful.”

Darwin: “We advise clients to have the available liquid funds to cover capital expenses over the course of a year. You want to be making money by the end of that year, but if there’s a rainy day, you want to be well-capitalized to survive.”

Armen Yemenidjian: “Understand it is a highly competitive market. Because there are so many competing applicants, it’s imperative to have a clear, concise plan with a budget and a path to victory. Applicants need to demonstrate they will be successful if awarded the license. You need to not only have the budget to pay for the application, but also show regulators you have the capital to [operate the business successfully].”

7. Get a head start before applications are released.

Gullickson: “When you’re proactive in putting a business plan together and engaging in the state’s programming before the rules and regulations are even finalized, you’re going to position yourself light-years ahead of somebody that just gets the idea to throw an application in when it’s published. My most recent successes are the clients that we’ve spent eight months or a year with, building their team and making sure they had a solid foundation on which to apply.”

Havens: “The No. 1 thing is to not wait until the last minute. The application timeline is going to be shorter than you want, so look for business partners prior to the application coming out. Attend meetings of medical cannabis commissions to understand what’s coming down the pike and when that next round of licenses is going to be dropped. Get your plans in order. The more elements you have to populate your application before they’re even dropped publicly is going to give you a leg up.”

8. Impose internal deadlines.

Havens: “Submission day always goes quicker than you think. It would be nice if everyone on the team could operate with the assumption that this is really due the day before it’s due, because there are always unforeseen circumstances.

“A lot of states require hand-delivery, so you can’t be finalizing things the day of. Have a single point person who’s the final arbiter of [deadlines, who determines,] ‘What time do we need to stop editing and head over to the state agency to make sure it gets in on time?’

“Some states have electronic submissions now, and to the extent they allow you to do a test submission, absolutely do that. If it’s due at 5:00, I wouldn’t start trying at 4:30 to upload a 700-page document. Start late morning at the latest, because there are always issues, and sometimes you can’t get the regulators on the phone to say, ‘What do I do now?’”

“From soup to nuts, I think a fair budget for a good-quality application is probably half a million dollars—which is crazy, but that’s what it takes.” –Erin Alexander, associate general counsel, Cresco Labs

9. Turn a boring application into a creative story.

Darwin: “Some companies have full teams of technical writers that have graded these types of applications before. That’s who you’re competing against, so it’s important to have a strong technical writing team.”

Alexander: “Write it in such a way that it’s easy to follow. These end up being massive legal writing projects, so taking the time to put together a very well-written piece will help you stand out. [That requires] ... good writers and good subject-matter experts. We have a couple attorneys that work on applications, and we have technical writers that have some operational expertise and can write about our operational practice [so it’s] readable to somebody who may or may not be familiar with how a dispensary operates.”

Gullickson: “You can hire a technical writer to put your application together, but if you don’t have style and grace and an overarching theme throughout your application, it’s not going to stick out. Who wants to read 100 security plans? Nobody. So how can you create a theme or a story and be really creative in your presentation?”

10. Partner with industry consultants who have done this before.

Yemenidjian: “If you’ve never operated a dispensary before, you probably could have gotten away with writing your own application five or six years ago. Now, the process has become so advanced, applicants must have an understanding of technical writing and standard operating procedures to be successful—especially because there are more criteria now, such as community engagement, corporate responsibility and social citizenship, that are being taken into consideration.”

Havens: “If you go at this alone and don’t involve consultants who know the cannabis business, it’s an uphill climb. I’m not saying it’s impossible, but one of the reasons you see a lot of national or multi-state operators is, obviously they want economies of scale and they want to broaden their footprint, but local interests need their help. It’s hard to populate an operational plan, a clinical plan and a security plan if you haven’t done it before.”

Gullickson: “I don’t urge working with an expert because I want clients; I urge working with an expert because ... you’re just not going to win if you don’t know all these idiosyncrasies, no matter how much you research on the internet. The devil’s in the details with the application, so you need that industry expertise; it’s mandatory. States don’t feel comfortable anymore giving licenses to somebody that doesn’t have the experience.”

I opened my first medical marijuana dispensary, Berkeley Patients Group (BPG), in 1999. Right from the start, my charismatic co-founder Jim McClelland pushed one clear goal: to provide members with the best cannabis. It helped that Jim was a cultivator, producing particularly delicious and dependable cultivars of Romulan and Bubbleberry from his Oakland warehouse.

This simple mission drove our team to create a menu full of potent and pure flowers and to seek out the finest hashes and ingestible forms of cannabis for our patient members. It was in a race to the top, but we never scrimped on quality. We stringently avoided any rush to commercialize the cannabis market or to homogenize the products.

The goal was also to help people enjoy life, with cannabis acting as both social and physical lubricants. In fact, all dispensaries back then had active event calendars, filled with activities to attract vibrant memberships. Dispensaries also provided direct assistance to patients. California law back then even mandated that dispensaries act as “caregivers,” providing for the “health, safety and housing” of their members.

When Jim passed away a year into the project, the importance of dispensaries really hit home for me. They were far more than retail shops; the social club aspect was equally important, providing an outlet for people who were critically and terminally ill to enjoy themselves. Dispensaries acted as sorely missing homes-away-from-homes for people, when they needed it most.

I left BPG after 10 years, and took over leadership of Magnolia Wellness, a newer dispensary in Oakland, Calif., in 2014. This scrappy city, with its diverse population and thriving social scene, suited my desire to prove that dispensaries were far more than simply retail outlets. After all, Magnolia’s founder, Dave Spradlin, had modeled the dispensary on BPG, which made it an easy transition for me. Today, Magnolia has a social calendar filled with exciting events, a menu of exceptional products and a vape lounge where clients can hang out and consume cannabis. And, it’s renowned for social responsibility and cutting-edge politics, often leading local regulatory changes that improve dispensary rules.

It’s not easy running a socially responsible, politically active, fiscally sound dispensary; on the contrary, it’s nearly impossible. Few will reach this goal, especially without guidance from industry experts willing to share knowledge and to coach and mentor entrepreneurial, like-minded people. With that in mind, I offer this list of my top operational challenges, and solutions that make them easier to manage.

1. Inventory Management

Challenge: Creating a stand-out menu

Solution: Doing competitive analysis is key; you have to know what other dispensaries have on offer and at what price. Use this intelligence to create a menu that has a mix of standard products, like Kiva Confections Blueberries, and items that are exclusive and available only at your shop. Making strong connections with suppliers is key, as you will have to convince them that your dispensary is the best place to feature their products.

Challenge: Keeping stock consistent

Solution: Watch sales closely and know what products move consistently. Clients will expect these to be available every time they shop, and they will be disappointed if you don’t have them in stock. They may even go somewhere else next time. Make sure to order more of these items than needed each week, so shelves don’t go bare. Keep good relations with distributors, so you can get special orders if you unexpectedly run short.

Challenge: Buying wholesale cannabis

Solution: Dispensaries buy cannabis on net terms, on consignment and cash on delivery. Maintain good relationships with wholesalers, so your inventory manager/purchasing agent can stock a large range of products without having to go out-of-pocket for everything at time of purchase. You will have a larger inventory and access to more unique products by maintaining a variety of payment terms with vendors.

2. Staffing the Dispensary

Challenge: Finding excellent employees

Solution: Start with clear job descriptions, detailing the knowledge, skills and abilities each position requires, and post these listings in places that people with these skills will see them. Do ranked phone interviews, and select only clearly experienced people for in-person interviews. Ask tough questions at the in-person interview, so you can get a feel for each candidate’s personality. When you find the right person, give them a written job offer outlining pay, benefits and performance expectations.

Challenge: Training staff

Solution: Provide each new employee with a staff manual that clearly explains all company rules and expectations of job performance. Create department-specific training programs, so that each staff member knows exactly how to do their job. Identify staff mentors to work with new employees during a 60-day to 90-day probationary period. Unskilled, unprofessional people make other employees uncomfortable and will reduce overall productivity—so be discerning, and terminate those who either can’t do the job or are not a good fit during probation.

Challenge: Retaining the best people

Solution: Once you find great people, work hard to keep them. Talented, satisfied workers are the key to driving sales and maintaining excellent customer service. Pay and benefits are a big part of this, so make sure to offer competitive wages with raises, regular bonuses and good benefits. The best employees will stick around if you offer health insurance, paid vacations, sick pay and, eventually, a retirement plan. You will also need to create a vibrant workplace, or the best pay and benefits won’t matter. Use your team’s talents to the maximum. Create space for innovation, help implement great ideas generated by staff, and demonstrate again and again that each individual person on the team is essential to the whole.

3. Marketing the Facility

Challenge: Standing out from the crowd

Solution: Know the competition, and always strive to be better. Take time to research and create a marketing and brand management plan, and spend your budget strategically. Design a beautiful logo, develop a style guide and create a physical space that will blow people’s minds. Hire the best possible inventory management team to seek out and secure amazing cannabis products. After all, your clients expect the best, and each brand on the shelf is a potential marketing partner. Geo-target your marketing efforts to attract locals, and draw them in with a mix of connoisseur products, loss leaders and great deals. Differentiate yourself from the crowd by looking better, being more efficient and having the best cannabis, always.

Challenge: Finding places to advertise

Solution: Dispensaries violate the terms of use on every social media site, so this is ultimately an undependable way to market your company. Many of us have felt the pain of losing our Facebook, Instagram and YouTube pages without notice—made especially painful to those with large and dedicated followings. With that in mind, use your social media to drive traffic to your website, and make sure it’s dynamic and interesting so people visit it again and again. Make sure your real-time menu is there, with use an online express ordering cart. Dispensaries also can’t advertise on social media, so local print media is the best place for this, and billboards are a fun way to promote dispensaries, if allowed in your municipality. Make sure you collect your client’s emails, as blasts and newsletters are a great way to drive traffic.

Challenge: Getting earned media

Solution: Television, print and online media are all interested in the marijuana market, and you can become the go-to expert. Host events and invite the media, give interviews on 4/20 and Black Friday and proactively reach out to comment on important topics. Media outlets are all looking for an interesting setting for their story, and your dispensary can be it (pending your local/state regulations, especially in medical markets). You have to be visible to get coverage, though, so get out there and start making waves.

An employee handbook is essential for any dispensary. It is a valuable resource that can improve a dispensary’s productivity and profits, ensure employees understand performance and behavior expectations, and provide defense against employment lawsuits.

Employee handbooks are comprised of clear and consistent policies concerning dispensary culture, workplace standards, benefits and employee behavior. These policies should be developed by dispensary management with the assistance of an employment law attorney. The attorney should also review all handbook language prior to publication and distribution.

Here is a primer on the basic topics that should be included in the handbook.

The 'WELCOME'

This section introduces employees to the handbook’s importance and purpose. Include descriptions of the dispensary’s culture and mission, and how employees can support the company’s goals.

Acknowledgment and Receipt: The employee handbook’s first page might be a tear-out "acknowledgment" form to be signed by the employee and submitted to management. All employees should be required to acknowledge receipt of the employee handbook and the policies contained in it, which are based on federal Equal Employment Opportunity laws as well as state and local employment notices. A free acknowledgment form can be found at bit.ly/cd-handbook-receipt.

SECTION BREAKDOWN

The following sections describe the minimum topics that should appear in an employee handbook. Each section’s contents must adhere to federal, state and local employment laws applicable to dispensaries. For organizations that own dispensaries in multiple states, the handbook should be edited to reflect differing state and local laws.

1. Dispensary’s ‘Employment at Will’ Statement.

This section states employment is on an at-will basis, meaning that the employee or the company may terminate the employment relationship at any time for any reason without notice. Confirm this language with the employment law attorney.

2. Equal Opportunity and Handling of Complaints.

At minimum, the dispensary should state its commitment to creating and maintaining a safe workplace. Specific language related to harassment and complaint procedures defined in the Civil Rights Act of 1964 (Title VII) must be included in this section, as well as applicable state or local laws with additional requirements.

In this section of the handbook, the dispensary should state its policies and procedures for handling and investigating harassment complaints. Standard verbiage regarding various harassment types, sexual harassment and hostile workplace definitions, and retaliation is available online. Additionally, include language that addresses Americans with Disabilities Act (ADA) requirements and how the dispensary will accommodate them.

3. Conflicts of Interest and Confidentiality.

Here, the dispensary should state expectations regarding ethical conduct, personal integrity and engaging in activities outside of the dispensary that could reflect poorly on the company. Examples of inappropriate or unacceptable activities that should likely be included in this section include:

• providing confidential information or data to another dispensary or to suppliers;
• borrowing money from customers or suppliers;
• accepting substantial (as determined by the employer) gifts from customers or suppliers;
• using one’s position in the dispensary or knowledge of the dispensary’s business for personal gains; and
• engaging in activities that violate antitrust laws, commercial bribery laws, copyright laws, discrimination laws or other laws regulating dispensary conduct.

4. Employment Relationship.

Employment Classification is based on federal laws. Each employee classification definition should be included in this section. These classifications (exempt; nonexempt; regular, full-time; regular, part-time; temporary, full-time; and temporary, part-time) are defined online in the Society for Human Resource Management’s (SHRM) “Employee Handbook Template.” Access it here: bit.ly/employee-definitions.

This section also includes the dispensary’s standard work week, business hours, work schedules and permitted employee breaks (which are often governed by state or local laws and may differ from federal requirements). The law requires time records for all nonexempt employees. Use this section to describe the process for how employees will complete and submit accurate weekly time reports. If employee overtime is required, the rate of pay calculation for nonexempt employees and the dispensary’s overtime policies, such as the need to obtain prior management approval, is documented in this section.

Dispensary employees’ salaries, payroll deductions and pay practices must conform to the Fair Labor Standards Act (FLSA). The pay period (weekly, biweekly or monthly) and payday should be documented here, along with the process for a payday that falls on a federal holiday.

This section should also explain where personnel files are kept, who has access to them and how employee access is managed.

5. Employment of Relatives and Domestic Partners.

The dispensary’s policies regarding nepotism or current employees who marry each other are documented in this section.

6. Separation From Employment.

This section outlines the dispensary’s expectations regarding written notice in the case of voluntary resignation and the process for exiting the employee (collecting company property, final pay, COBRA if applicable, etc.). This dispensary process must comply with state and local requirements.

7. Workplace Guidelines.

Attendance: Many HR issues related to employee attendance can be avoided by specifying the dispensary’s expectations regarding tardiness, absenteeism and the consequences for not meeting those expectations. Also, be sure to include how and when an employee should communicate tardiness or absenteeism with management.

Job Performance: This section addresses communication between employees and management. Information about performance evaluations should be documented. (The dispensary’s process for addressing poor job performance should be in the handbook’s disciplinary section, below.)

Dress Code: Expectations for employees’ clothing and grooming should be specified in this section. Employees need to support a professional work environment consistent with good hygiene and safety. For customer-facing positions, management may require lab coats or company-branded clothing.

Social Media: This section documents the dispensary’s policy regarding employee participation on social media platforms, such as Twitter, Facebook, LinkedIn, YouTube, Snapchat, Instagram and others. This should cover social media use during work hours, social media use during personal time and what constitutes an appropriate post.

Other topics to consider including in Workplace Guidelines are:

• staff communication, updates and notices
• solicitation by employees and non-industry parties
• handling confidential information on company computers
• policies regarding internet use, email and company resources

Employee handbooks are comprised of clear and consistent policies concerning dispensary culture, workplace standards, benefits and employee behavior.

8. Disciplinary Procedure.

Every dispensary needs a documented policy outlining employee standards for behavior and performance, as well as a clear description of consequences when these standards are not met.

Dispensaries should ideally utilize a policy of progressive discipline, which informs individual employees when they fail to meet behavior and performance standards and allows them the opportunity to improve over time. The steps dispensary management will take to administer discipline if an employee fails to improve should be documented in this section.

9. Paid and Unpaid Time Off and Leaves of Absence.

This section documents the dispensary’s holiday schedule and its policies for taking leave prior to or after an official holiday. The dispensary’s policy regarding religious holidays is documented here, too.

How vacation hours are accrued, how they are to be used, who is eligible for paid vacation, how vacation is scheduled, whether employees are permitted to carry over accrued vacation, and how payout for unused vacation time will be handled should all be in this section. Review state and local laws with an attorney, if possible, when creating your dispensary’s policy.

Medical leaves of absence are extremely challenging because many states have multiple leave laws which interact with federal laws. The interaction between state laws and the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and Workers Compensation needs to be well understood, and both state and federal applicable policies need to be documented.

Employers with 50 or more employees (either part-time or full-time) must comply with FMLA regulations, and all employers, regardless of size, must notify workers of their rights under the FMLA, usually by displaying labor law posters and including the notification in the employee handbook. Dispensaries should consult with an employment attorney experienced in both state and federal leave laws when defining policy and administering medical leaves of absence.

Other topics that should be included in this section include:

• sick leave
• maternity and paternity leave
• military leave
• bereavement leave
• jury/court duty
• time off for voting

The dispensary’s policy for when, where and how much testing of product is performed during business hours and on-site, if any, should be documented.

10. Workplace Safety.

Drug-Free and Alcohol-Free Workplace: At the federal level, most private employers are not required to have a drug-free workplace policy. The federal Drug-Free Workplace Act (DFWA) does not require employers to either conduct drug testing or fire employees who test positive for drugs. The applicable employment law and employers' responsibilities regarding medical and recreational cannabis vary greatly.

Many dispensaries encourage employees to test, try and recommend cannabis products to customers. The dispensary’s policy for when, where and how much testing of product is performed during business hours and on-site, if any, should be documented here.

Some dispensaries may state that “any employees using drugs and alcohol must meet the same standards of performance and behavior as other employees,” and that “all applicable federal and state laws and regulations concerning drug and alcohol use will be followed.”

Other dispensaries may decide to have a more formal zero-tolerance policy to:

• reduce drug-related accidents
• avoid liability issues
• protect the dispensary’s image
• increase productivity and profits

Additional topics to be included in this section might include:

• smoke-free workplace
• workplace violence prevention
• safety commitment
• emergency closings

11. Employee Benefits.

Dispensary size, culture and market position usually determine the extent of benefits offered to employees. If your dispensary offers any of the following benefits, then each should be described in the handbook, along with information as to who is eligible, what portion is paid by your dispensary and which are mandatory:

• Medical, Dental and Vision Insurance
• Group Life Insurance
• Short- and Long-Term Disability
• 401(k) Plan
• Workers’ Compensation
Employee Assistance Program

Remember: Building a suitable employee handbook will streamline your onboarding process and ensure that all employees understand their roles and rights.

Note: This column is not to be considered as legal or financial advice nor does it address all HR regulatory actions that may impact your business.

Budgets can get a bad rap—they’re often compared to diets from which you are destined to deviate; however, businesses that fail to budget ultimately fail themselves. Budgets are living documents that define the relationships between your customers, your employees and your business, and they provide context for how your business operates. Budgets not only connect these groups, they also place values on these relationships.

The first step in building a budget is to collect the information you will need to build your budget. This should include:

• how many customers (if any) you have served;
• the number of patients registered for your state’s program, and the monthly change in that number;
• your service area’s population (county/metropolitan area, etc.);
• the number of dispensaries that service that area;
• products you sell, the retail price for those products and how much they cost you;
• a list of accounts from your accounting software;
• the amount spent last fiscal year per vendor (if available); and
• competitive pay rates in your area.

A budget that includes this information becomes an opportunity to incorporate forecasting and identify tools available to you to not just survive, but to thrive. There is a way to build a budget that will serve as a roadmap to your dispensary’s success, and it has four components:

1. Revenue Model: Visibility to revenues, margins and growth.

2. Staffing Model: Who is necessary for your business to deliver on this?

3. Operating Budget: What resources are needed to make it actionable?

4. Projected Profit & Loss Statement: What does it all mean for your business?

1. Revenue Model:

What do you sell, to how many people, at what price and at what growth rate?

Understand the level of demand for cannabis products to determine what you will spend on people, materials and services. Spending, which is the bulk of a traditional budget, is highly dependent on other factors being accurate. If “content is king,” context is the kingdom, and your customer volume is that context.

Initial customers: Your baseline of volume. Consider that the total addressable market is likely to be 2 percent to 3 percent of your local population.

Increase in volume per month: The growth in your volume. In general, consider how many new customers you can expect less any customers you won’t retain. For perspective, look at the monthly increase in registrants for your state’s program. (Note: If your retention rate is lower than 80 percent, there is an opportunity for organic growth through tools such as loyalty programs, pricing, customer service and product selection.)

Spend per customer per month: How much does a typical customer spend per month in your dispensary? While $180 to $220 is a good benchmark, it will vary based on local demographics.

Sale price and cost per product: This is the space to segment your product lines: flower, oil, extracts, edibles, etc. What are typical market prices in your area? Also, make baseline calculations for your gross profit margins (retail sale price minus the cost).

Calculate monthly projected revenue using the formula: customers x monthly spend.

2. Staffing Model:

Who maintains your business and services your customers?

Reviewing your revenue model, consider how many customers you will have each month, how long each transaction will take, how many shifts will be needed and how many employees each shift will require. Research competitive pay rates for your market so you can retain your top employees.

Next, build an employee list organized by department and role that includes each employees’ monthly gross wage.

If your market allows for processing and packaging of bulk product at the dispensary, separate employees participating in these activities from employees who aren’t, as there may be tax advantages. Consult with your accounting and legal resources on what is, and is not, allowable as a deduction.

3. Operating Budget:

What infrastructure is required, and what tools will make operations more efficient?

This is a more traditional budget view, and an opportunity to be creative in where you put money to work in growing your business.

Volume-based/Consumables: This is the space to include everything that goes with each transaction, including labels, other printed customer materials, child-resistant bags, other packaging, etc. Examine the per-unit costs for each of these items and multiply by your projected monthly volume.Tip: If you are packaging flower at the time of purchase, multiply the projected number of monthly prepackaged flower sales by the per-unit packaging cost.

Building, upkeep and utilities: These are often fixed or overhead costs associated with having and maintaining your brick-and-mortar storefront.

Operations: What goes into making the day-to-day happen? Security monitoring, seed-to-sale and point-of-sale (POS) software, paper, ink and even sticky notes.

Corporate and professional services: This section includes everything else to make the company run. If you have multiple dispensary locations, this section would be universal to all of them. This is also where you can consider the return on your investment for certain line items, like: Is it less expensive to outsource your accounting and legal services? How are your customers finding you? Should you invest in websites such as Leafly and Weedmaps, or printed brochures at certifying physician offices? Where can you invest in your employees? Educational opportunities such as industry conferences and continuing education can pay big dividends down the road.

Payroll budget: The sum of your monthly wages, payroll tax (roughly 9.5 percent) and cost to provide benefits.

Capital expense budget: Any construction, equipment or big-ticket/one-time purchases typically go here. The most common are: build-out costs, furniture, security cameras and computer hardware. Plan to replace about 20 percent of your computer hardware in any given year, given that they depreciate on a five-year schedule.

Before moving on from this section, review all your expenses and vendors used in previous years. If they were not one-time purchases, ensure they are accounted for in your operating budget.

4. Projected Profit & Loss (PP&L) Statement:

What is the bottom line?

This is a summary page suitable for investors and executive management. It also serves as an overall barometer for your company’s health. Tally all expenses from the operating budget to calculate the Run Rate of the business.

Your Burn Rate equals your projected revenues minus that expense total (Run Rate). It will provide you with a good indication of any cash requirements to float your business until you reach a cash flow-positive status.

By adjusting variables in the revenue model, staffing model and operating budget, you can quickly understand how this impacts your bottom line and the overall success of your business. Include your key managers in this process to enroll everyone in the plan. Motivate your employees by sharing monthly statistics like sales relative to forecast, and expenses relative to operating budget. The more transparency to this level of information, the more invested employees will be in the dispensary’s success.

Colin Kelley is a member of the board of governors for LeafLine Labs.