It’s not easy selling green. Around 20% of small businesses fail within the first year, but when that venture is in the cannabis sector, the chances of folding are even more likely, experts say.
Following New Jersey’s legalization of cannabis for recreational use, a growing number of entrepreneurs are looking to enter the nascent industry. Forecasted to hit $2.4 billion in annual sales within the next three years, the Garden State’s legal marketplace may appear to have limitless potential, making it ripe for get-rich-quick thinking. However, experts warn the very nature of being involved with a product that is still illegal at the federal level and subject to an ever-shifting regulatory landscape can make it very difficult for aspiring cannaprenuers to pursue their dream.
Just because the opportunity is there, it doesn’t necessarily mean sustainable profits and long-term success will follow, and about half of all new cannabis businesses won’t make it to the five-year mark, according to cannabis accounting firm Green Growth CPAs.
Moreover, operating in a highly regulated industry that comes with many above-average cost burdens can make it tough to turn a profit, with more than 58% of business owners saying they are not breaking even or are losing money, a March 2022 survey by the National Cannabis Industry Association found. Hurdles identified by the 396 respondents include competition from illicit growers, state and federal taxation, limited investment capital, dominance by large multistate operators, and lack of access to banking and other financial services. Other challenges include complex regulatory structures and unpredictable consumer behaviors.
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