Some may believe having a cannabis business license is akin to having a license to print money. That’s certainly not the case in the USA, with a high proportion of firms struggling.
Cannabis consulting firm Whitney Economics has revealed preliminary findings from its 2024 Cannabis Industry Business Conditions and Sentiment Survey. The survey found just 27.3% of cannabis businesses have achieved overall profitability this year, compared to approximately 65.3% of all small businesses in the U.S.
This year may be tough, but 2023 was even tougher, with only 24.55% profitable. The last two years were a big change to 2022, when 42.40 % achieved profitability.
Other profitability-related findings:
- Breaking even: 20.30% (2024), 34.48% (2023) and 40.56 % in 2022
- Not profitable: 37.40% (2024), 41.07% (2023) and 32.17% in 2022
- 33.7% white operators are profitable, compared to only 17.5% of their non-white counterparts.
Whitney Economics founder and Chief Economist Beau Whitney said the US cannabis industry is experiencing a rough ride mainly due to a combination of hefty federal taxes, poor access to financial services and heavy state and federal regulation.
Regarding taxes, proposed rescheduling of cannabis would result in lower tax burden says the firm, which are forecast to cost the cannabis industry an additional $2.3 billion in excess taxes under current scheduling policy. As well as the tax benefits from rescheduling, it would result in a boost to cash flows through increased sales.
“The proposed scheduling change would be a stimulative monetary policy allowing operators a greater chance to achieve profitability and enable them to invest back into their communities,” said Mr. Whitney.
Rescheduling cannabis is still being considered by the Drug Enforcement Administration, which just ended a public feedback period that attracted tens of thousands of comments. Early analysis from various sources indicate the majority of submissions supported rescheduling. President Joe Biden and Vice-President Kamala Harris also support it, with a review of marijuana scheduling triggered by Joe Biden back in 2022.
On the disparity between white and none-white operators, Whitney points out most regulators do not track data related to social equity’s impact in states with such programs.
“State legislatures will need to support and fund regulators to collect this type of data,” he says.
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