How much does it cost to get a cannabis license? Getting a cannabis license is very complicated and very expensive. CB Advisors has been helping their clients get licenses for many years, their President, Maxime Kot joins Dan Humiston to help demystify the process. She explains the range of costs for each type of license in each state and breaks down the expenses. She also discusses how previous applicants have raised capital to fund their expenses. Produced by PodCONX MJBulls: Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Maxime Kot - https://podconx.com/guests/maxime-kot CB Advisors - https://thecannabisbusinessadvisors.com/
How much does it cost to get a cannabis license?
Getting a cannabis license is very complicated and very expensive. CB Advisors has been helping their clients get licenses for many years, their President, Maxime Kot joins Dan Humiston to help demystify the process. She explains the range of costs for each type of license in each state and breaks down the expenses. She also discusses how previous applicants have raised capital to fund their expenses.
MJBulls: Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Maxime Kot - https://podconx.com/guests/maxime-kot
CB Advisors - https://thecannabisbusinessadvisors.com/
RC CB Advisor 3
Dan Humiston: [00:00:00] Today on the MJ bulls raising cannabis capital podcast, we are joined by Maxine cot, the president of CB advisors, Maxine walk them to the.
Maxime Kot: Hi, thank you so much for having me.
Dan Humiston: Well, I'm really happy that you could join us today. I have a lot of questions about licensing, which is one of CB advisor specialties. And I thought maybe to get things rolling, we could talk about what states are currently issuing licenses or preparing to issue license. And at what phase or what step of the process?
Maxime Kot: Absolutely. Yeah, so, there are two different types of. Markets, I would say , in industry speak we define it as an open market versus a limited market. And open market is more like California, Oklahoma Washington, Oregon, where the number of licenses aren't kept statewide.
They may be kept on a local level. So for example, in California, Los Angeles might [00:01:00] have a cap of their own on what type of licenses and how many they're issuing. Same with Oklahoma. Now they can choose not to cap it and that can cause a lot of oversaturation , in that specific area.
Right. And we see that a lot in Oklahoma versus a limited market where they're only giving out so many licenses like Pennsylvania, where they issued only 50 dispensary licenses statewide. Now each licensee is able to open up to three. Dispensaries, but that's still only 150 licenses statewide versus 10,000 and in Oklahoma.
So those are the two differences. So a lot at the time when I'm speaking to an investor that is the first thing that they are looking for as a market with, a limited number of licenses that are being issued statewide because obviously that affects, your market share , and your return and the revenue you can get.
In your business. So right now, there are about, 10 states that are [00:02:00] accepting applications are, will be accepting applications in the near future. California or Oklahoma, they're always going to be accepting applications because they don't have deadlines because it's always open and it's unlimited.
Some of the markets. A lot of investors are interested in and are watching, are New Jersey, New York, Connecticut which just legalized in the past year or so. And those are there states that are going to be a little bit more competitive because they tend to limit the number of licenses they issue.
Arizona will be accepting applications as well, but only for social equity applicants. So those are the top markets that most individuals are watching right now.
Dan Humiston: Oh, it's quite a few. It's a really good sign. they're. Yeah. It's a complicated topic licensing , and we don't have time to get into every aspect of it. So I was going to hopefully focus today on the costs and how to fund it. I know each state is different, but just to give people a [00:03:00] perspective, approximately how much will people spend to submit a competitive application?
Maxime Kot: For a competitive application in a market like New Jersey, like New York Pennsylvania, Ohio, just to name a few where the state is limiting the number of licenses. It depends on the type of license you're pursuing. So for a dispensary. , I like to say anywhere from a hundred to $150,000 pending on real estate, real estate is probably going to be one of your biggest expense because you have to somewhat secure it prior to the application.
And that varies pending. Location and the building size and all of that. And if you're pursuing a manufacturing license, which is sometimes referred to as a processor license where, you're able to create products, so edibles, tinctures, topicals oils, things like that. I would safely say around 152, to maybe 200,000 , because the property you're looking for a size that believe [00:04:00] bigger than a dispensary location, because you need all the equipment and all of that. And for a cultivation, I would safely say for a competitive application process, where you really want to go all out because you have to, if you're going to stay in a chance to win one of these licenses, it could cost you probably up to a quarter million.
I've seen people spend a lot.
Dan Humiston: And that's just for the application folks. That's where if you get the license and there's a lot of extra expenses on top of that, give us an idea of how that money will be allocated.
Maxime Kot: So typically for any competitive application process, a lot of the states will mimic each other. So the ingredients of what you need to submit an application that stands a chance and actually winning , it's the same. And so, some of the costs that you'll incur during an application process to submit the application in house.
You get one of these spaces as though it's not guaranteed. There is some risk to this expense is your. That's going to be a best friend. You need one.[00:05:00] So your attorney fees, obviously what range. So typically be like our clients to budget anywhere from 10 to 20 grand, just depending on, the complication of the partnership agreements.
And then. If you hire consultants such as ourselves to help you navigate through the entire application process, to consult on team building real estate selection, and actually drafting your policies and procedures, which are very important and the meat and potatoes of your application our fees range anywhere from 50 to $150,000.
And then your real estate is probably. Where you'll spend most of your money in terms of your application costs depending on how you secure it, it can cause nothing, if you own the property by coincidence, or it can, range up to 20,000 or even more, depending on what the landlord wants for them to hold the property for you.
I've seen some clients get away with 2,500. It just depends on the market. And your application [00:06:00] fee. So oftentimes. The state will requesting non-refundable application fee. And that ranges anywhere from as low as 2,500 to 20,000, right? Some of which are refundable.
A portion of it sometimes is refundable, but at a minimum, you're looking at at least 2000 to 5,000. Non-refundable
Dan Humiston: And this is, really this is just for a ticket to the dance. I mean, you're not, you don't, you haven't actually got the ticket stamped, but you can,
Maxime Kot: I love that analogy. Yes, you're right.
Dan Humiston: it is, it's crazy, for, like you said, , for a chance , in the lottery this is what you have to spend. You guys. In addition to all the other services, do you help some, your clients secure their funding or help them raise the money?
Maxime Kot: yes, we do. So we have helped clients raise. Pre application for the application for the expenses we just talked about and also for [00:07:00] operations. So of our clients are lucky enough to get a license and they need help raising. We've helped them do that as well. And what we typically do is similar in both fashions, obviously the only differences, what you're raising for.
So it's easier to raise for the application cost just because it's a smaller amount typically. We've helped clients put together their investor deck, a business plan, their financial performer and projections a breakdown of what the application costs will entail and what the funds are being utilized for.
And typically that's a small family, friends raise obviously depending on the type of license you're pursuing. So sometimes it can take out clients, a week or a month. Three months to raise it just depends on who they approach and how quickly they can strike a deal. But yeah, we've definitely helped with that.
And then it gets a little bit more complicated when it comes to operations, just because there's just different ways to invest in actual operations. [00:08:00] Right. There are some investors that may not necessarily want to invest in, the plant touching side of things, but we'll invest in the real estate.
So they'll purchase the real estate and lease it back., the operator
Dan Humiston: There's no reason to reinvent the wheel. You guys have done it so many times. You understand the process, you can explain it to your clients and help them navigate through this. It is so complicated.
You talk about putting together the, Yeah, so P's and the manuals, that's really just the tip of the iceberg. There's so much involved. I know that I want to talk about. Though for the lucky people that get her license awarded in the past, a lot of those people were just either partnering up with a larger entity immediately, or in some cases they were selling their license.
Like as soon as they got it is that still a thing
Maxime Kot: it is still very much a thing. There are some states that will put her parameters in there to prevent this from easily happening, but there's always work a ways [00:09:00] around it. So if you really are looking to sell. There's a way. Right? So for example, Arizona, for the social equity program, if you are awarded a social equity license here in Arizona, Sell, you can't do anything to the license until you get your approval to operate for your dispensary, which means you have to have your dispensary ready and for inspection. And once they give you that approval to operate, then the rules change a little bit, but that prevents somebody from immediately turning around and selling their license without an actual building or potential operations.
So that's one. Of very few markets that have done something to prevent that from happening. But that's also to protect the social equity applicant. I'm assuming that's our goal. But yes, that happens a lot. Arizona actually just issued 13. Licenses and Arizona's licenses are probably one of the more valuable licenses because we are a recreational market.
And it is a limited [00:10:00] number of licenses. And that's hard to find because a lot of the recreational markets tend to not cap the number of licenses they issue. We see that in Michigan. We see that in California. That obviously means there isn't any money to be made in this markets.
It just. Isn't as immediately valuable as Arizona would be where there is a, cap number of licenses. So they just issued 13 which makes the total including existing licenses , that were able to convert to adult use. The total is now 143 licenses total. And it's a vertically integrated license, which means with that one license, you can grow manufacturer and sell.
And so those licenses alone in not including operations, not including, staff product or anything are going for anywhere from eight to 20 million. And there are buyers.
Dan Humiston: Oh my gosh. Oh my gosh.
Maxime Kot: Because I'm going to sows that are multi-state operators that have made, a [00:11:00] sizeable profit in other markets are now starting to have the actual capital to expand through acquisition. And sometimes that is easier for them and less of a risk for them rather than going through the application process.
Dan Humiston: Wow. Well, staying with the ticket allergens. If you get the golden ticket, that is that, is it worth it? It's worth it. $150,000 to turn around for 20 million. It's not such a bad gamble. I wow. Well we'll, we'll have, and Maxine's info and CB advisors information in the show notes. So. I think it's a good idea.
If you're serious about getting into this business or even trying to pursue a license, it's always a good idea to speak with a professional before you jump into it, because this is competitive. It's very competitive and it helps to have somebody that's been around the block a couple of times, which CB advisors [00:12:00] certainly has Maxine.
Thanks for being on the show today.
Maxime Kot: absolutely. Thank you so much for having me. It was a pleasure. You've been really easy to work with. Thank you so much.