How much does it cost to start a cannabis grow operation? It’s an essential question that you must ask yourself before you begin making serious plans to start a cannabis cultivation business. It’s an essential question … but it’s also a very difficult question to answer.
The fact of the matter is that numerous factors will influence how much you need for a grow op setup. Unfortunately, your expenses don’t end after you buy all the equipment and supplies you need to grow healthy cannabis plants.
The following article cannot give you a specific amount of money that you need to start a grow op. Even an experienced cannabis business consultant can only give you a ballpark figure.
We can, however, review some of the expenses that you can expect to encounter, give you some estimates, and explain how your business plan will influence the amount of money you need to get started.
Expenses to Expect When Deciding How Much It Costs to Start a Grow Op Setup
Let’s start by reviewing the expenses that every indoor cannabis grow operation can expect to pay.
Permit Fees and Taxes
Plenty of states pass recreational cannabis laws because they want to collect additional tax revenue. It’s a win-win for the state and consumers. It’s also a good thing for business owners who want to enter an extremely lucrative industry. Unfortunately, the arrangement means that you will spend a lot of money on permit fees and taxes.
The amount of money that states charge varies significantly from place to place. Most states will also charge you varying amounts depending on the size of your grow operation. If you have a fairly small grow op, you might pay a $1,000 application fee compared to the $5,000 fee that a large warehouse would pay.
Don’t make any assumptions about how much you will need to spend on your application and taxes. Your state has an agency that can give you accurate information. The agencies aren’t always as easy to find as you might think, though. Some states even let their alcohol bureaus regulate cannabis.
Get accurate fees and tax estimates by reaching out to an accountant or CPA with experience working in the cannabis industry. Plenty of knowledgeable professionals advertise their services on 420 Property. Look for listings in your area so you can talk to an expert who knows your local laws and fees.
Cultivation, Office, and Packaging Space
If you want to start an indoor grow op, you probably want to find warehouse space that has been zoned for the cannabis industry. Don’t assume that every building can become a cannabis grow operation. Most cities have strict laws about where you can grow cannabis.
You will also need room for packaging your products and conducting business.
How much space do you need in a warehouse? That completely depends on how much cannabis you want to grow and how much money you have to spend.
A lot of companies start by leasing warehouse space. Leasing has several advantages for startup businesses. For example, you get to avoid the large down payment you would need to get a mortgage — of course, that assumes that a lender will even give you a mortgage on property where you plan to grow cannabis. Instead of the high, upfront cost, you pay a monthly rate.
You also get to avoid much of the warehouse’s maintenance. If the water main breaks, your landlord will have to fix it. It’s not your responsibility because you don’t own the property.
Of course, there are disadvantages to leasing warehouse space. Some landlords with property in green zones don’t want to lease warehouse space to cannabis cultivators. As long as the federal government considers marijuana illegal, you will encounter people unwilling to do business with you.
You might also discover that your landlord wants to raise your monthly payments after the first year ends. You can always negotiate to keep your rate, but property owners don’t have to let you keep your business there once your year-long contract ends. They could simply raise your rent by such a large amount that you can’t afford the lease.
You can save yourself a lot of problems by using 420 Property to find warehouse and industrial space owned by people interested in the cannabis industry. The database has hundreds of listings with green zone properties for sale. The listings include information about price, size, and features, so you can make a decision that fits your business plan.
You can also browse hundreds of warehouse and industrial spaces for lease. Some of the listings include warehouses that various companies have used for years. Others will direct you to new buildings constructed specifically for cannabis cultivators.
Take time to review your options so you can get a good idea of how much green zone property costs to purchase or lease in your area.
Equipment and Supplies
The equipment and supplies your grow operation needs depends on how much you plan to grow and what you plan to do with plant material — if you plan to extract chemicals from plants, for instance, you might take a different approach to growing them.
Typically, you can expect to buy the following equipment for your indoor grow op:
- Grow lights
- Irrigation systems
- Vertical racking
- Humidity control
- Trimming tables
- Decarb oven tables
- Drying equipment
Individually, these items don’t cost that much money. Together, though, they add up quickly.
You can often find LED grow lights that sell for about $1,000. An automated lighting system that covers a large space (approximately 30 x 100 feet), however, can cost as much as $15,000. Many companies start small and grow as they generate profits.
Your irrigation system will probably force you to spend the most money at once. Cannabis plants are very sensitive to moisture, light, and heat. You need to control those factors at all times. For a medium-sized irrigation system with a built-in carbon filter, you might pay as much as $100,000.
It often pays to shop around to find equipment and supplies at discounted prices. When growing companies want to get rid of their old grow lights and irrigation systems, you could get them at drastically lower prices. You might also find that you get cheaper prices when you buy from a company that’s going out of business. Unfortunately, not every cannabis cultivator succeeds in the competitive market.
You can search equipment listings on 420 Property to compare offers. Listings include:
- Irrigation and watering systems
- Grow lights
- Lab and extraction equipment
- Solar panels and inverters
- Processing and packaging equipment
When it comes to buying supplies for your grow op, try to purchase in bulk. You can often get discounted rates on fertilizers, soil substrates, and other essentials when you contact suppliers and request bulk pricing.
How much does it cost to start a grow op? Just wait until you see your monthly bills for utilities. When you grow crops indoors, you have to replace natural sunlight and rain. That usually means spending a lot of money on electricity, water, and sewage.
You can potentially lower your long-term costs by investing in a solar power system. Solar power is a big upfront cost, though. If possible, you might want to choose a solar company that will extend your payments over several years.
Try to reduce your energy and water use as much as possible. Do not, however, put your plants at risk. Saving 20% on your monthly bills will not make up for a 20% reduction in flowers. You grow high-quality crops that people are willing to spend a lot of money on. Don’t let short-term savings prevent you from making long-term profits.
You can’t run a successful grow op on your own. In fact, you probably need a team of at least five people to operate a small indoor grow operation. Luckily, only a couple of those employees command high salaries.
Your master grower can earn anywhere from $80,000 to $150,000. The salary depends on the master grower’s experience and how many plants are under their care. You might also want to include incentive bonuses when the grower exceeds expectations.
If you produce extracts at your grow op, you can expect to hire an engineer who will earn at least $100,000 per year. You don’t have to include this person on your team. Many grow ops sell their flowers and other plant materials to companies that specialize in chemical extraction. The industry, however, shows a remarkable trend toward extracts. Keeping extraction in-house could help you cut out the middleman and earn higher profits.
Your other employees will need to fulfill tasks like checking plants, trimming flowers, and packaging products. Depending on your location, you can expect to pay them about $15 per hour. You might find that you can save money by hiring part-time workers who don’t receive benefits like health insurance and retirement plans.
Every business needs insurance. As a cannabis cultivator, you will likely need general liability insurance that protects you from injury on the property. You will also need workers’ compensation insurance.
As an indoor grower, you can worry less about losing crops than farmers who grow their cannabis outdoors. Pests and diseases can get inside your warehouse, though. If you don’t address the problem before it harms your plants, you could lose everything. Crop protection insurance will ensure that you get paid a minimum amount of money. It’s probably not as much money as you would like, but it will cover your losses and give you another year to strive for success.
How Much Money Do You Need to Start a Grow Operation?
There isn’t a set rule for this, but many states want to make sure you have enough capital to start and run your grow operation. Depending on your location, you might not get a cultivation permit until you have enough capital on hand.
Generally, you can expect to need at least $250,000 in capital. The more money you have, though, the easier it is to get your license. You don’t necessarily have to spend all the money. The licensing agency simply wants to know that you have access to enough capital.
Make sure you include proof of capital when you submit your business plan to the licensing agency.
How Much Money Do Commercial Grow Ops Make?
Is all of this worth it? That depends on how well you manage your business and grow your crops. Most business owners expect to make $150 per square foot of growing space. That isn’t the revenue of a square foot. That’s the profit!
With a 1,000-square-foot grow operation, you’re looking at $150,000 in profit. No, that doesn’t make you an instant millionaire. It does give you more capital to invest in a larger facility and more efficient systems, though. If you grow your business a little each year, you could exceed $1 million per year within a decade.
This is not a guarantee. No one can guarantee how much money you make from your business. But it’s a good guess. It also explains why so many companies have gotten into the legal cannabis industry.
Search cannabis warehouses for sale on 420Property.com!