The U.S. housing market is currently red hot, with the majority of homes on the market selling in less than one week around the country. But the housing market isn't the only market experiencing a boom right now. The demand for cannabis licenses, especially on the secondary market, is also skyrocketing, with multi-state operators seeking to expand their operations fueling demand. Public cannabis companies raised 1.6 billion of capital in January 2021 alone, making these operations extremely attractive to investors, especially as they anticipate federal marijuana reform.
Additionally, rather than going through a time-consuming application and approval process by local and state municipalities; MSOs (multi-state operators) have found success in acquiring Turn-key business opportunities through specialty cannabis business brokers. Due to the knowledge, and expertise of the brokers, these cannabis opportunities have opened the doors to acquisitions in retail, delivery, cultivation, manufacturing and distribution businesses and licenses.
What Is the Secondary Market?
As the cannabis industry grows and evolves and companies expand, a lot of smaller, original growers and retailers are starting to put their licenses up for sale via the secondary market — just as you would list a home for sale. This growing trend gives cannabis entrepreneurs a fresh way to secure a valuable business permit rather than going through their state's application process, which is known to be expensive and time-consuming, with no real guarantee that you will secure a license. In fact, data shows that the average group spends $300,000 to $1.5 million pursuing a license and still ends up not getting it.
What's Causing the Cannabusiness Boom?
The secondary market has been growing steadily for the past few years. The growth is mainly attributed to the fact that most marijuana markets in the United States have caps on the number of business licenses issued, making it much easier for newcomers to get in by buying an existing business instead of attempting to win a competitive and crowded process for the highly coveted licenses.
Other factors that industry leaders attribute to the surge in interest include:
- COVID-related restaurant and bar closures drove many entrepreneurs to enter the cannabis field as their other ventures were shuttered. This also extends to other industries hammered by COVID, such as gym owners and hospitality workers who are flocking to a new career in cannabis because they feel it's a "recession-proof" industry.
- With a Democratic president and more and more states legalizing recreational marijuana, hopes for federal marijuana legalization are at an all-time high. Included in the proposed federal marijuana reform is legislation that would allow cannabusiness owners to deduct their business expenses from their taxes — a huge benefit and cost-reducing measure.
- Multi-state operators (MSOs) are on an acquisition spree as they look to solidify their presence in the industry and create a national presence. This is leading to an all-time high demand in the secondary market.
- The U.S. economy is bouncing back from the pandemic. As the economy reopens and the money returns, a lot of investors will be ready to …