LOS ANGELES- A recent research dispels any notion that the U.S. cannabis sector is an easy one in which to turn a profit. It will come as no surprise to industry players that 37% of cannabis firms in the United States are not profitable, according to a survey by Whitney Economics and the National Cannabis Industry Association (NCIA).
Only 42% of the 396 cannabis businesses polled across the nation were determined to be profitable, while 21% said that their investments were only breaking even.
The NCIA report identifies certain particular issues affecting cannabis, such as overtaxation and competition from the black market. The survey also lists price volatility and a lack of banking access as significant roadblocks for cannabis business owners.
The recent publication of the Whitney Economics U.S. Cannabis Business Conditions Survey Report offers a granular look at how respondents are feeling, and what they are worrying about.
The Survey’s Objectives
“Establish a baseline of data, and highlight the successes and challenges that operators in the business are facing,” was the survey’s stated goal.
The poll used demographic questions, questions designed to provide a clear answer to a particular question, and questions that provided space for various responses or comments to analyze policy, regulatory concerns, industry successes, and overall opinion.
NCIA members participated in the survey. Since this poll was planned to be carried out every three months going forward, the NCIA anticipates an increasing percentage of its membership to take part.
Important Findings from the Survey
Only 42% of those surveyed report making a profit. Additionally, non-white and female respondents perform significantly worse than white and male respondents in terms of profitability.
While 58% of businesses as a whole are not turning a profit (either breaking even or losing money), 62.5% of businesses run by women and 67.8% of businesses owned by people of color are not.
The main problems facing cannabis operators are a lack of banking, market instability, and state and federal taxes.
Access to banking and other financial services was cited as the main problem by 72% of respondents.
Because they are being tugged in two opposite directions, smaller operators struggle. The illicit market, which competes for the same customers as the smaller operators, is on one side, while major corporations, which are constantly present and actively seeking to consolidate the market, are on the other.
Regardless of size, taxation is a problem that affects all businesses. Cannabis businesses run the danger of going out of business due to taxes. State officials are preoccupied with local concerns while neglecting the effects of federal policy, and vice versa for federal policymakers. Business owners are under pressure as a result of the fragmented tax system.
Operators are more concerned about the sector’s problems than it is about its triumphs, which has an effect on the mood of the industry. Business owners are quite happy of what they have done over the previous year, including expanding opportunities for women and minorities, improving working conditions for their staff, and educating a growing customer base.
Despite this achievement, however, the worries of cannabis business owners overshadow their sense of accomplishment, which is having an effect on the general mood of the industry.
The fact that we have now created a baseline of fresh data that reflects operator sentiment and economic situations puts the industry in a good position. When discussing policy at the state and federal levels, this data can back up and illustrate the operator’s narrative.
“We are pleased with the results of this initial study and look forward to continuing to monitor the cannabis market in the future. We truly appreciate the cooperation we received from top national cannabis groups such as NCIA” said Beau Whitney, the founder of Whitney Economics. Whitney also described the results as: “no surprise.”