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Appraising a Marijuana Dispensary

by Administrator on Jul 3, 2017 Business Appraisal 432 Views

When you think about it appraising a marijuana dispensary is not that much different from appraising a restaurant or a taco stand.  You can sell 40 different kinds of weed and paraphernalia but it's all about what you pay for the product, your expenses and what you can sell it for.  In other word it's all about net profits.  Business appraisers try to establish historical evidence by looking at income and expenses over several years.  If you know what to expect over the next several years you know what you can afford to invest as a buyer and get a return on your time and money.

When businesses are newly established, like marijuana dispensaries are in Nevada, it's almost impossible to tell how well the business will do.  It's not the same as a chicken fast food restaurant that is jammed for the first 6 months and then business falls off and it becomes just another chicken place, but there are similarities.

The demand for marijuana will keep most dispensaries slammed for the next several months but once everyone in an area surrounding a dispensary have purchased their stash many will see demand slow.  Those dispensaries that are accessible by tourists near or on the Las Vegas Strip could see an exceptional level of demand that just doesn't fall off.  Paying millions of dollars for a dispensary even one with lines out the door every day still involves risk, and appraisers can only forecast that volumes will continue even with a 3 to 5-year history, they can't guarantee it.

Licensing should keep dispensaries from locating on top of one another, but that remains to be seen.  Will businesses with especially lucrative locations in Las Vegas Strip malls be able to keep the locations to themselves or will licenses be allowed that infringe on profitable turf?  Only time will tell how regulators will manage these competitive businesses.

Appraisers will make determinations based on whatever information is available from inside Nevada or possibly from other states regarding capitalization rates.  Mary Jane dispensary sales in Colorado can influence an appraiser’s decisions about the value of a Nevada dispensary when there is little or no data available in Nevada.  Appraisers who appraise specialty properties like golf courses, RV parks, Ski resorts and solar farms understand how valuable information is.  You have to know insiders and stay in touch with them or you won't have the data that you need to complete the next assignment.

Marijuana grow facilities supply the retail side of the businesses with product but they deal with relatively few customers and their businesses are entirely different from a dispensary.

When you have appraised diverse businesses, like title RV Parks, mobile home parks, outdoor advertising sign businesses, insurance companies, professional service companies, fitness centers, cemeteries, motels and taverns you realize how important it is to have accurate and reliable operating data and sales information.  Appraisers will be waiting to accumulate information on marijuana related businesses to use as a basis for future appraisals. 

If you have any data that you would like to share please contact the author of this article at the email address that is provided in the following paragraph.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

Article source: http://www.appraisalarticles.com/Business-Appraisal/4656-Appraising-a-Marijuana-Dispensary.html

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