Patient Advocacy and Community Outreach Drive Successful Dispensaries

One of the most important components of the marijuana industry is the dispensary. Since marijuana cannot be legally shipped through the post office, and since laws in most states are at best vague about delivery services, the best way to sell legal marijuana is in a building known as a dispensary.

What good is investing in all sorts of back-of-the-house industrial equipment if there’s no front-of-the-house store to sell it in? Apparently this was not a question many people thought to ask at the Marijuana Investor Summit. Attendance was light at the “Dispensaries” panel, even though the breakdown of what it takes to start and run a dispensary was informative.

The dispensaries discussion took place in the Crowne Plaza DIA on April 21, 2015. It began about 45 minutes late due to the prior discussion running long and was right around dinnertime, which may have contributed to the sparse crowd. The discussion was led by two industry consultants: Kayvan Khalatbari from Denver Relief Consulting, and Trevor Smith from Chicago-based Quantum 9 Consulting. Khalatbari covered the operations and marketing side of things while Smith spoke on the financial picture and pitfalls of running a dispensary.

Running a dispensary is the slower way to make money in the industry. Running a dispensary is less about making an investment, unless the investor went against the advice of the panel, and more about running a business. Many investors at the three-day summit were interested in new technology and products, likely due to the potential of fast earnings.

Khalatbari has experience running a dispensary in addition to running a consulting firm. Using the same name as his consulting firm, Denver Relief is actually the oldest dispensary in Colorado, according to Khalatbari. Currently Denver Relief is a recreational and medical shop, but when it started, Khalatbari said his focus was on advocacy and outreach. The goal was to integrate in the community, and to change the perception of cannabis.

“[Denver Relief] started on the basis of advocacy,” Khalatbari said, referring to advocacy for patients, “and we tried to engage with traditional institutions to prove viability,” Khalatbari said about the other businesses and organizations Denver Relief has worked with in the past.

Patient advocacy was also important to Smith, who said, “If you can’t see how your work helps others, quit.” Smith said reading patient reviews is why he gets up in the morning, to do what he does. Smith worked at Herbal Wellness Center, which is the highest-rated cannabis medical center on Leafly, with over 1,300 patient reviews. Currently, at Quantum 9, Smith is helping dispensaries optimize the prices of their products.

While dispensaries are the slow way of making money in the industry as it involves running a business, there is also a share of risks involved. The marijuana industry is a bit like the Wild West right now, but that might not always be the case. Khalatbari suggested adhering to FDA and USDA standards as if they applied to marijuana because it’s likely those standards will apply someday.

Smith drove home the point that good employees need to be retained. “If you find great talent in this industry, you need to keep them. Particularly at the general manager level.” Khalatbari also had thoughts on associating with good people, but said that should be the standard; everybody has good people.

Khalatbari went further than that, “Everybody’s won a Cannabis Cup. We won one. It doesn’t mean anything,” although he pointed out such accolades are good for marketing. Speaking of marketing, Khalatbari said that word of mouth and new media are the best ways to advertise in the industry, and Denver Relief has not run a print advertisement in three years.

Smith pointed out that dispensaries are not like other investment opportunities, “This is a cash-based business. If you’re an out-to-lunch owner, they’re going to know you’re an out-to-lunch owner,” Smith said in regards to the risk of employees acting unethically. A dispensary is a very hands-on investment.

Khalatbari also warned against the “snake oil salesmen” that will try to get a dispensary to push their products. Khalatbari said a lot of products and merchants can’t live up to the sales pitch. He said to look for things like reputable associations, and gave an example of the National Cannabis Industry Association. Khalatbari said that it doesn’t mean a company has been vetted just because it is connected to the NCIA, but such a connection does carry a little weight because it increases profile and visibility, and it represents a process undertaken to obtain membership.

But the crowd at the Crowne Plaza DIA wasn’t really interested. Many other things at the summit were far more popular. Everybody wants to be involved in owning a piece of the necessary back-end, but nobody wants to run a brick-and-mortar business. As indicated earlier, these back-end investments will do little good if there are no dispensaries for them to call home.

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