Cannabis Nursery Businesses: The Right Investment for You?

November 30, 2020 Cannabis Business, Entrepreneurs, Financial Strategy, Investors, Legalization

Cannabis nursery businesses can be excellent investments for nearly anyone operating in the cannabis sector. While starting or purchasing a nursery sounds like a smart move, it’s ideal to know what you should expect.

Cannabis nurseries add diversification to your operations. While you’re likely operating in a separate niche of cannabis and have considered becoming involved in a full cultivation operation, a cannabis nursery business model offers a less-involved way to work with plants and seeds.

A cannabis nursery business can bring in the big bucks–when done correctly. While you’ll need to develop a solid cannabis nursery business plan to follow, it’s possible to grow a nursery’s income over time.

Tax-wise, your immature seeds in California don’t receive the same cannabis cultivation, sales, and excise taxes. But we’ll talk more about that later.

Interested in having the financial aspects of a cannabis nursery handled by an expert? Contact us today to learn more about how we can help.

California Cannabis Excise Tax & Cultivation Tax Insight

Cannabis Nursery Business: What Does it Involve?

The Text of Final Proposed Regulations from the Medical Cannabis Cultivation Program (MCCP) defines nurseries as “all activities associated with producing clones, immature plants, seeds, and other agricultural products used specifically for the propagation and cultivation of cannabis.” Since cannabis became legal for recreational adult use, the definition now includes recreational cannabis too.

Thus, opening a cannabis nursery presents opportunities for cannabis entrepreneurs as you can become involved in the cultivation of your products. Nurseries enable you to produce consistent genetics.

Growers can be fantastic at growing cannabis. But when it comes to breeding cannabis, a cannabis nursery specialist can be worth his or her weight in gold.

Your nursery–managed by the right cannabis nursery specialist–also could allow you to specialize and focus on developing a specific strain of cannabis plant. And if you grow something with superior genetics, you’ll also have control over those genetics by culling out weak plants before they become a problem.

Most importantly, implementing a cannabis nursery business model gives you a new revenue stream. So if you’re a manufacturer or a cultivator who has some extra space, adding a nursery could be the investment you need to bring your business to the next level.

And let’s not forget about compliance. Each state has its own regulations in place for cultivators. For example, in California, cannabis waste disposal is regulated.

Estimated Financials of a Cannabis Nursery Business: What to Expect

What should a cannabis nursery license bring to the table? Is it really worth the investment?

Let’s crunch some numbers in an example of a cannabis nursery business model.

In a 2,000 square foot warehouse, you can house between 40 and 80 mother plants. This depends on the size of the plant and how you use your space.

If each mother plant gives you between 15 and 30 healthy cannabis clones per month–depending on how well you or your cannabis nursery specialist cares for them and their regeneration capabilities. This translates to between 600 and 2,400 clones per month.

Let’s say you sell each clone for $10 apiece. This means your nursery could bring in $6,000 to $24,000 per month selling cannabis clones.

These are conservative estimates too. Some cannabis nursery businesses can pull more clones out of a warehouse this size.

The amount of income you can expect from a clone nursery in California depends on a few factors:

  • The number of clones purchased in a single order.
  • The frequency a grower purchases your clones.
  • The demand for your genetics.
  • Your reputation as a cannabis nursery specialist.

A cannabis nursery license is usually essential to conduct a clone nursery in California. But just because you have a license to sell clones does not mean you’ll be successful.

You’ll need an excellent reputation in this highly competitive market too.

Consider how consistent and fair you are in your business relationships. Rather than focusing on the THC or CBD potency of your strains, it’s crucial to establish your reputation by investing in your business relationships. This means dedicating attention, time, and respect to your growers. In turn, they’ll do the same.

taking care cannabis trees

Cannabis Nursery Business Expenses

You’ve seen the profits a cannabis nursery business model can deliver. But knowing how to start a clone business and its potential earnings is only part of what you should know.

A license to sell clones comes with expenses. These costs vary depending on your location. License, real estate, utilities, marketing, and labor are all costs associated with your nursery’s location. For example, LA nurseries have more expensive costs than a nursery in Oklahoma.

For business owners who already operate a cannabis facility, real estate is already something you’re paying. This means most of your incremental costs will be utilities and labor.

Cannabis nurseries have taxes to pay too. But cannabis cultivation, sales, and excise taxes apply differently to immature seeds in Cali. Here’s what to expect:

  • Cultivation tax: Cultivation tax doesn’t apply when you’re selling immature seeds, clones, and plants.
  • Sales tax: Sales tax only applies if you’re selling a cannabis product in the retail market. So as long as you’re selling your seeds, clones, and immature plants to cannabis growers, you don’t have to worry about sales and use tax.
  • Excise tax: Cannabis nursery businesses can sell seeds, immature plants, and clones to other cannabis licensees. But distributors need to transport plants from the nursery to the licensee. If you’re selling or transporting seeds, immature plants, and clones to a retailer, you–as the distributor–will have to collect a 15% cannabis excise tax from the retailer.

Could Opening a Cannabis Nursery Be the Right Move for You?

Before you develop a cannabis nursery business plan, it’s important to consider the actions you’ll need to succeed.

As a cannabis nursery specialist, you’ll need to test your plants’ genetics through full bloom to determine the quality of your seeds and clones. You’ll document the entire process across several mediums (writing, photos, and video), as well. With this information available, you can show growers the quality of your plants.

Consider what growers you’d like to target. Since some growers prefer specific characteristics–for example, some look for short and wide plants while others seek tall and thin plants–it’s important to allow a seed to mature fully to let growers know what they can expect. You’ll also need to offer a certificate of analysis as proof of the quality of your seeds and clones.

If you plan to bring plants to maturity, you’ll need a cultivation license. Depending on the size and specifications of your grow space, you might need other licenses too.

Interested in investing in a cannabis nursery business? Contact us today for expert assistance.