Starting a Cannabis Cultivation Business in Maryland

If you're ready to put your green thumb to work and join the cannabis revolution, Maryland is the perfect place to start a cultivation business. Since the state voted to legalize recreational marijuana in 2022, the demand for high-quality cannabis products is on the rise, and owning a cultivation business offers the potential for significant financial rewards. Cultivating cannabis is both a science and an art that requires careful planning, preparation and execution. With the right resources and support, you can become a successful cannabis cultivator and contribute to the growth of the industry. 

What is Commercial Cannabis Cultivation and Processing?

Commercial cannabis cultivation and processing includes growing, harvesting, trimming, drying, curing, packaging, labeling and transporting cannabis products. The purpose of commercial cannabis cultivation and processing is to create a safe product with consistent quality that meets all state regulations. 

Why You Should Start a Commercial Cultivation Cannabis Business in Maryland

With its progressive laws, Maryland has some of the most favorable regulations for cultivating cannabis in the country. It has established licensing rules that allow cultivators to obtain permits at reasonable costs and timelines while ensuring strict quality standards are maintained throughout production.

Cannabis Cultivation Business Demographics in Maryland 

Demographics help identify customer needs and wants, as well as determine the size and growth potential of the target market. According to surveys and studies conducted by the state government, the age range of cannabis users in Maryland is quite wide, ranging from teens and young adults as young as 18 years old to senior citizens over the age of 65. Here are some other useful stats provided by the state:

• 43% of Marylanders have used cannabis within the past year.
• 19% of consumers report daily or almost daily cannabis user.
• 25.4 is the average monthly grams purchased. This number is higher than in states without legalized programs. 
• Linear growth suggests sales will reach over $240 million per month.
• Consumers are willing to travel 11 to 20 minutes to purchase cannabis.
• Consumers are willing to pay a median of $14 per gram for cannabis, which is much higher than other states. 

How Much Do You Need to Spend for a Cannabis Cultivation License and Facility?

The cost of starting a cannabis cultivation business in Maryland can vary greatly depending on the size of the facility, equipment and local market conditions. On average, prepare to spend several hundred thousand dollars or more.  

In addition to the cost of the building, equipment and licensing necessary to get started, you’ll need to factor in the actual cost of growing the cannabis. Canna Business Plans, a site offering cannabis business plan templates, calculates the direct cost of growing cannabis at about $516 a pound. This estimate doesn’t include any of the administrative, marketing, distribution costs or taxes.

According to some estimates, you can expect to invest around $850,000 in the first year of your cultivation business. The growing equipment alone is estimated at $150,000. 

For a wholesale cannabis operation, you'll pay an average of $42 per square foot in startup expenses. This money goes toward a number of items and services, including:

• high-powered grow lights
• fans and other air circulation systems
• electricity and other energy costs
• seeds or clones
• nutrients and fertilizers
• soil mixes
• pest control items and materials 
• environmental monitoring instruments like thermometers and humidity gauges
• pots or trays 
• harvest containers for storing bud 
• trimming and cleaning supplies like scissors and alcohol wipes
• packaging and labeling materials. 

License Fees 

The first step to setting up any commercial cannabis cultivation business in Maryland is to obtain a license from the state's Medical Cannabis Commission. Before you can begin the application process, you must pay a $6,000 nonrefundable fee. This fee covers the cost of reviewing your application and conducting an on-site inspection of your proposed facility once approved. There is also an annual license fee of $125,000. The largest expenses are typically the cost of building and equipping the cultivation facility.

Consulting Fees

The first step to establishing any cannabis business is to work with consultants who specialize in cannabis industry law and regulations. Consulting fees vary by jurisdiction, so it’s important to know what local laws apply to your project before starting the process. In Maryland specifically, consulting fees can range from $500-$2,500 per hour depending on the complexity of the case. It is also important to consider other costs associated with setting up an LLC or other corporate structure for the business entity itself. 

Building and Construction Fees

After your application has been approved, you will need to invest in constructing or renting a facility that meets all relevant regulations and safety standards. Building a cannabis facility requires specialized expertise, and there is no one-size-fits-all solution. Depending on size and scale, this can add up quickly.

Buildout costs for cannabis cultivation facilities vary widely depending on the type of facility. Indoor cultivation can require anywhere from $2 million to $20 million, depending on the features and size of the facility. An indoor facility typically requires larger investments because of the need for climate control systems, light fixtures and other expensive equipment necessary for year-round production. Mixed-light greenhouses or outdoor facilities may require a smaller up-front investment because they do not need climate control systems or high-intensity lighting.

Expenses such as electrical wiring and ventilation systems need to be taken into account for compliance purposes as well as safety. It is important to hire experienced contractors familiar with local building codes who have experience dealing with similar projects or you may end up spending more money than necessary because of unforeseen problems or delays in construction timeframes.  

Equipment

Depending on what type of facility you choose and how much equipment you need, these costs can range anywhere from $100,000 to $300,000 or more for larger operations.

Essential pieces of equipment include:

Growing equipment: This includes grow tents or grow rooms, hydroponic systems, grow lights, ventilation systems and climate control systems.

Harvesting equipment: This includes trimming machines, drying racks and storage containers.

Processing equipment: This includes trimming machines, extraction equipment and infusion equipment.

Testing equipment: This includes testing equipment for potency, contaminants and moisture content.

Packaging equipment: This includes equipment for packaging, labeling and sealing products.

Safety equipment: This includes fire extinguishers, security systems and personal protective equipment.

Lighting equipment: This includes LED grow lights, supplemental lighting and ballasts.

Ongoing Operational Costs 

Once operational, there are ongoing costs related to electricity usage for lighting and ventilation systems as well as labor costs for employees who will manage day-to-day operations at the site. Examples of operating costs include: 

• Hiring and training employees
• Salaries, benefits and taxes for full-time and part-time employees
• Maintaining and upgrading equipment
• Purchasing supplies such as fertilizers, pesticides and growing mediums
• Energy costs, including electricity and water
• Cost of licensing fees, taxes and legal and accounting fees to stay compliant 
• Liability insurance, property insurance and worker's compensation insurance
• Advertising, promotions and packaging costs
• Research and development costs

Cannabis businesses face unique challenges when it comes to seeking out funding options. While many traditional forms of financing are still closed to them because of cannabis's federally illegal status, financing is available through specialized lenders.  

4 Financial Benefits of Owning a Recreational Cannabis Cultivation Business in Maryland

Opening a recreational cannabis cultivation business in Maryland is a great idea that can be highly profitable and bring a variety of financial benefits. The startup costs may seem hefty, but with the proper planning and research, these costs can be managed and result in major rewards for the business owner.

High Profit Margins

Cannabis products are typically sold at a premium price, which can lead to high profit margins for growers and processors. Because there is still not much competition within this sector, especially when compared with other industries, it’s possible that your profits could be higher than expected if correctly managed and marketed properly from the very beginning stages of your venture. 

Ambitious cultivators can also take advantage of Maryland’s unique research opportunities when setting up their commercial cultivation businesses. Universities like Johns Hopkins have long been conducting research into medical marijuana treatment options, offering cultivators access to cutting-edge knowledge about cannabis genetics, extraction techniques and post-harvest processing methods that may help them maximize yields or develop new products. 

Investment Opportunities

Owning a cannabis cultivation and processing business allows you to capitalize on the growth of the legal marijuana market by investing in companies operating within it. Many investors are now turning toward this sector because of its potential for high returns and its low risk profile compared to other industries. Investing in cannabis has become increasingly popular over the past few years because of the increasing number of states legalizing it for recreational use as well as its rapidly expanding global market share. 

Tax Benefits 

Owning a cannabis cultivation business in Maryland could offer tax benefits. Businesses engaged in the production of marijuana may be able to take advantage of certain deductions and credits available through federal law, which could significantly reduce their taxable income. Additional deductions may be available depending on what kind of equipment or supplies are used during production or other areas where cost savings can be had. 

Accessibility

Because there are only so many licenses available for cannabis businesses in Maryland, having one gives you an advantage over competitors who don’t have them yet. You will also have access to exclusive events such as conferences, seminars, trade shows and workshops that are tailored specifically for owners of these types of businesses. These events provide tremendous insight into the industry while allowing you to connect with key players who can help grow your business. 

Potential for Success

Starting a recreational cannabis cultivation business in Maryland is a significant investment that requires careful planning, preparation and funding. From equipment and supplies to annual licensing fees and insurance, the costs of starting a cannabis cultivation business can add up quickly. But the potential rewards of owning a successful cannabis cultivation business can be substantial, with the growing demand for high-quality cannabis products providing opportunities for significant financial returns.

Frequently Asked Questions