Seven years ago, cannabis was the next great American growth industry. Get in early and watch your money multiply.

A $10,000 investment in the top 10 publicly traded cannabis companies at their early peaks would be worth $1,500 to $2,000 today. An 85 percent loss.

The Wipeout:

Yet well-run dispensaries in strong markets generate healthy profits. The question isn’t whether profitability is possible—it’s how to achieve it.

A GreenBooks CPA analysis of New York dispensaries reveals the divide between market perception and operational reality in this tale of two cities:

200 to 400 customers per day at an average of $60 per customer = $4.4 million to $8.8 million annually.

Set up costs $380,000-$800,000, including.

100 to 200 customers per day at an average of $50 per customer = $1.8 million to $3.7 million annually.

Leaner economics as you can see:

Manageable numbers in most retail sectors. Cannabis is different.

IRS Code Section 280E prohibits cannabis businesses from deducting ordinary expenses because marijuana remains Schedule I federally. Dispensaries face 70 to 90 percent effective tax rates—triple comparable retail.

“A dispensary in Manhattan, generating $5 million in annual revenue, might face a federal tax liability upwards of $3.5 million due to 280E limitations,” the GreenBooks analysis states.

This explains why public companies generate revenue growth while destroying shareholder value. Federal tax policy makes profitability elusive at scale.
The only relief: Cost of Goods Sold deductions. This spawned specialized cannabis accounting focused on maximizing COGS categorization.

Curaleaf, Trulieve, and peers raced to build multi-state empires through acquisitions funded by capital raises dependent on rising stock prices. When prices collapsed, high debt and bloated structures became anchors.

Focused regional operators with vertically integrated operations, optimizing COGS, found viable paths to profitability. The difference: controlled expansion, lean operations, and a focus on unit economics.

Location drives everything. Manhattan’s $8.8 million potential versus Buffalo’s $3.7 million creates operational leverage that absorbs fixed costs and funds customer experience.

Tax optimization determines profitability. Specialized CPAs who understand COGS maximization make the difference through accurate cost categorization, efficient inventory management, and strategic structuring.

Lean beats empire building. Multi-state operator wreckage proves growth without discipline destroys value. Better to dominate one market with excellent unit economics.
Diversify revenue streams. Non-cannabis products may be taxed differently. Merchandise, consulting, or ancillary offerings provide income not subject to 280E.
Patient capital wins. The rush to go public pushed unsustainable growth. Private operators with realistic timelines build profitable businesses generating consistent returns.

Trump signed the executive order on December 18, outlining a path that could address 280 (e). Federal rescheduling from Schedule I to Schedule III could transform economics overnight. A Manhattan dispensary paying $3.5 million in taxes might see that drop to $1 million, converting losses to profits.

But operators can’t wait. The industry’s history of “imminent” legalization promises dating to 2018 counsels skepticism. Build businesses that work under current rules.

The public market collapse signals the end of growth-at-any-cost. Dispensaries in strong markets with disciplined operations, optimized tax strategies, and lean structures generate healthy profits.

Seven years in, the truth: profitability isn’t about riding legalization waves or exchange listings. It’s about retail fundamentals—location, operations, margin management—executed with precision.

For professionals who master these basics, the opportunity remains substantial. Consolidation removes overcapitalized competitors, leaving room for operators who understand profit comes from doing the basics exceptionally well.