How to Find the Right Opportunity in an Emerging Market

Ten factors potential acquirers should consider in emerging markets, such as New Jersey.

Since January 2023, New Jersey has been the most active market in the cannabis space for mergers and acquisitions, bar none. Such an attractive market begs the question, “How does one find the right opportunity in an emerging market such as New Jersey?”

That’s what we’ll answer here. First, note that emerging markets are mixed bags, and their success is highly dependent on the quality of the legislation that is passed allowing for the establishment of a retail market. In the case of New Jersey, it seems that the state legislators and local governments have unwittingly united to create a limited supply of locations that can secure an annual license in a high-demand market, making it ripe for opportunity.

Since legalization and the issuance of conditional licenses, the rollout and establishment of dispensaries and the securing of the coveted annual license has taken quite some time, due in part to a focus on ensuring proper regulation and compliance with state laws as well as local ordinances. This delay in the rollout has allowed the sophisticated business advisor to gain a granular view of what townships are issuing licenses, how many, and what the surrounding townships will be deciding to allow it all.

This is where you will find the best value in this state, or any emerging market for that matter.

Contrast all of the above discussion with Oklahoma, which allowed anyone with a pulse and $2,500 to secure a license, and you see how starkly different markets can be. The value of cannabis licenses in Oklahoma, along the whole vertical, are the lowest in the 50 states, by far. The reason for this is an abundance of supply, which drives down prices.

It’s no secret that the laws of supply and demand dictate all aspects of business, even in the cannabis industry, and when you have an emerging market with limited locations to establish a retail dispensary, the value of such a location increases exponentially, and that is the New Jersey market currently.

Knowing that New Jersey has considerable value, you need to make certain you find the right opportunity. The following factors should influence the choice of a cannabis business to buy in New Jersey:

  1. Licensing and compliance: Ensure the business has obtained the necessary licenses and adheres strictly to state regulations. Any legal issues or noncompliance could pose significant risks.
  2. Location: Consider the location’s demographics, proximity to customers, accessibility, and local regulations. Municipalities may have different rules regarding cannabis businesses, so understanding these nuances is crucial.
  3. Financial health: Review the financial statements and performance of the business. Look at revenue, expenses, profitability, and potential for growth. Factor in the initial investment and ongoing costs.
  4. Market demand: Assess the demand for cannabis products in that specific area. Consider market trends, consumer preferences, and competition from other dispensaries.
  5. Supplier relationships and product quality: Evaluate the relationships with suppliers and the quality of the products offered. Consistency in supply and high-quality products are crucial for customer retention.
  6. Brand and reputation: A positive brand image and reputation within the community can be a valuable asset. Consider customer reviews, social media presence, and public perception.
  7. Operational efficiency: Evaluate the efficiency of operations, including inventory management, staffing, security measures, and technology systems in place.
  8. Expansion potential: Consider the potential for expansion or diversification of services. Some businesses might have opportunities to expand their offerings beyond just retail sales.
  9. Legal and regulatory changes: Stay updated on potential changes in laws and regulations that could impact the business. Being compliant with evolving regulations is essential.
  10. Management and team: Assess the experience, expertise, and capabilities of the management team. A skilled and knowledgeable team can significantly impact the success of the business.

Engaging legal and financial advisors experienced in the cannabis industry can provide valuable insights and guidance when considering the purchase of a cannabis business in New Jersey. Conducting thorough due diligence on all these aspects is crucial to making an informed decision and turning to the right advisors with knowledge of the space is critical.

2024 January 8th. How to Find the Right Opportunity in an Emerging Market. Green Market Report

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