Home Basic Articles Valuing & Qualifying An Emerging MMJ Market

Valuing & Qualifying An Emerging MMJ Market


Opportunities in cannabis seem to be booming as more states and countries pass initiatives for medical marijuana. Since every cannabis market is separate and unique, not every marketplace is ideal for every entrepreneur.  By defining data sets via the questions below, you can get closer to determining whether a specific market is attractive to you.

Start simple – according to census data, how many people live in the market?

Do regulations allow for reciprocity?

  As is the case in Jamaica, and Hawaii as of 2018, select medical markets allow patients who qualify at home to also purchase as visitors. Although still rare these days, reciprocity could be the easiest solution to patient access problems related to traveling. While tourist purchases yield a larger market, it’s difficult to accurately quantify the value since at-risk patients may not represent a large portion of the tourist population.

How and how easily was the program approved?

     Most frequently, MMJ is approved by citizens via a ballot question. In other cases, the government itself approves the bill and frames the program.

    If your market passed MMJ via a citizen-approved ballot question, this is beneficial. While the number of voting individuals is realistically only a subset of total residents, the majority percentage speaks to the awareness level of prospective patients and their willingness to enter the legal market.

     New Jersey’s Legislature approved the program in 2010 and challenges ensued when a new governor took over, delaying the program nearly 2 years. Polling indicates that NJ residents overwhelmingly support MMJ, but with little media coverage and a ban on advertising that is still in place, patients simply weren’t aware of the program.

     In Michigan, organizations were formed months or years in advance to educate the populace. Voters approved MMJ in 2008 by a majority of 63%. While this doesn’t mean all 63% will be patients, it does mean that 63% felt informed enough to make a decision in support.

     As of February 2017, New Jersey had just 5% of Michigan’s patient population; 12,514 patients compared to Michigan’s 218,556. While public awareness isn’t the only factor at play here, it warrants attention.

What are the qualifying conditions?

     We’re starting to determine what subset of the population could become patients. The number of, type of, and definition of each condition will greatly impact the number of qualifying patients. By “types” of condition, I’m referring to whether the condition is terminal or chronic. A list that leans predominantly toward terminal illnesses will grow more slowly and reach a plateau more quickly than a market with more chronic conditions simply by the nature of how many people are affected by each condition at a given time.

    Look for “catch-all” conditions – those that are difficult to diagnose, allowing compassionate physicians to recommend MMJ to patients who may benefit but would otherwise not qualify.  More catch-all conditions means a larger patient market.

How many will qualify based on the conditions approved?

Time to determine the incidence rates for qualifying conditions. The CDC provides incidence rates for conditions in the US, and other countries have parallel organizations. For common diseases like cancer, a state-by-state incidence rate is often published. For rarer diseases or where data by area is lacking, country-level incidence rates are usually available.

With state-level data, it’s easy to determine an estimated number of qualifying patients per condition. Extrapolate incidence rates per 100,000 citizens for the entire state population to determine a total number of citizens afflicted for each condition.

In cases where you have to rely on country-level data, there’s additional calculation needed. Follow the same procedure above, extrapolating incidence rates per 100,000 citizens for the entire population of the country, to get the total number afflicted. Then determine what percentage of national population your state represents. Eg: If your state has 10MM citizens and the country has 100MM, 10% of the population lives in your market. Take the total number of patients afflicted in the country and segment out 10%  for your state to get a reasonable estimate.

How easy or difficult is it to obtain a medical card?

While some states make it easy, others require an onerous process. NJ requires that patients establish a 6 month relationship with their recommending doctor or complete 4 visits before they can receive a recommendation. Taking the physician’s form, they file more information online, pay $200, and wait 2 weeks for the state to approve it and mail the card.

In Colorado, you can meet with a doctor, get your recommendation, receive a temporary paper permit and purchase legally in about 2 hours. Remove the barrier, and the patient market inevitably grows.

Are there advertising restrictions?

Advertising works. In states that allow advertising, both patient and doctor populations grow more quickly. Sighting percentages here that singularly compare states that do or don’t allow it would unduly glaze over other significant variables, so we won’t go there and face impending backlash.  But I’m intimately familiar with the majority of medical markets, and I’ll vouch for the fact that advertising plays a huge role in how quickly and effectively a program gets off the ground.

Are there other comparable markets to extract data from?

Now that 29 states and over a dozen countries have legalized MMJ, there are plenty of models to compare. Governments often look to other programs when drafting their own regulations, so similarities between programs are mounting, enabling you to apply their data to new markets.

A few examples:

MN and PA – both only allow extract, no flower

PA and WV – both extract only, list of qualifying conditions is almost identical, and # of licenses is going to be similar based on population

What are the income demographics of the market?

Having millions of qualifying patients is great, but if most live below the poverty line, they likely can’t spare $300-$500 per month. Markets that are more affluent will of course grow more quickly and be more stable.  In Illinois where the median income is 10% above the national average, average spend at a dispensary is also higher. Even though their program started slow, it’s now growing quite successfully, as are revenues. Nevada on the other hand, with one of the lowest median incomes in the country, 6% below the national average, still only had an active patient count of 28,308 prior to recreational legalization in July. That’s not quite 1% of the population.

To claim that this list is exhaustive would be imprudent, but the work done here will uncover whether the opportunity meets your criteria for further investigation.


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