January 2, 2013

Bad Business Practice? Rush to Open 1st Colorado Marijuana Club Leads to Lost Opportunity

Image of Medical Marijuana in Colorado

Well that was fast. The first Colorado business targeting recreational marijuana users has already closed, thanks to an over-eager entrepreneur who got caught up in the hype to be first.

Paul Lovato opened a marijuana club in the small town of Del Norte before his lease even started. The idea was to sell coffee and merchandise in one area, and then offer free samples of marijuana in another. Lovato initially planned to open on Jan. 1 – when he could begin using the building under the terms of his lease. But he decided at the last minute to launch on New Year’s Eve to beat the opening of Club 64 in Denver by a few hours.

Not a good move: His landlord saw local and national media coverage of the business and decided to pull the lease before it went into effect, according to the Denver Post. Meanwhile, the first meeting of Club 64 – which will use different locations for each gathering – went off without a hitch.

Let this be a lesson to everyone interested in tapping the emerging recreational cannabis markets in Colorado and Washington: Bad business practices will sink your company before the feds or state officials do, any day.

There are of course advantages to being first. It allows you to establish a loyal client base and build a reputation before your competitors. And you earn bragging rights (which can be used for marketing purposes), to boot.

But there are well-known drawbacks, too. Being first means making mistakes that others can learn from, and you have to take on much more risk – and face much more scrutiny – than those who come later. In the marijuana industry, you also have to deal with complicated legal issues and landlords who are uneasy with the idea of renting out their properties to cannabis businesses.

What’s unfortunate is that this situation likely could have been avoided had the owner followed a common-sense approach to running a business. If Lovato waited just a few hours to abide by his lease, it would have been difficult for the landlord to evict him without engaging in a legal battle.

Additionally, he had no business or competitive reason to launch early. The opening of a social club in Denver would’ve had no impact on a business in Del Norte, as the cities are more than 200 miles apart. Bragging rights are great – unless it costs you the entire business.

Every fledgling industry needs pioneers who are willing to take on sizable risks. And anyone who tries to open a marijuana club or shop in Colorado before the state develops and implements rules covering the industry is definitely a pioneer. But taking on unnecessary risks is not advisable in an industry that is already extremely risky as it is.

That doesn’t mean you should sit back and simply watch as the marijuana market develops in Colorado and Washington. Getting in on the ground floor is still important. Craft a business plan and develop a strategy that will allow you to move in quickly down the road. But it might be a good idea to let others make the initial mistakes. Don’t rush everything to the point of recklessness. And if you really want to be one of the first businesses to tap the market, at least make sure you’re all square with your landlord.


6 Comments:

  1. My thoughts exactly.

  2. WEED + GREED = DESTRUCTION

  3. Let me get this straight? This guy opened a couple of hours early on new years eve and you are bagging on him for doing so? Obviously, his landlord is a prick and was looking for a reason to break their agreement after he saw the media coverage. If he was not? He would not have made such a big deal about a few hours when he had already given the guy the keys and possession of the property. This article point the finger at the wrong person, you should be criticizing the landlord, not the renter.

  4. I think the guy is a genious he is the first buiseness in 3 billion years to open a pot smoking facility he didn’t go to jail he has all the free publicity, Probrably got his money back. go dude! America is on your side!

  5. And he has cannon balls!

  6. Paul and his first landlord parted on good terms (sounds like Good Business Practices to me). found a second landlord within hours and reopened. which is better – a floating game like Club64 or a fixed business site like Paul’s? keep watching…

Post Your Comment:


Please note:
Comments are moderated by our editors who do their best to approve comments ASAP. As Marijuana Business Daily is focused on business, we approve comments that are specifically relevant to industry professionals. General opinions and questions about cannabis may not be posted.

Louisiana 2+ Years Away From MMJ Sales

Louisiana officials are predicting it will take at least two years for the state’s first [click to continue...]

Opening of Cannabis-Friendly Resort in Colorado Delayed

coloradocannabis

A company hoping to launch an all-inclusive vacation resort catering to cannabis users has delayed [click to continue...]

Alaska Governor Names 5 to Marijuana Control Board

Five Alaskans were appointed to a board that will craft laws governing the state’s recreational [click to continue...]

Denver MJ Growers Major Contributor to Rise in Energy Use

Marijuana cultivation facilities have been specifically identified as a key contributor to Denver’s increasing electric [click to continue...]

New York Could Reveal MMJ License Winners Soon

NewYorkMedicalMarijuana

The New York Health Department may announce winners of the five medical cannabis licenses up [click to continue...]

50+ Medical Cannabis Business Applications Filed in MA

The Green Rush is back on in Massachusetts. The opening of the first medical cannabis [click to continue...]

Oregon Rec Rules Materializing, Early Sales Possible

Rules governing Oregon’s recreational marijuana market are taking shape, with state lawmakers sending two bills [click to continue...]

Rand Paul Brings in Six Figures at MJ Industry Fundraiser

Rand_Paul_official_portrait_with_flag_edit

Republican presidential candidate Rand Paul made a splash in Denver on Tuesday, raising an estimated [click to continue...]

Hawaii Bill Establishing Dispensaries Likely to Become Law

Dispensaries could be open in Hawaii in just over a year, as a bill establishing [click to continue...]

Second MMJ Bill Introduced in Pennsylvania Legislature

In an attempt to get around obstructionists in the state House of Representatives who have [click to continue...]

Fifth New Jersey Dispensary Given Green Light

New Jersey medical cannabis, pot dispensary and marijuana industry news

And then there were five. Dispensaries permitted in New Jersey, that is. Compassionate Sciences, Inc. [click to continue...]

Louisiana Gov Signs Medical Marijuana Bill

Louisiana Gov. Bobby Jindal has signed a bill making his state the latest in the [click to continue...]

New York Cannabis Firm Buys Oregon Utility Building for $3M

In another sign of the marijuana industry’s growing national reach, a New York-based real estate [click to continue...]

WA Moves Closer to Overhauling Marijuana Tax Structure

cannabis taxes

Washington State growers and processors would no longer pay a 25% tax on cannabis and [click to continue...]

Marijuana Business Daily