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Considering starting a cannabis laboratory?
Think it’s a gold mine for the taking?
Laboratory testing is not for the faint of heart and can be downright cutthroat under some circumstances.
Many prospective laboratory owners and investors are not scientists and might in fact be first-time business owners.
The canvas of factors that enter the equation is broad and often understated.
Researchers at the University of California, Davis, crunched the numbers on the costs of cannabis testing in California.
Using a series of assumptions with a statistical simulation model, they concluded that the most significant predictors of testing cost are batch size and test failure rate.
In the 2019 California market, researchers found that batch size of 8 pounds of dried cannabis flower, along with a failure rate of 4%, will cost approximately $136 per pound to meet the regulatory testing requirements.
The research model was based on 49 California laboratories and 1,210 distributors approved by the state’s Bureau of Cannabis Compliance.
Variables that were considered in the simulations included the distance between labs and distributors, laboratory size, batch sizes and volume of testing.
Researchers also broke down the laboratory testing cost to the “successfully” tested samples versus those samples that previously failed to meet regulatory specifications.
Additional variables such as annual operational costs, startup expenses, sampling equipment, instrumentation and personnel were factored into the model.
To estimate a laboratory’s efficiency – that is, the number of successfully tested samples each year – the researchers made four sets of assumptions:
- Maximum number of samples that could be theoretically tested.
- Ratio of actual tests to total possible tests per day.
- Ratio of unsuccessful tests to all tests.
- Number of annual testing days.
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The researchers’ paper, titled “Costs of cannabis testing compliance: Assessing mandatory testing in the California cannabis market,” provides a comprehensive evaluation of the most significant variables necessary to predict the cost of opening and operating a cannabis testing laboratory.
However, potential owners and investors should be aware of overall risks associated with the project.
The most significant prediction is the unpredictable. Potential owners are best advised to plan for the unexpected – it’s bound to happen.
The only part that can’t be predicted is knowing where or when the breakdown will happen.
But, rest assured, there will be a breakdown.
Some of the greatest challenges include understanding:
- The importance of hiring an effective and experienced senior laboratory staff with decades of lab experience.
- Instruments will break down.
- Regulatory requirements and specifications will change (they’ve been a moving target for years).
- Consumables necessary for method development will always cost more than planned.
There is nothing inexpensive about opening a cannabis testing laboratory, particularly if the laboratory is pressured to open its doors before establishing a technically and scientifically sound foundation in test methods.
Owners are best advised to not delude themselves that opening the lab with an abbreviated scope of tests will not compromise the quality of subsequent method development.
Subsequent methods will nearly always suffer the fate of being rushed and compromised because resources will be allocated to processing customer samples.
The end result? Chronic crises, high energy and stressed laboratory staff.
Prematurely opening the laboratory will likely position the laboratory to struggle and possibly implode.
Susan Audino, who holds a doctorate in chemistry, is a chemistry consultant and instructor for the American Association for Laboratory Accreditation. She is based in Delaware.