Marijuana Business Factbook 2019

297 Appendix © Copyright 2020, Marijuana Business Daily , a division of Anne Holland Ventures Inc. You may NOT copy this Factbook, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact CustomerService@MJBizDaily.com or call (720) 213-5992, ext. 1. MJBIZDAILY.COM Economic Impact Estimates Economic multipliers are commonly used to illustrate the “trickle out” effect of a dollar spent within a market. For example, a patient goes to a dispensary and spends $100. The MMJ business will then use a portion of that to pay an employee, who in turn goes out and uses that money to pay rent, dine at restaurants, buy a car and so on until the marginal additional dollars injected into the economy are virtually zero. Traditional macroeconomic multipliers can range anywhere from 10 to 20 times the original dollar amount spent, while more specific values can be derived for particular industries, regions, etc. Through a series of calculations based on data from survey respondents, in addition to consultation with a cannabis economist, we settled at a standard multiplier of 3.5 for the marijuana industry. In other words, for every $1 consumers/patients spend at dispensaries or rec stores, an additional $2.50 of economic value will be injected into the economy, much of it at the local level. Updated data and analysis regarding the effects of the cannabis industry on the broader economy have been released in recent years, causing us to revise our multiplier down from the 2016 and 2017 versions of the Factbook, where a standard multiplier of four was used to estimate the economic impact of the cannabis industry. This is not the same metric as total revenues along the cannabis supply chain that can be used to approximate the “total size” of an industry. Rather, the economic multiplier paints a picture of the impact the cannabis industry as a whole has on the broader economy. The multiplier does reflect the economic value created along the supply chain since marijuana retailers use revenue from customers to pay suppliers and vendors, but it also encapsulates the broader impact and can be applied to any instance of spending/sales/revenue. For example, any type of individual cannabis company could use this multiplier to quantify the impact on the local community of its decision to hire two more employees by multiplying their wages by 3.5 to determine the total impact of those jobs. Conversely, the multiplier can be used to demonstrate the value that will be removed from a community if jobs are lost or whole businesses are forced to close. Legislators and bureaucrats often rely on this type of metric when determining the economic impact of welcoming new businesses to a municipality or the implications of a tax rate change. Cannabis entrepreneurs can use this metric on a broad scale to make impact statements, influence/inform legislative processes and rulemaking, and so on.