INTRO

If you were to ask 10 medical marijuana patients, “what is a medical marijuana collective?”, odds are you would  get 10 different answers simply because a collective plays a unique role in each and every patients life. For many patients, it is where they get their daily, weekly or monthly medication or ritual.

There are many patients who sign up at collectives in order to become vendors a.k.a. Caregivers in order to provide fellow patients with their excess meds. Many also provide clones, edibles, drinks, concentrates among many other mmj related products and services to collectives for fellow members.

While many think dispensaries, collectives and co-ops are one in the same, they are actually very different, both in legal terms as well as how they operate.

Definitions

In reality a collective, in its simplest form is a place where those who provide medical marijuana can help those who currently do not grow or have their own. A collective allows both “types” of patient the ability to participate as long as they have a valid medical marijuana recommendation or card AND they are a member of the collective itself.

The term “collective” actually comes from the MMP provision under California Health and Safety Code §11362.775 which is what allows patients and caregivers the legal ability to “ collectively or cooperatively” cultivate medical marijuana. The term “cooperatively” referred to the “cooperative corporation however the term “collectively” remained undefined and where this gray area resides currently.

Based on the California Attorney General however a collective should be, “ an organization that merely facilitates the collaborative efforts of patient and caregiver members – including the allocation of costs and revenues. As such, a collective is not a statutory entity, but as a practical matter it might have to be organized as some form of business to carry out its activities.

 

Difference from Dispensaries

Dispensaries differ from collectives in many regards but mainly their for-profit business model which most ( if not all ) local, state and federal laws specifically consider illegal. They sell marijuana to any and all qualified patients versus the “members only” option that collectives and co-ops operate on.

Many dispensaries had to ( and still do ) deal with their share of raids, shut downs, confiscation of meds and donations as well as actual jail time. Due to these legal battles, many dispensaries have since switched to a collective non-profit business model and with good reason or have shutdown for good.

 

Legality

Most states that allow mmj collectives have ironed out the details further to remove most of the gray area that tends to confuse those wanting to start up a collective. Many cities and counties have gone so far as to provide specific mmj specific business licenses, fees and taxes in order for collectives  to operate. This alone has helped many legal patients and caregivers start up and  run their collective 100% within local and state laws.

Sadly federally speaking, the distribution of marijuana even under a non profit business model is still 100% illegal.  For example, let’s say you have a medical marijuana recommendation and want to setup a collective while abiding by all local and state laws, federally you are still doing something completely illegal and can face possible federal criminal charges, arrest, fines and even jail time.

 

Costs 

Setting up a medical marijuana collective can actually be more expensive than you might think. Many cities have their own tax system in place where collectives pay a % ON TOP OF the current city and state taxes. This “hidden cost” of setting up a collective is something that many potential new collective owners have not considered.

Other costs associated with setting up and running a successful collective include many things such as security, rent, insurance, shop manager, budtenders, cute receptionists and the actual mmj products themselves. There are also other costs called “safety net” purchases such as attorney and accounting fees. You need professionals who understand mmj laws and how they pertain to collectives specifically while adapting to any new and or changing laws.

In general the average collective start-up costs are in the $50k to $100k range. There are many collectives that appear to have launched for what seems like next to nothing, however even those smaller “hole in the wall” types of collectives had plenty of costs associated especially when just getting started.

The actual term “profit” is somewhat vague especially when we are talking about a non-profit mmj collective. Many outside the industry take the term non-profit quite literally in which they think that everyone who works at the collective is not getting paid and simply volunteering their time. While this would be admirable, that in reality is NOT what is actually happening.

Each and every “volunteer” is getting meds, donations or something in exchange and that along with all other costs must be figured into the “donation prices” for the various medical marijuana products and services offered.

As you can see the costs in starting up and launching a successful collective has many variables especially when calculating costs. The pay off however if done correctly can be huge especially when being able to benefit fellow medical marijuana patients with quality medicine and service.

 

Revenue 

Since medical marijuana collectives are a non profit organization the term “revenue” is somewhat misused. Everyone volunteering their time is compensated including those who started the collective up. The revenue generated however is used towards all of the costs which were mentioned earlier in this article. As a collective owner or potential collective owner you will need to figure out the overall revenue needed to be generated in order to afford and pay for all of the fees and costs associated.

The easiest way to figure out potential revenue is by averaging and estimating marijuana prices based on current mmj markets and donation amounts.

At an estimated going rate of $300 per ounce, a collective would have to sell over 1,600 ounces per year just to generate $480,000 in overall yearly revenue and this is before all expenses ( rent, security, payroll, etc… ). With a very conservative estimate of 1 to 2 ounces a month per mmj patient, a typical collective would need at least 100 patients actively participating monthly ( donating towards medication ) just to break even.

Now many collectives have far more than 100 patients going in and out their doors on a monthly basis however actively figuring out your costs, revenues and overall expenses now will only making your collective launch that much smoother.

 

Members and Caregivers

The backbone of each and every collective is the caregivers or more commonly known within the mmj community as “vendors”. These vendors are just like the patients who come in for medication except they are the ones actually providing the medication for the collective to acquire donations with.

They have their doctors recommendation just like all other patients however they provide the collectives finished meds, clones, drinks, edibles and everything else that the other patients ( who do not grow or make med related products with ) are able to donate towards.

If a collective is going to succeed, having quality vendors is imperative. While the environment of the collective, the cute receptionists and the funny yet knowledgeable budtenders are very important, nothing matters more than the medication itself.

Remember when you were figuring up all the costs associated with running a collective earlier in this article? Well the medication will be coming from these caregivers ( vendors ) and you will need to negotiate the amount you will give the vendor for his or her medication.

Some collectives offer a consignment deal where they will give X amount per week or once X amount of meds has been donated for. This allows a new collective the ability to have a ton of medication on hand without all of the up front costs associated with it.

This sort of agreement has its perks for the collective owner especially NOT having to pay a penny for meds until AFTER they are sold. The downsides to the vendor sadly could be huge. For example, what if a collective that YOU, the vendor just “consigned” 1 pound of tasty girl scout cookies gets raided and all medication confiscated? It happens so as a caregiver it is best to research any and all collectives that you intend to vend to and make sure they are following all local and state laws.

A more agreeable option is an upfront donation so that the meds go to the collective and the recoup of costs associated with growing that fine medication is already in the hands of the vendor then and there. As a collective owner you can either negotiate with vendors yourself or hire someone qualified in “pricing” medical marijuana and other mmj related products.

Caregivers simply have more meds than they can personally consume and luckily instead of stockpiling it for themselves, they allow other patients the ability to enjoy them ( for a donation of course ). Without a solid stream of both members and caregivers a collective will in all sense of the word “collapse”.

 

Where To Go From Here

Starting and running a collective can be a simple process however researching all local, state and federal laws beforehand is always important. Another strong suggestion is to locate a qualified mmj attorney who can help answer any and all legal questions including city / state specific questions that you may have.

We also hope that this has finally answered the question that has been asked so many times over the years which is, “ What Is A Medical Marijuana Collective?”.