Setting up a marijuana market in Washington from scratch

Marijuana plants grow at Perennial Holistic Wellness Center, a not-for-profit medical marijuana dispensary in operation since 2006, on September 7, 2012 in Los Angeles, California.

Jeff Wright, an unemployed social worker, is trying to raise funds to set up a legal recreational marijuana-growing business in Washington State's new licensed and regulated pot market. His business is called The Yeoman Farmer, in Olympia, Washington. Wright has been growing marijuana for the medicinal market, and he uses the product to relieve pain from injuries he suffered over decades as a construction worker. 

Eric Zolman's day job is as a hardware and software tester. He runs a side business making edible medical-marijuana products (under the brand name Eric's Medibles), including the S'mores cookie he's showing off at Serious Medicine Collective in Olympia, Washington. He's considering going for a license to process recreational marijuana legally under the state's new regulated system. 

Forrest Escobedo is a director of Serious Medicine Collective, a nonprofit medical-marijuana store in downtown Olympia, Washington. He's considering moving into the legal recreational marijuana market. 

Following voter initiatives last year, Washington and Colorado are writing up regulations to license recreational-marijuana producers and retailers and to tax sales, which are still illegal under federal law.

As much as this is an experiment in allowing legal use of a hallucinogenic drug, it is also a business experiment. How do you set up an entirely new commercial marketplace worth billions?

Randy Simmons' is in charge of developing the new regulations for recreational marijuana in Washington. His co-workers at the Washington State Liquor Control Board made him a nameplate when he got the new job -- it says "Ganja Guru." Bringing illicit drug-producers and -sellers in from the cold is kind of a weird job.

"We can take those people who have been successful running these small mom-and-pop businesses -- they pay taxes for one thing, and they know they're not going to get arrested -- [and] get them into a regulated market where they feel more like real businesspeople," Simmons says.

So who are these businesspeople?

Jeff Wright is the CEO and owner of The Yeoman Farmer in Olympia, Washington, the state capital. Wright's in his mid-50s, an unemployed social worker who recently got into the medical marijuana business. He initially used it to treat his own pain from injuries when he was a construction worker. Now, he wants a license to grow-for profit. He is trying to raise the funds.

"I'm figuring right now it's going to be close to $50,000 to be competitive," Wright says. "There's a lot of startup costs, it's going to be a matter of getting a building." Wright has stopped growing for now, to focus on R&D -- choosing the best seeds, soil media, growing conditions. 

And there are problems.

"Nobody will touch you as far as credit," he says. "I tried."

Banks worry they will be in trouble with the Feds for taking drug money. Security is also a big concern -- everyone in the business has a story of home invasion.

Next stop on the supply chain? Pot-processor.

Eric Zolman, a medical marijuana user, takes medical marijuana and produces edible marijuana products, including S'mores (his business is called Eric's Medibles). 

"It's got a graham-cracker based cookie and the butter is infused with marijuana," Zolman says.

Zolman is just out with a version of the S'mores cookie for the 'nutritional' market: gluten-free.

"I wouldn't mind getting into the legal side" of the business, Zolman says. "This is kind of a side job for me. My other job, I'm a hardware and software tester."

The biggest business here might be for retailers. Forrest Escobedo runs a nonprofit medical marijuana store in downtown Olympia called Serious Medicine--they sell dozens of varieties of marijuana, plus concentrates, infusions and edibles, like Zolman's cookies.

"I guess it would open a larger market for us if we could sell recreationally, because we have people asking to buy recreational pot all the time," Escobedo says. Right now, they have to refuse those people because medical marijuana is sold only by prescription in Washington.

Escobedo is worried profit margins might be too low -- around 40 percent of the price will go to the state through sales and excise taxes and licensing fees (Washington has no income tax) -- and he'll have to sell cheaper, lower-grade pot.

He's got one thing going for him though, the store is adjacent to a bar, tattoo parlor and a vintage record store. And you know the old adage: Location, location, location.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

Jeff Wright, an unemployed social worker, is trying to raise funds to set up a legal recreational marijuana-growing business in Washington State's new licensed and regulated pot market. His business is called The Yeoman Farmer, in Olympia, Washington. Wright has been growing marijuana for the medicinal market, and he uses the product to relieve pain from injuries he suffered over decades as a construction worker. 

Eric Zolman's day job is as a hardware and software tester. He runs a side business making edible medical-marijuana products (under the brand name Eric's Medibles), including the S'mores cookie he's showing off at Serious Medicine Collective in Olympia, Washington. He's considering going for a license to process recreational marijuana legally under the state's new regulated system. 

Forrest Escobedo is a director of Serious Medicine Collective, a nonprofit medical-marijuana store in downtown Olympia, Washington. He's considering moving into the legal recreational marijuana market. 

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