Proof Is in the Pot: Legal Weed Gives Colorado Business a Boost
New Year's Day 2014 was the first day Colorado allowed licensed vendors to sell marijuana to anyone 21 years or older, making buying a bag of pot virtually the same as buying a six-pack of beer. Just 24 hours later, the state's retail marijuana shops, most of which are in the Denver area, surpassed an aggregate $1 million in sales.
According to the latest data from the Colorado Department of Revenue, the state's legal recreational marijuana industry sold more than $22 million worth of cannabis in April. Since legalization, weed sales have generated $11 million in sales and excise taxes, a figure expected to increase to $30 million by the end of the year.
Though that tax revenue is devoted to building schools and funding social programs, the marijuana business is having a huge impact on a wide array of industries--be they centered around pot or not. Nearly six months after the first state in the country ended the prohibition on weed, Inc. spoke with people at fast-growing private companies in Denver to see how their businesses have been affected.
On the job
Although marijuana is legal in Colorado, it's still illegal according to federal law. Across the state, drug testing has increased since the law changed, and people continue to be fired for testing positive. Rich Johnson, CEO of the Premier Group, a search firm for both executives and workers, says the disparity between state and federal law has proved perplexing for some of his applicants.
"There's a lot of confusion," he says. "As the industry started to move along, we started to see people come in to apply for a job and give their medical marijuana card as an ID. There's a lot of candidates who think they can come out as a habitual pot user and think it will not bar them from employment."
Johnson says Premier tests for all drugs and warns candidates about it so those who smoke, ingest, or vaporize marijuana don't waste their time by failing a test and ruining their chances of employment. The preemptive move has had little effect, however. "It's amazing how many people will walk in the door after we give them a heads-up over the phone that we drug-test for marijuana and they say, 'I don't do any drugs, but I have a marijuana card,'" he says. "It doesn't even enter their head. It's like a driver's license for some people."
Even in industries in which drug testing is not common, however, it doesn't appear that relaxed attitudes toward marijuana use have resulted in a work force prone to accidents from people's being constantly stoned on the job. Before he started Premier Group, Johnson worked at a large corporate staffing agency that had a pilot program in which only one of two construction crews underwent testing. The result? There was no difference in safety records between them. "We all say drug testing is for safety, that it helps to find a better employee," he says today. "But it's probably not true."
More jobs, more applicants
Demand for Johnson's staffing services has gotten a bump recently, in part thanks to demand related to the marijuana industry. "In the first quarter of the year, which is typically a low season for us, we couldn't get enough electricians out wiring circuits and electricity in places that used to be empty warehouses and now are grow houses," he says. "They are literally everywhere." Ironists may appreciate how Johnson sends only drug-free individuals to build and outfit marijuana-growing facilities, but the demand for more workers is serious business. "If we had 100 more electricians, we'd have them on a job by Tuesday," Johnson adds.
There is also an influx of workers to the state, says David Bacon, the CEO for Better With Bacon, a recruiting firm for startups and technology companies. He's found legalization has made Colorado a more desirable destination for the famously different-drummer types attracted by the businesses he serves. "The fact that companies based here are in a state that recognizes a certain freedom for recreational use has strengthened the appeal for job applicants," he says. "I'd say there's up to a 20 percent increase in people contacting us for a job in Colorado."
The rise of weed tech
Meanwhile, entire new categories of businesses have sprung up around legal weed. One of Bacon's clients is a software company that has built a seed-to-sale tracking system for marijuana growers and dispensaries. Colorado law mandates that marijuana must be tracked until it's sold--so a plant is catalogued starting when it's cloned, through when it's chopped up and dried (or turned into oil or pot-infused foodstuffs known as edibles), distributed to stores, and placed on shelves. "Whenever you have a federal, or in our case a state, law or mandate, there are new regulations and compliances that come into effect," Bacon says. "You can't just go grow pot and sell it." And with such regulation, he says, also comes opportunity.
Run on real estate
Ethan Chumley, CEO of Denver-based national steel building construction company Armstrong Steel, says revenue at his Denver business increased 35 percent in the past few months, in part from customers requiring buildings to grow marijuana. "It's been such an uptick that it caused me to consider offering turnkey construction for growers--ventilation, lighting, and all the other things they need," he says, noting that the rise in such construction projects has created a significant number of jobs.
According to Colorado law, retail marijuana grow houses must be located in buildings zoned for industrial use and be 1,000 feet away from a church and school. A scarcity of properly zoned real estate has driven up prices so high that Chumley says industrial building owners are being offered cash. "If you're going to build [a new building], you're talking months and months of lost revenue," he says. Instead, growers "are offering four times market value, and a big chunk up front in cash."
Weed-friendly real estate
Denver-based real estate agent Rona Hanson, who specializes in finding houses for medical and recreational marijuana home growers, says her business has increased 100 percent from two years ago. Hanson used to focus on accessible homes for disabled people, but once she realized most of her clients had cards that allowed them to grow pot, she decided to change her niche. "I used to get one call a week, because it's a big deal for people with disabilities to move," she says. "Now, I am getting 10 calls a day."
Looking back to the depths of the recession in 2008 and 2009, Hanson says she "couldn't give a house away." But since the beginning of 2013, she says, properties have been snatched up within a week. "103 percent of asking price is normal," Hanson says. "Part of this is pent-up demand from the recession. But there is a definite influence because of the change of marijuana laws."
Change you can see
The opportunities from the Colorado gold rush don't stop with new companies, new business models, and fast-selling properties. The Premier Group's Johnson says the run on real estate has had tangible effects in certain areas. He remembers how rundown south Broadway, a major business district in Denver, was just two years ago. Now the marijuana shops have moved in and have attracted other businesses.
"These pot shops have actually turned south Broadway into a nicer area," Johnson says. "The shops around the stores have been refurbished, the road has been repaved, and the whole shady district of south Broadway is now looking attractive--all because of the money flowing in from the pot shops. If you choose to go in and patronize them or not, it doesn't matter--it's better looking from the outside."
No matter how good the city's façade looks, not everyone was ready for recreational marijuana. Denver city Councilman Charlie Brown, the chair of the council's Amendment 64 committee charged with implementing the legal-pot law, voted against the legalization of recreational marijuana five times.
Like many people, Brown remains concerned about the effect legalization will have on children. "I do believe we have the potential to lose a generation of young people--starting with 12-, 13-, 14-, or 15-year-olds in schools," he says. "We've already seen a case where a fourth grader was caught trying to sell dope on the playground. You're going to have more incidents like these."
But he's since reluctantly embraced the industry, citing how his constituents voted for it. He also may be swayed by the law's economic implications. Between retail stores, grow houses, and product-testing facilities, by Brown's calculations there were close to 900 existing or pending marijuana-related businesses in Denver as of mid-April. "The recreational marijuana industry certainly has improved the economy," Brown tells Inc.
A weed grows in every business?
As the nation watches Colorado's headfirst dive into a socioeconomic experiment of legalizing and commercializing weed, stories recounting pot-related tragedies and incidents of marijuana getting into children's hands have appeared in top media outlets. (And, of course, New York Times columnist Maureen Dowd famously ate far too much of an edible during a recent trip to Denver.) But so far, doomsday scenarios of crime spikes--or, worse, the state's turning into a giant Phish festival--haven't materialized. Instead, almost half a year after pot went legal in Colorado, the violent crime rate in Denver, the state's largest city, has dropped 10 percent, and the government has banked tens of millions of dollars in new tax revenue.
Because marijuana has been illegal for the past 80 years, its strong economy has been historically underground. But as the pot market rises to legitimacy through new laws, new construction, new jobs, and new investments, in Colorado the birth of the legal weed economy is demonstrating how it's touching many seemingly unrelated industries.
Which many in Denver now realize. The Premier Group's Johnson, who is neither gung-ho supporter nor naysayer when it comes to pot, neatly sums up the big picture: "I could argue that it has made our life more difficult and complicated, and we have to work harder. On the other hand, jobs are falling into our laps. We thought we had nothing to do with this industry. But clearly we do."
WILL YAKOWICZ | Staff Writer | Reporter, Inc.com
Will Yakowicz is a staff writer for Inc. magazine. He has covered business, crime, and local politics for The Brooklyn Paper and was the editor of Park Slope Patch. He has also reported in the West Bank and Moscow for Tablet Magazine. He lives in Brooklyn, New York.