6 Essential Questions and Answers To Run a Successful Marijuana Dispensary
The key to maintaining a healthy, successful marijuana dispensary is not only knowing what questions you need to answer about your business but also understanding how to use those results to drive your profitability and productivity forward. Asking the right questions will help you understand where your strengths and best opportunities for growth lie, as well as identifying which processes might need a little improvement.
To get you started down the right path to running a successful, growing marijuana dispensary, we've compiled the 6 most important questions every cannabis retailer needs to know and how to track down the answers. Bonus - we'll also give you a few key tips on how to help your business thrive!
1) How many customers can my current employees handle?
Running a marijuana dispensary is expensive, and with competition in the cannabis industry at an all-time high, it's more important than ever for retailers to keep costs low and profits high. This means finding creative ways to leverage the staff you already have to support your growing customer base.
To calculate this for your customer intake team, divide the total number of customer visits by the total employees working customer intake during any given amount of time (one hour, one day, etc.). For your sales team, divide the total number of sales by the total employees selling during any given amount of time (one hour, one day, etc.).
If you recognize the need to boost efficiency at customer intake, look for opportunities to break the line before one even starts. If you have a security guard, why not enable them to quickly check-in returning customers with a tablet or mobile device, while directing new sign-ups straight to the reception? Some point of sale systems, like Treez, offer mobile intake tools as part of their core feature set. Allowing retailers to better capitalize on the precious time that customers spend at their store.
If there's room for improvement on the sales side, it may be time to start thinking about a less traditional in-store setup. Mounting freestanding tablets with online ordering capabilities or leveraging floating sales consultants similar to the Apple store, lets you decentralize your point of sale and enables customers to place express orders without having to wait in line at all. Larger options like Tevano ordering kiosks require no staff whatsoever and create a unique, express experience that will keep customers coming back for more. With so much modern technology at your disposal, who says the entire sales experience needs to happen at the counter? The key to running a successful marijuana dispensary is diversifying your sales experience.
2) How long are my customers waiting before being helped by my sales staff?
Studies show that retail customers expect to wait no more than 10 minutes in line before they start getting irritated, and cannabis customers are no different. As the dispensary market gets more competitive, customers are likely to become increasingly picky about what shops they frequent. Growing and maintaining a loyal customer base is essential to running a successful marijuana dispensary. You should monitor your wait times and work to keep them at and below the 10-minute range.
To calculate customer wait time, take the time when a customer's checked into your store and subtract it from the time that customer's transaction started. Do this for all the customer transactions within a certain time period (for example one day of transactions) and find the average wait time during that time period. Analyze the average wait times across various time periods such as weekends, holidays, or peak times within a single day to understand when wait times are at their worst.
If your results show that wait times are consistently exceeding the 10-minute mark, you should look into creative ways to reduce wait times. For one, you could add a pickup order option to your online menu, designate staff to pack these orders, and create an express pick-up line at your shop for customers to quickly grab packed orders. This way customers who would normally be clogging up your regular line already have their orders packed and ready to go when they arrive, reducing the wait time in your regular line. Bonus: when your other customers see how fast the express line moves, they'll be encouraged to order ahead next time. Pique their interest by hanging a few branded signs around your store that direct them to your eCommerce site or other express ordering options.
3) How much time does a customer spend with your staff at the register?
Longer transaction times mean longer wait times and fewer customers being helped. Not to mention, it directly affects how much staff you need on the clock at any given time. However, not all the time spent with customers is time that can or should be eliminated. In fact, spending a little extra time listening to past experiences and offering personalized recommendations nurtures relationships with your customers and shows them how much you value their patronage â€” a great way to increase repeat business and create a loyal customer base. Before being able to make any time-saving changes to your workflow, you'll need to determine your current average transaction time. Once you have a baseline, you'll be ready to look for areas of the sales process that take your staff away from customers without offering an equal benefit in return. This baseline will enable you to properly gauge whether any changes you make actually improve this metric or if you need to keep tinkering. Understanding the impact of changes on your bottom line is critical to running a successful marijuana dispensary.
To calculate transaction time, take the time a customer's transaction opened and subtract it from the time that the customer's transaction closed. Do this for all the customer transactions within a certain time period (for example one day of transactions). Calculate the average transaction time during that time period.
Once you have your average transaction time, shadow your sales staff during a few transactions and take notes about what steps take your staff the most time to complete. Brainstorm ways to remove obstacles to complete these longer tasks in a more efficient way. One big potential time-saver is to enlist the help of mobile cannabis consultants who can advise customers based on their preferences and offer specific recommendations while they wait. Almost all customers want to know specific details about your products (such as effect, strain, and THC content) before they decide to make a purchase, so you can save your staff a lot of time by making that information available to them before they ever arrive at the point of sale.
Also, consider how your sales and discounts are being implemented. If your standard procedure involves a physical binder of barcodes that staff needs to thumb through to find discounts, you can save a ton of time by transitioning to a cannabis-specific dispensary point-of-sale software platform that automatically applies qualifying discounts. Taking every opportunity available to optimize transaction time is an important part of how to run a dispensary successfully.
4) How satisfied are your customers?
Increasing sales volume while holding cost fixed is only possible if you can maintain a high level of overall customer satisfaction. Asking yourself how to run a successful dispensary? Ask how happy your customers are. Satisfied customers are not only are more likely to return to your store, but they’re also are more likely to recommend your store to their network of connections. This is important because studies have shown that 83% of people say they completely or somewhat trust the recommendations of friends and family. This means customer satisfaction can be the key to gaining new customers, while customer dissatisfaction can do the opposite.
To calculate customer satisfaction, there are many different approaches you can take. One of the simplest ways is to create a short customer exit survey that customers fill out on a mobile tablet before they leave your store. To start, ask your customers two questions: 'on a scale from 1-5 on how satisfied were you with your visit?' and 'do you have any other comments or feedback for us?'. Another way you can track satisfaction levels is to find out how many customers have visited your store once and divide that by customers who have visited more than once.
If either your survey results or your ratio of return customers to new customers, indicates there's room for improvement, try implementing 1-2 changes and see how that moves the needle. One way to increase satisfaction is by creating a personal experience for your customers, where they feel your staff actually knows what they need/want. To achieve this goal, make sure your staff can easily view a customer's buying history during a transaction. This way your staff can listen to what a customer liked and disliked about past orders, look up the exact order content, and make recommendations based on products with similar or opposing characteristics.
Another great way to run a dispensary is to implement a rewards program, which can create satisfied, and loyal, customers. After all, 63% of consumers agree that they expect brands to have a loyalty program. This can be an easy win if your point of sale system has a built-in rewards program already at your disposal. Then, you'll just need to set how much you want customers to accrue in rewards per $1 spent at your store and how much they'll need to accrue to redeem their rewards.
5) How much is each transaction costing you?
Knowing the labor and overhead cost to conduct a sale (not including the cost of the product) is a great way to understand the health of your business and the foundation of how to run a successful dispensary. If the amount your spending per $1 of product sold is too high, you might be risking the financial stability of your business.
To calculate the cost of your transactions, first find out the total cost attributed to the selling process, by calculating the cost of goods sold (COGS) during the last 30 days. Then add in your regular monthly fees (like paying employees and rent) plus any yearly fees you pay divided by 12 (months). Then take that total cost and divide it by the total gross sales that month.
If your results reveal you're spending excessively per $1 of goods sold, you need to go to the drawing board and determine if there are ways you can drive down your expenses without experiencing negative consequences in your store. If there's no good way to cut costs, consider looking into ways to increase your sales numbers. Sometimes these solutions might increase your overhead costs but will end up benefiting you in the long run because your sales have increased a considerable amount.
A great way to increase sales is by adding delivery or express pick-up options to your online menu, especially if the cannabis dispensary POS software you already pay for provides tools to support those avenues. Convenience is a huge selling point in our technologically-driven era and more ordering options mean you're catering to a wider and more diverse customer base. Another way to increase your sales is by creating promotions and discounts that encourage your customers to purchase more goods than they originally planned. You can offer items with a large markup at seemingly cheap prices (like $5-10 pre-rolls) for your sales staff to up-sell to customers. Placing small displays of affordable items next to the POS terminal will entice customers to add a few last-minute extras to their order - just like candy in the checkout line at the grocery store. Another idea is to look at your stock and take new products, or products with a small, but loyal, customer base, and create limited-time promotions that get more customers to buy these products (and keep them buying even after the promotion ends).
6) How efficiently is your business using its sales space?
Along with your employees and the cost of products, retail space is one of the biggest expenses your business has. This is why it's important to make sure the space you pay for is being utilized to your greatest benefit. A tried-and-true method for determining this is calculating the annual revenue per square foot of your sales space. The biggest retailers in the country use this metric to track how well their management is doing when it comes to maintaining and growing their business. If you want to know how to run a successful marijuana dispensary, you should know your sales per square foot.
To calculate your sales per square foot, take your total annual in-store sales divided by your selling area in square feet. Now, see how your numbers compare to those of major retailers (below). Some of the top dispensaries on Treez transact more per square foot than the Apple store!
Once you have your sales per square foot, you can implement changes to your sales floor and track how those changes improve (or worsen) your numbers over time. One way to improve your sales is by making sure your products are displayed in a clear and concise way and your store's visuals catch customers' eyes and promote sales. Minimal improvements can go a long way, like making sure your menu is easy to read, up to date, and featuring high-quality photos. Also, consider how frequently you're changing your display cases to showcase the latest and greatest products in your store. Sometimes simply decluttering your store, or rearranging it, can improve the flow and win you some extra sales.
Now that you know the questions you need to ask to run a dispensary, and how to plug in your data to get the answers you need, it's time to put that knowledge to work! Find a place to document and track your results over time and set monthly and yearly goals to drive you closer to your ideal numbers. Not only is this data a great way to tout the success of your business to potential investors - but you're also able to track how small and large changes affect your store's overall performance, and make changes accordingly to run your marijuana dispensary successfully.