Glossary
Welcome to our glossary, your go-to resource for understanding essential terms related to the cannabis industry. Whether you’re navigating business transactions, exploring valuations, or assessing compliance requirements, this glossary provides clear and concise definitions. We’ve designed it to be user-friendly and accessible, ensuring you have the knowledge needed to confidently engage in this rapidly evolving sector.
Common Cannabis Brokerage & Dispensary Transaction Terms
Appraisal
A formal assessment of a business or property’s value, typically performed by a certified professional. In the cannabis industry, appraisals may include retail revenue trends, foot traffic, inventory turnover, and regulatory compliance history.
Broker
A licensed intermediary who facilitates the sale, acquisition, or merger of a dispensary or cannabis-related business. Brokers assist with valuations, negotiations, marketing the listing, and connecting qualified buyers.
Commission
The fee paid to the broker for completing the sale or securing a buyer. Usually calculated as a percentage of the final sale price or structured with flat-rate retainers.
Due Diligence
A detailed review conducted by a buyer before finalizing a purchase. For dispensaries, this includes verifying sales data (POS reports), excise tax records, licensing compliance, lease terms, supplier contracts, and inventory accuracy.
Equity
The portion of ownership in a business after all debts and liabilities are deducted. Buyers often acquire equity in a dispensary through full purchase, partial buy-in, or investment shares.
Market Value
The estimated price a dispensary or cannabis business would sell for under typical conditions—determined by comparable sales, revenue, location, license type, and growth potential.
Net Operating Income (NOI)
A key profitability metric calculated by subtracting operating expenses from gross income. In dispensaries, this often excludes debt payments, depreciation, and taxes.
Portfolio
A group of cannabis businesses or investments owned by an individual or corporation—such as multiple dispensary locations, cultivation licenses, or manufacturing operations.
Valuation
A formal process used to determine what a dispensary is worth. Factors include revenue, EBITDA, license type, brand strength, customer base, compliance history, and market trends.
Yield
The return generated from an investment over a specific time period—often referring to annual profitability or cash flow projections.
Additional Cannabis & Brokerage-Specific Terms Asset Sale
Asset Sale
A transaction where the buyer purchases specific assets—such as the dispensary license, inventory, equipment, or lease rights—without assuming corporate liabilities.
Share Sale (Stock Sale)
A buyer purchases the ownership shares of the corporation itself, assuming all existing assets and liabilities. Common in fully operational dispensary transfers.
License Transfer
The regulated process of transferring a cannabis retail authorization (RAC), license, or permit from the seller to the buyer. This requires provincial approval and background checks.
LOI (Letter of Intent)
A non-binding document outlining the major terms of a proposed purchase, including price, structure, timelines, and conditions. Often used before drafting a full Purchase Agreement.
NDA (Non-Disclosure Agreement)
A confidentiality contract signed before sharing sensitive business information such as financials, sales data, or proprietary operations.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. One of the most common valuation metrics used for dispensaries.
SDE (Seller’s Discretionary Earnings)
A measure of total owner-operator profit, including salary and perks. Popular when valuing smaller or single-location dispensaries.
FF&E (Furniture, Fixtures, and Equipment)
Physical assets included in a sale—e.g., display cases, POS systems, security cameras, safes, and interior fixtures.
Cash Flow
Net profit generated after expenses. Buyers rely on trailing 12-month cash flow to project future performance.
T12 (Trailing Twelve Months)
A 12-month financial snapshot commonly requested by buyers to assess recent performance trends.
P&L Statement (Profit & Loss)
A financial report showing revenue, cost of goods, operating expenses, and profit. Essential for verifying a dispensary’s true performance.
CAP Rate
A ratio used by investors to compare income to market value, especially when evaluating dispensaries with strong real estate components.
Escrow
A neutral third party that safeguards funds and legal documents until all sale conditions are met and the transaction is complete.
Closing Costs
Fees involved in the transaction include legal fees, transfer fees, licensing costs, and escrow charges.
Working Capital
The operating cash required to maintain business functions after purchase, including expenses like payroll and inventory.
Inventory Count
A full verification of cannabis product stock levels at the time of sale to ensure accurate valuation.
Multiple of Earnings
A valuation approach where the sale price is calculated as a multiple of earnings (e.g., 2× EBITDA or SDE).
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