How Much Does it Cost to Grow Cannabis Indoor? – Business Plan Templates Canada

Cannabis Cultivation License Types in Canada

A cultivation (micro, nursery, standard) licence allows you to grow cannabis indoors and outdoors by cultivating, propagating and harvesting. This licence also allows you to:

possess cannabis
do limited processing activities indoors, if necessary, such as:
- drying, trimming and milling for micro and standard cultivation licences
- drying for nursery licences
do analytical testing of cannabis
do research and development within your authorized activities, such as developing new growing procedures (tissue culture, cloning techniques, trying different nutrients)

Micro-cultivation licence

“A micro cultivation licence allows you to produce cannabis plants and seeds, and fresh and dried cannabis. With this licence, you can use a grow surface area (plant canopy) of up to 200 m². There’s no size limit for areas used for non-cultivation activities and storage.”

Application screening fee: $1,886 per application (as of April 1, 2023).

Nursery licence

“A nursery licence allows you to produce cannabis plants and seeds for starting materials. With this licence, you can use a grow surface area (plant canopy) of up to 50 m² for budding and flowering plants and have up to 5 kg of harvested flowering heads at any given time (except seeds). You must destroy flowering heads (except seeds), leaves and branches within 30 days of harvesting them. There’s no size limit for non-budding and non-flowering plants, such as cannabis in their vegetative stage (mother plants, plant cuttings or clones).”

Application screening fee: $1,886 per application (as of April 1, 2023).

Standard cultivation licence

“A standard cultivation licence allows you to produce cannabis plants and seeds, and fresh and dried cannabis with no size limit on grow surface areas (plant canopies).”

Application screening fee: $3,767 per application (as of April 1, 2023).

Cannabis Cultivation Fees and Taxes in Canada

Entry year annual regulatory fee:

$2,500 for micro-cultivation, micro-processing and nursery licences
$23,000 for standard-cultivation, standard-processing and sale for medical purposes licences

First and subsequent years annual regulatory fee will be the higher of:

the minimum fee for the licence class
- $2,500 for micro-cultivation, micro-processing and nursery licences
- $23,000 for standard-cultivation, standard-processing and sale for medical purposes licences
a percentage of the cannabis revenue on the previous year’s Statement of cannabis revenue
- for micro-cultivation, micro-processing and nursery licences:
  - revenue up to $1,000,000: 1%
  - revenue above $1,000,000: 2.3%
- for standard-cultivation, standard-processing and sale for medical purposes licences: 2.3%

The Canada Revenue Agency (CRA) administers the Excise Act, 2001 (EA2001) and is responsible for the provisions relating to the imposition of excise duties on cannabis products. Only the greater of the flat-rate cannabis duty ($1 per gram) and the ad valorem cannabis duty (10%) is payable. For dried/fresh cannabis, cannabis plants and cannabis plant seeds delivered to a purchaser in Alberta, Nunavut, Ontario or Saskatchewan, there is also an adjustment to the additional cannabis duty that is required to be calculated.

Cannabis Cultivation Setup Costs

The current trend is towards micro-cultivation operations, which typically require significantly lower startup costs and produce higher quality cannabis. Last year, Canada’s federal government issued 58 standard cultivation licenses and 130 new micro-licenses. One advantage of micro-cultivation companies is that the quality of their products tends to be higher than large scale-produced cannabis, which seems to be increasingly appealing to consumers. For our example, we are considering a warehouse with an area of 200 sq. m, holding approximately 300 plants with an estimated yield of 33 kg and 6 harvests per year. The setup costs are the following:

Warehouse rent – $22,500
Build out, improvements – $16,000
Growing equipment – $43,000
Lighting system – $37,000
Alarm & Security System – $5,760
Licensing & legal fees – $10,000
Direct costs (first months before profit) – $100,000
Administrative expenses – $35,000
Other expenses, incl. salaries – $30,740

Total = $300,000.

Cannabis Cultivation Direct & Operating Costs

Direct expenses include electricity, water, labor and packaging costs.

Good lights are one of the most important factors when growing cannabis indoors. You can achieve yields of around 1.3-1.5 gram per watt of light.

Lets try to calculate how much electricity does it take to grow cannabis indoors for our scenario:

Cost Electricity – $0.0986/kWh
Number Hours: 1,440 light hours:
Vegetative Stage 720 hours: 40 days of 18/6 schedule
Flowering Stage 720 hours: 60 days of 12/12 schedule
Wattage: We supposed to use 45,000 W system.

$0.0986 kWh x 1,440 hours x 45 kW = $6,390

However, one thing that’s very important to remember when doing any estimations is that although your grow light may account for a lot of your electricity bill, fans and pumps and other things in your grow room also take electricity. These other items cost 3/4 as much electricity as the grow light. It will be plus $4,792.

So, total electricity costs will be about $11,182. Water costs will be no more than $250.

Growing solutions, including nutrients – $2,500
Cloning – $1,500 (excl. labor and electricity)
Lab testing – $1,500
Packaging, transport & storage – $500
Grow light bulbs – $750
Other supplies – $500
Direct labor – 1-2 employees, $20,000
Cannabis duty – about $38,946

Thus, the direct cost of growing the cannabis will be around $77,600 or $2,350 a kg (47% of wholesale price). It doesn’t include administrative, marketing, distribution costs and taxes, which varies depending on the location.

Cannabis Cultivation Annual Gross Profit

Sales are about 200 kg per year:

Revenue + $1,000,000
Direct costs – $470,000 (47%)
Gross Profit = $530,000 (53%)
Net Income = $240,000 (24%)

Cannabis Cultivation Financial Model

Calculate the costs and profits of your grow business with our pre-populated cannabis financial model for Canada. All you have to do to get started is enter the size of your grow surface area. The model will help you estimate how much it costs to start and operate your own cannabis cultivation business, plot all income and expense items monthly over a flexible seven-year period, and then summarize the monthly results by quarter and year for easy viewing. We offer solutions for standard and micro cannabis cultivation businesses.