We recently came across an intriguing article that reported on the earnings of a black-market weed dealer the article referred to only as Frank. Using the numbers provided in the article, we decided to calculate just how much Frank could realistically make from selling cannabis on the black market.

The Scenario

According to the Herb.co article, Frank buys a quarter-pound (QP) of cannabis for about $1,000, which seems quite expensive, but we’ll roll with it.

In Frank’s region, weed is typically sold at the following prices:

• $50 for an eighth (3.5 grams)
• $100 for a quarter (7 grams)
• $350 for an ounce (28 grams)

If Frank sells his product by the ounce, he’ll make $400 in profit per QP, netting $100 per ounce. However, if he breaks the quarter-pound into smaller eighths, he’ll make a more lucrative $600 in profit per QP, gaining $150 per ounce.

An impressive 40% return on investment (ROI) for the first scenario, an astonishing 60% for the second.

How We Calculated Frank’s Earnings

To estimate Frank’s potential monthly income, we first assumed that he sells one QP of cannabis per week. With this assumption, we calculated his total monthly profits based on both selling strategies: selling by the ounce and by the eighth.

Scenario 1: Selling by the Ounce

• Cost of a quarter-pound: $1,000
• Selling price of an ounce: $350
• Profit per ounce: $100
• Total profit per QP: 4 ounces × $100 = $400 per QP
• Monthly profit: $400 per QP × 4 weeks = $1,600 per month

Scenario 2: Selling by the Eighth

• Cost of a quarter-pound: $1,000
• Selling price of an eighth: $50
• Profit per ounce: $150 (if sold in eighths)
• Total profit per QP: 4 ounces × $150 = $600 per QP
• Monthly profit: $600 per QP × 4 weeks = $2,400 per month

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Impact Of Frequent Customers

But that’s not the whole story. Frank reports having around 10-12 regular customers, with about 4-5 described as “good, frequent” customers who visit him every day or every other day. These frequent buyers account for a significant portion of his income. He says that $200 is the most he’s made from a single transaction.

Using these details, we estimated Frank’s additional monthly income from these frequent customers:

• Frequent customers: An average of 4.5 customers
• Transactions per month per customer: 15 (assuming every other day)
• Income per transaction: $200
• Monthly income from frequent customers: 4.5 customers × 15 transactions × $200 = $13,500 per month

Read Also: State By State: Price Of Weed Across The U.S. In August 2024

Total Monthly Income

When we combine Frank’s profit from selling his cannabis with the income from his frequent customers, his total monthly income looks like this:

• Selling by the ounce: $1,600 (monthly profit) + $13,500 (income from frequent customers) = $15,100 per month
• Selling by the eighth: $2,400 (monthly profit) + $13,500 (income from frequent customers) = $15,900 per month

This is assuming frank has no other associated costs, which are most likely to exist in illegal markets when operating at certain scales.

While these numbers may seem staggering, it’s important to remember that Frank operates outside of the legal market. Typically illegal markets charge higher prices because of the implied risks.

In the regulated cannabis industry, businesses face operational costs, including taxes, compliance fees and overhead expenses such as storefronts, employee wages and security measures. These costs significantly reduce the profit margins of legal cannabis companies.

Comparing To Legal Cannabis Businesses

But legal dispensaries play a crucial role in ensuring the safety and health of consumers. By adhering to strict regulations, legal businesses offer products that are tested for quality, potency, and harmful contaminants. While taxes and compliance costs—such as licensing, packaging, and marketing—may seem high, they ensure that cannabis is sold responsibly, in environments that prioritize consumer safety. The costs of ensuring safety and accountability are well worth it when weighed against the risks of unregulated products.

Frank’s ability to pull in between $15,100 and $15,900 per month is a testament to the profitability of the black market, despite growing legalization efforts.

The black market thrives on its ability to bypass the regulatory and tax burdens that weigh down legal sellers.

While the profits may be enticing, operating in the black market comes with its own set of risks, especially the potential legal penalties if caught.

Cover: AI generated image