To evaluate your Minnesota cannabis ROI, measure your Return on Investment (ROI), Payback Period, and Internal Rate of Return (IRR). These financial metrics help determine whether your business’s projected profits justify the capital required—and the risks involved.
Your MN cannabis investment will be terrible
Not really.
It depends how you evaluate it.
In Minnesota’s fast-developing cannabis market, the real opportunity isn’t just about getting licensed. It’s about making sure the math behind your business makes sense. That means understanding your return—not just on paper, but in practice.
And the only way to know if your investment is truly viable?
You need to know your numbers.
This article walks through how to use both, plus IRR (Internal Rate of Return), to measure the real performance of your business and avoid investing in a money pit.
The Two Most Important Cannabis Investment Metrics
1. Return on Investment (ROI)
ROI is your annual profit divided by your total investment.
If you invest $500,000 and make $100,000 a year, your ROI is 20%.
But if you earn $1M/year on a $20M investment? That’s just 5%.
In cannabis, low ROI doesn’t cut it. Not when you’re facing licensing costs, tax pressure, and operational overhead that most industries don’t touch.
Target ROI: 33% or higher
2. Payback Period
Payback measures how long it takes to recover your initial investment.
With $500K invested and $100K in annual profit, your payback is 5 years.
But if your profit is delayed—or your costs balloon—you could be looking at 6-10 years before you break even.
Target Payback: 3 years or less
Why Minnesota Cannabis ROI Matters in 2025
Let’s say your cannabis business earns $100K in annual profit. Your total investment is $500K. That’s a 20% ROI—and a 5-year payback period.
Now imagine you generate $1M in annual profit. Sounds great—until you realize you spent $20M getting there. That’s a 5% return.
You could’ve earned that with far less risk through a savings account or government bond.
That’s why understanding Minnesota cannabis ROI is so important. High revenue doesn’t always mean high return. You need to know whether your capital is working hard—or just getting locked into a high-risk, low-reward cycle.
Minnesota’s cannabis framework is still evolving, and regulations around licensing, operations, and compliance are actively being updated by the Minnesota Office of Cannabis Management. Staying current with these updates is essential when modeling your return.
What Is a Good ROI for Cannabis in 2025?
Let’s benchmark cannabis against other major asset classes:
- Equities: ~10%
- Bonds: ~4–5%
- Real Estate: ~7–9%
- Private Equity: ~13–14%
These are stable, lower-risk investments. So if your cannabis ROI falls short of these ranges, you’re not being compensated for the risk, complexity, or capital intensity.
A healthy cannabis ROI? Aim for 33% or a 3-year payback. That means for every $100K invested, you’re generating $33K in annual profit and recovering your capital in under 36 months.
Want a deeper look at ROI expectations, strategies, and risk factors? Check out our Cannabis Investment Guide: ROI Expectations & Risks for a detailed breakdown of milestones, value drivers, and smarter investment angles.
ROI vs. Payback vs. IRR: What’s the Difference?
Each metric provides a different angle on performance:
- ROI = (Annual Profit ÷ Total Investment) × 100. Great for simple returns.
- Payback Period = Time to recover original investment. Key for liquidity planning.
- IRR = Accounts for timing, variation, and eventual sale. Best for real-world projections.
If you’re investing now and expecting future cash flows (especially if you plan to sell), IRR gives you the most complete picture.
How to Improve Minnesota Cannabis ROI
If your ROI is below 33%, don’t panic. Here’s where to focus:
- Track COGS accurately: Especially under 280E, knowing deductible costs matters.
- Segment product performance: Some SKUs may be dragging down margins.
- Optimize labor efficiency: Labor should stay within 15–18% of revenue.
- Revisit your entity structure: LLC vs. C-Corp can affect ROI post-tax.
- Plan your exit: Knowing your target valuation helps back into smarter capital use today.
Minnesota Cannabis ROI at a Glance
- High revenue doesn’t always mean high return.
- Aim for 33% ROI or 3-year payback to justify the risk.
- Use IRR to assess long-term performance, including exit value.
- Dial in operations, entity structure, and COGS to increase return.
Conclusion
Minnesota’s cannabis market is full of potential—but not all investments are created equal.
By focusing on ROI, payback period, and IRR, you’ll know whether your capital is being put to good use—or if it’s time to reconsider the plan.
Want to plug in your own numbers? Download our free cannabis ROI calculator here—or reach out if you’d like to walk through it together.
FAQ: Minnesota Cannabis ROI
How do I calculate ROI for a cannabis business? Annual Profit ÷ Total Investment. Multiply by 100 for percentage.
What is a good ROI in cannabis? 33% or more. Anything below 10% likely isn’t worth the risk.
Why is IRR important for cannabis? It helps operators and investors understand long-term value, including timing and sale price.
Can I model this myself? Yes, but without a cannabis CPA and the right financial tools, most operators miss critical variables like 280E tax impact, licensing costs, and cash flow timing. If you want numbers you can actually build on, it’s worth getting expert support.
