by Brian Mayfield and Adam Benko
A friend in need is a friend indeed, especially in the weed industry. It’s easy for cannabis founders to get overwhelmed after obtaining their coveted business license. Building any business is a juggling act, but starting a cannabis company is further complicated by the myriad regulatory agencies, compliance standards and cultural variations state to state. Toss in the “Green Rush” of traditional business vendors hoping to capitalize on the fast-growing cannabis space, and suddenly there are way too many balls in the air.
It’s easier to play a game of catch than it is to juggle, however—and building trusted relationships with experts in the cannabis space can help clarify your path to opening day. As consultants, we’ve assisted cannabis founders nationwide with a wide variety of challenges and found there are as many solutions as there are unique business models. But amidst all that nuance there are a few pieces of advice we dispense pretty frequently, from early business strategy to your last steps before liftoff.
Understand your cash flow. Because of federal prohibition, identifying potential financial partners requires extra due diligence—not only to start up and scale but to also eliminate your dependence on cash-only transactions down the line.
Assess your banking and payment strategies, as well as your cash-management training. Remember to include ancillary financial services in your planning, such as specialized lawyers, CPAs and accounting services, and insurance carriers. Consider delegating the time-consuming vetting process for these many vendors. Thanks to maturing state markets, reputable business-focused service networks mean you no longer have to “build the plane while flying it,” as was once true.
Lock in local licensing and permits. Securing your operating license is just step one. More bureaucracy is ahead for each state-regulated item on your list, from location approval to building code compliance. And some states—particularly those that have recently changed their laws like Virginia or are large in size like California—can get more backed up than the line at the DMV.
If you aren’t yet familiar with an emerging market’s regulatory holdups, or are expanding your business into a new state, it can be helpful to connect with experts who already have the lay of the land. For example, when Oklahoma first legalized cannabis, so many dispensaries started up at the same time that the Office of the State Fire Marshal was inundated with inspection paperwork. Having a permitting consultant on speed-dial helps you anticipate potential roadblocks like these in advance, or quickly pivot your opening strategy so you don’t burn through your capital.
Make the most of marketing. There was a time when cannabis companies could, and did, treat marketing as an afterthought. But in today’s competitive market, marketing is as much of a necessity as licensing and inventory. Not only do you need a robust marketing strategy in place before you ever open your doors—including your brand values, a logo, website, social media accounts and other collateral— you need a plan for how to use the marketing data you’ll collect once you’re operational.
You’ll be able to operate more efficiently, and grow more strategically, with an omnichannel view of your customer lifecycle. Using point-of-sale data to better understand your target market will keep you ahead of your competitors and shows a direct ROI in addition to informing other aspects of your marketing strategy like SEO and email outreach.
Don’t rush vendor relationships. Someone else’s sales goals shouldn’t dictate how your business operates. While operational software will be a critical component of your business, don’t lock in too early with a vendor, as your business model may evolve as you approach opening. You want your software partners to fit your unique business model and regulatory needs, and without unbiased advice and expertise, you may not land on the optimal solutions for your long-term growth.
Consolidation in the cannabis space isn’t going away any time soon. Just look at the big moves made by companies like WeedMaps picking up CRM platform Sprout or Dutchie acquiring POS vendors Leaflogix & Greenbits. One thing we’ve seen time and time again is how mergers and acquisitions can impact the vendor relationship for cannabis businesses of all sizes. The services you sign a contract on today could be very different six months from now depending on how consolidation plays out behind the scenes. A professional consultant with long-term visibility on the consolidation landscape can offer timely advice on how to pivot if you’re thrown for a loop, and help you finesse the timing on when to lock in partnerships.
Define your operational workflow and environment. If you’re setting up a brick-and-mortar cannabis business, the physical space and logistics you create will answer not only some of the questions raised during your branding and marketing strategy sessions but also about what kind of vendor solutions you need. For example, retailers may require different features for POS and inventory tracking depending on whether their dispensary will have an online order pickup area or consumption lounge. Different security setups require different types of technology. Nail down these details before you commit to a particular third-party solution.
Set up your staffing and SOPs. Before you start hiring, make sure your HR and payroll are lined up, complete with the necessary administrative support. Keep in mind that, like finding cannabis-friendly financing, it can take a little more time and effort to connect with staffing and operations management vendors who understand the unique needs and regulations of the industry.
The Final Push
Staff up with enough time before opening to conduct training and dry runs of your newly minted standard operating procedures (SOPs). Those SOPs will be dictated by your state’s regulatory mandates, so establishing easy-to-follow processes is key to staying compliant.
For founders new to the cannabis space, or new to a particular state’s regulatory environment, figuring out every task on your own is an exercise in frustration. Seek out professional advice to see clearly through the nuances that are endemic to both established and emerging cannabis markets.
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About The Co-Author
Adam Benko is the co-founder & head of partnerships at MJstack and is focused on expanding and nurturing the company’s robust partner ecosystem, which is an integral part of connecting their customers with the right tech partners for long-term, mutual success. Prior to founding MJstack, Adam worked in enterprise tech sales and strategy for industry-leading companies like Flowhub, Floify, and CA Technologies where he was focused on helping customers become thriving modern digital businesses.
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