A giant window opened up when Californians approved the adult use of cannabis a few months ago. Startups and companies looking to expand are taking advantage of the opening, but they have to act fast. As time goes on, it’s going to keep narrowing and could completely shut down once big businesses start streaming into the market.
That’s just one of the many threats facing entrants to this space, where it’s illegal at the federal level, legalization is limited to a handful of states for now, financing options continue to be finite, and tax questions will persist for some time.
During this exciting time, it’s essential for these companies to set a solid foundation that includes realistic assumptions about their viability and the competitive landscape over the next five years. To get started, we suggest folding in the following six questions as you prepare for a successful entry or expansion into the cannabis industry.
1. What’s the vision?
Work out a strategic vision and develop a roadmap to get you where you want to go. Here’s where you plot out how big and fast you hope your business will grow based on a host of assumptions. These assumptions need to be realistic and include plans for bumps along the way. Reach out to experts who know the space and have experience navigating similar territory
2. What’s your value proposition?
You’re entering a hot market and the rivalry is going to be tough. Your value proposition needs to be defensible, to not only win over investors but to be sturdy enough to withstand a dynamic environment. Think of the roadblocks potential rivals will put in your way. Can you stop them with what differentiates your company and product from the rest?
Zero in on the unique value your company adds to the sector, and consider how that may evolve as you prepare to go to market. Without understanding your true value, you will be lost in the ever-increasing competition
3. How can you build in agility?
From the get-go, aim for a corporate culture that practices strong operational and business know-how and can handle rapid change. Volatility is going to be with this industry for awhile, so build up and plan for nimbleness that can handle these change drivers:
4. What’s your fundraising strategy?
Founder and family cash can run out mighty quickly. Be sure you know your cash flow for the next one, six and twelve month time frames for your operations. Map out a strategy for getting you through the ups and downs of the start stage and propelling you toward the growth phase.
Think through who you want your investors to be, how you’ll find them, and your expectations for what you want from them. Investors look for management teams that possess strong financial discipline. How efficient can you be with your use of funds—how will you make the most of it?
5. How can you ensure you always have an “A” team?
Throughout the lifecycle of your business, your skills needs will shift, but you’re always going to want top talent. When you’re not at the point of hiring full-time employees for all spots and specialties, you can lean on outside assistance to ensure that you have the right talent when needed, you don’t burn out the people you have, and outside assistance can fold in best practices for knowing when to hire up.
This isn’t a dilemma that should weigh you down with worry – in fact, it should bring relief. Get to know top-notch consultants who can expertly guide you on when a position should be outsourced or brought in-house
6. How are you building in room to grow?
Everything feels “here and now” when you’re starting up a new venture, but long-term value is a goal you’ll want to start climbing toward ASAP. How can you build up a loyal client base and keep expanding it? How capital-efficient can you operate to withstand the unexpected twists and turns ahead?
Create tight partnerships with a built-out ecosystem of specialists and experts (look for growth partners who have the expertise to help you expand and grow quickly) to help you make smart choices.
Now.. ready to hit the gas?
What’s needed now is a clear picture for how the company will progress over the next few years. If it’s hard to envision on your own, experts who have followed similar journeys can work with you to develop a roadmap that clears the way forward. It should be built on best practices, clear checkpoints and helpful guidance. And leave some avenues open in case you need to course correct.
Use these questions to look past your present demands and adopt a forward-thinking mindset, and access the kind of knowledge and expertise that can help you make sure you’re going in the right direction.
Maureen Ryan is a vice president at Kukuza Associates, a cannabis finance advisory firm with roots in the sector that go back to 2014. Named to the 2020 list of influential business women in Silicon Valley for her pioneering work in cannabis accounting and finance, Maureen has also been profiled by the National Cannabis Industry Association. Contact her at [email protected] to unlock your company’s potential or visit Kukuza’s site to get assessed.
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.
Notify me of follow-up comments by email.
Notify me of new posts by email.
By Griffen Thorne, Attorney at Harris Bricken Cannabis licensing has a pretty standard trajectory by this point in time. States tend to start out with medical programs and later adopt recreational programs. What usually happens is that the recreational cannabis market swallows up the medical market. The majority of medical operators will seek out and…
The New York State Department of Labor has released new guidance regarding legalized recreational marijuana use and the workplace. According to that new guidance, employers must cite “articulable symptoms of impairment” in almost any effort to take action against an employee due to marijuana use. That means an employer must provide “objectively observable” evidence that…
Vermont’s Cannabis Control Board estimates that spending on recreational marijuana in Vermont could reach $225 million annually by 2025, which would translate to nearly $46 million in new state taxes. The figures are just some of the news from a highly anticipated report the board released last Friday. The 64-page document lays the groundwork for…
The initiative, promoted by independent legislator Zoila Rosa Volio, received the affirmative vote of 33 legislators, while 13 voted against it, after extensive discussion and the opposition of several legislators, mainly from the Restauración Nacional, Nueva República, Integración Nacional (PIN), and independent Shirley Díaz. The plan focuses on authorizing the production of cannabis plants, both…