Most cannabis companies that receive cultivation licenses consist of individuals that aren’t from the horticultural industry.

They are intelligent people that have been successful in other industries and are attracted to the opportunities in cannabis.

They do their research, go to conferences, and speak with other entrepreneurs. They may even hire a grower from the legacy market to help design the facility and plan production.

But entrepreneurs new to the cannabis industry, and even some cannabis growers new to the world of commercial-scale cultivation, don’t know what they don’t know.

Investors trust that the entrepreneur knows what they’re doing, and entrepreneurs trust that the grower knows what they’re doing. But this isn’t always the case. Sometimes, these situations can result in a snowball effect of assumptions that turn into an avalanche of financial losses if not corrected.

Even if an operator feels confident in their plans, it never hurts to have a second, experienced set of eyes on a project.

Employees at start-ups wear many hats, and it’s common for simple oversights to turn into costly mistakes when their focus is spread across multiple functions.

Even existing businesses can benefit from an independent outside opinion because companies that don’t invest in fresh perspectives risk breathing their own exhaust.

Enter the value of validation.

What is a validation audit?

A validation audit is when an independent subject matter expert (SME) reviews a cultivation company’s plans or existing operation.

For start-ups, that can mean reviewing the cost projections, yield estimates, and production timelines, as well as the intended flow of people, plants, and products through a facility. It can involve critiquing plans to acquire genetics, launch and expand production, or hire and train the cultivation team.

For existing growers, it’s a comparison to industry benchmarks or key performance indicators such as production costs, yield per square foot, or harvests per year.

Why is it valuable?

Validation audits can be vital to both an operator’s peace of mind and the business’s bottom line.

Audits give start-ups a chance to pivot before oversights turn costly, and they help reassure owners that the plan they’ve been developing over the last year or two is based on reality. They can also help comfort anxious investors that their precious start-up capital is being well spent.

For underperforming cultivation businesses, audits can help identify the problems that may be holding a company back from performing at the level of its peers. If the audit reveals they are on target, it’s a chance to leverage further what they’re already doing right.

Audits can help safeguard against unnecessary expenditures that are in the pipeline but have yet to come to fruition. I once visited a greenhouse under construction whose master grower was planning to install an expensive and overly complex irrigation system. I confided to the CEO that it was unnecessary and that an appropriate alternative solution could be implemented at a fraction of the cost. His reply? “You just saved me $200,000.”

Validation audits can help temper unrealistic expectations and avoid irate investors, stressed-out owners, and distraught head growers.

Audits can also provide a safe way to “test the waters” with a consultant, SME, or trusted advisor that you are considering for a more extended engagement

How do you do it?

Find an expert that has no “skin in the game.” Pay a flat fee for this service and be done with no further obligation. This will help ensure an unbiased audit with no ulterior motives.

For example, avoid inviting a cultivator that’s out of work to review the capacity of your grow team. Inevitably, they’ll determine that your existing grower isn’t capable and will end up vying for their job.

You’ll also want to avoid experts from companies that sell equipment, technology, or grow inputs. Regardless of your situation, they’ll determine that you need to replace your existing equipment with their products to avoid irreparable damage to your crop.

Seek an expert that has no financial motive beyond providing you with honest advice after an extensive look under the hood.

What to expect

For best results, be crystal-clear about what you want to be validated. Any of the following are fair game:

• Cultivation strategy and deployment
• Production capacity, operational expenses, and timelines to market
• Production flow
• Plans for identifying, recruiting, and keeping key hires
• Head grower capabilities
• Cultivation team roles and responsibilities
• Standard operating procedures
• Genetics acquisition plans
• Crop health
• Regulatory compliance
• Contamination risks
• Expansion plans

Entrepreneurs new to cannabis don’t know what they don’t know.

Having an outside expert validate your plans before launching a new grow operation may seem unnecessary, but it pales in comparison to the cost of a crop failure.

The lesson? Be proactive and invest your money wisely!