Tried And True Mainstream Business Practices That Every Cannabis Business Should Adopt
Running a cannabis business – especially at startup – often requires that you become a jack-of-all-trades. Accordingly, it is vitally important to become knowledgeable in a wide range of skill sets in order to successfully steer any business to a profitable future. However, with many cannabis entrepreneurs now facing a difficult and challenging environment due to a number of conditions including oversupply, increased competition, and partnership disputes, it is useful to look to mainstream corporate America to find suitable and effective practices that can adopted and adapted to help cannabis companies succeed.
Steve Tobak, author of Real Leaders Don’t Follow, wrote: “The biggest problem founders and small business owners have is that they’re experts in their field and novices in what it really takes to effectively run a business. That’s what usually trips them up, sooner or later.”
Remember, ideas alone are worth very little. If you want to successfully run a business, you need to solve meaningful problems. Execution is everything.
Without further delay, here are some of the most important business tenets from successful mainstream companies that should be employed at any cannabis enterprise:
Be a Wizard at Finances
Understanding your finances is key. Knowing your revenues, capital requirements, profits, labor costs, cash flow, debt, and effective tax rate (which in the cannabis industry can be quite high) – is vitally important.
Sometimes books and records are not carefully maintained, or they are kept in what I would call “post-it note accounting.” Often times in young companies, very little effort is given to the financial management side of the business because all the attention is given to raising money from investors, selling, marketing, and brand building. This is a grave mistake.
On the flip side, I have seen business owners give all of their accounting over to a CPA firm, including basic bookkeeping. The causes accounting bills to go through the roof. What a business owner needs is a part-time bookkeeper for the day-to-day financial essentials, not an expensive CPA firm.
Hire Well and Manage Employees
Hire the best and brightest you can afford. Admit that you don’t know everything and hire people that add to your brain trust by bringing skills that complement rather than compete with your own. Additionally, the cost of losing a star employee is enormous, so take steps to ensure that top employees are motivated and properly compensated.
Make sure that all employees who interface with the public are polished and professional. A company is judged by its weakest link, so make sure your customers only see the strongest of your team.
On the other hand, you can’t fire bad employees fast enough. If someone is not working out, make a change and keep moving forward. Dead weight sinks a business.
Understand Your Competition
No matter what niche you are entering, you will have competitors. Even if you think there are no other businesses offering exactly what you plan to sell, there likely are other products or services that are similar in nature and meet your customer’s needs. To be successful, you need to identify and understand the competition, and develop insight into their sales channels and techniques. Competitive research is something you should plan on doing on an ongoing basis.
Don’t Make Excuses
One key difference between successful people and those that fail is that the successful people learn from their mistakes and move forward. They don't blame external factors or others for their fate. It is okay to be humbled. If the path to their goal is blocked, they find another way around, or adapt to new conditions. Action, not excuses, define a great leader.
Keep Overhead Low
I know of at least of several cannabis companies that are earning tens of millions a year in revenues, yet have still not shown a profit. This is simply not sustainable. While running in the red is common in start-ups, don’t blow all your investment capital on shiny new and expensive buildings, buildouts, vehicles, and machinery. Keep overhead low and grow smart.
Pick Investors Carefully An investor can be your savior or your worst nightmare. Make sure you like and trust your investors. Make sure they understand your vision and your goals. Be certain their investment horizon and expectations are realistic for your company. Don’t keep them in the dark. Maintain open communication, in good times or bad.
Manage Your Time
Learn to quickly determine where your time is best spent. Make quick decisions and decide which tasks are crucial and which are not. Everything that comes across your desk does not have the same importance. Learn to prioritize and delegate.
Be a Marketing Maven
There are few things more important to growing a company than making certain that your brand messaging is on-point, consistent, and uniform across all marketing platforms. From colors, to fonts, to logo use, to the style and tone of voice, your messaging is what will create customers, generate loyalty, and build your brand. Whether you hire experts or do your marketing in-house, it needs to be done correctly, across the board.
Budgets are always a sore subject. The typical corporate budget is often as much political as it is practical. However, budgets for a small business or startup can make or break the company. Understand what you can afford and what you are paying for.
Become an Expert in Agreements
It is vital to learn how to read effective agreements; you can always have a business attorney write them for you. These will be cornerstones in building a successful business. When you understand business agreements, your business relationships will improve.
Whether it is cleaning a bathroom or running a piece of machinery, you need to understand the daily tasks that keep a company running. There are usually hundreds of things that need to happen every day to keep a company afloat. Understand those details and you will be better equipped to grow your business.
Stay Mentally Sharp
Learning is a lifelong process. Keep reading and gain wisdom from others that have succeeded. Exercise your brain in addition to your body. A sharp mind and body will help you overcome obstacles, maintain focus, and have the stamina to get the job done.
You’re Not an Entrepreneur, You’re an Executive
There is a key difference between most leaders of mainstream businesses and most entrepreneurs that launch a company. Mainstream business leaders most often started at the bottom, whether at the company they now lead or elsewhere, and worked their way up the ladder through a variety of positions that exposed them to many different facets of the company’s operations. Accordingly, these business leaders usually have experience at every level of the industry.
Entrepreneurs, on the other hand, have an idea and launch a business, often times without having experience in many of the areas of the company. Especially in a new industry such as cannabis, there simply aren’t a lot of people that have tons of experience, because the field didn’t even exist a short time ago. That’s why it’s even more important to follow basic business principles to keep your cannabis company strong, profitable, and successful.
About the author:
Scott Yahraus is a leading business builder and conflict resolution specialist, with significant expertise in the cannabis industry. With experience in state and federal court receiverships, and provisional director assignments, he specializes in helping companies improve operations, solve partnerships disputes, and restore profitability. He brings vast knowledge and experience in the areas of law, real estate, business management, construction, retailing, and conflict resolution to help cannabis companies avoid or repair complex issues. With an unparalleled track record in navigating businesses to positive outcomes, Scott can help put companies on a pathway to success. You can visit him at www.Scott4Business.com