ANJA Presents: Insights from NECANN NJ 2023 - Pinching a Penny so Hard it Screams

Introduction

The NECANN 2023 conference was a treasure trove of actionable insights for cannabis entrepreneurs. One seminar that particularly caught our attention was "Pinching a Penny So Hard It Screams." This session offered an in-depth look into the financial complexities of running a cannabis business, focusing on four critical stages: Formation, License, Operation, and Exit. In this blog, we'll delve into the seminar's key takeaways, providing examples and recommendations to help you navigate the financial intricacies of the cannabis industry successfully.

The Four Stages of Enterprise

Formation

The formation stage is where you lay the foundation for your cannabis business. The seminar emphasized the importance of creating a detailed timeline and budget. For instance, you might draft your initial business plan yourself to save on consultancy fees and then have it reviewed by an industry expert. This approach allows you to maintain control over your vision while benefiting from professional insights, thereby saving money without compromising quality.

License

Securing a cannabis license is often a bureaucratic maze filled with unexpected costs. The seminar advised setting aside a contingency fund of at least 20% above your estimated budget to cover unforeseen expenses. Additionally, consider hiring a legal advisor experienced in cannabis licensing to guide you through the process, thereby reducing the risk of costly mistakes or delays.

Operation

Once your business is operational, the focus shifts to efficiency and risk management. The seminar recommended creating a contingency plan that outlines steps to take in various emergency scenarios, such as product recalls or regulatory changes. Additionally, consider joining industry associations or networking groups to stay updated on best practices and available resources that can help optimize your operations.

Exit

The exit stage is crucial but often overlooked. Many operators in the cannabis industry have a long-term goal of being acquired due to the high capital requirements and operational complexities of the industry. If acquisition is your endgame, focus on building a strong brand and customer base from day one. Also, keep detailed financial records and compliance documentation to make your business more attractive to potential buyers.

Banking Considerations: The Safety Net of Multiple Accounts

One eye-opening recommendation from the seminar was to maintain multiple bank accounts for each business entity. This is particularly crucial in the cannabis industry, where sudden regulatory changes can lead to account closures. For example, if you have accounts with three different banks and one shuts you down, you still have access to 67% of your capital. This diversification acts as a financial safety net, ensuring business continuity even in turbulent times.

Building Profitable Relationships

When dealing with banks or other financial institutions, the seminar advised focusing on asset-based negotiations. For example, if you own the property where your dispensary is located, that's a valuable asset that can be leveraged in financial discussions. Building strong relationships with your bankers by regularly updating them on your business milestones can also help you negotiate better terms and conditions.

Conclusion

Financial planning in the cannabis industry is a complex endeavor, but it's far from impossible. By understanding the four key stages of a cannabis enterprise and implementing strategic financial planning, you can effectively "pinch a penny" without sacrificing your business objectives. The seminar's advice on banking diversification and strategic exit planning offers invaluable insights for both newcomers and seasoned cannabis entrepreneurs.

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