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Cannabis Business Owners Offer Tips on What They’ve Learned
In the past five years, Colorado’s cannabis executives—both plant-touching and ancillary—have learned enough about doing business in a new recreational market to write textbooks on the topic. The Centennial State made history when it launched the world’s first adult-use marijuana market on Jan. 1, 2014. Along the way, the state’s marijuana pioneers have experienced plenty of growing pains, lessons that can be applied to other emerging adult-use markets.
Seek out a seasoned veteran and bone up on the regulations.
While in the early stages of building a cannabis company, it’s crucial to conduct as much research as possible, including consulting with established professionals. Brad Nattrass, CEO of Colorado cultivation equipment company Urban-Gro, advises industry newcomers to incorporate the lessons learned from cannabis veterans to advance their own company’s goals. “Seek resources with experience to help you avoid making mistakes,” he added. “Ask questions. Ask for help. You don’t have to re-create the wheel.”
New marijuana markets typically have limited licenses and stiff competition, so new business leaders will want all the possible arrows in their quiver before they begin. This could include someone on your team with experience working in an established licensed cannabis market as well as a legal professional who can help you read and understand complicated business documents.
“To win a license and compete in your market, it is imperative to have the required business acumen, passion and industry expertise on your team,” said Andy Williams, co-founder of Medicine Man, a Denver-based vertically integrated cannabis company. “And don’t forget to read the fine print”, advised Kristi Kelly, executive director of the Marijuana Industry Group, a trade association. When you’re signing a contract, for example, you don’t want to have any surprises pop up down the road. “This is an industry where details matter,” she said.
Genifer Murray, strategic business development for Drug Plastics and Glass in Denver, strongly re-emphasized that sentiment. “Do your research. Then do more,” she said. “Then do it again. You don’t know how much you don’t know.”
Many business owners are surprised when they are hit with unexpected issues that could have been anticipated, including zoning ordinances, restrictions on advertising and mandated tracking and handling of products. “However, all of these issues are spelled out in the regulations, if you take the time to read and understand them,” Murray said. She added that the cannabis market is now flooded with products, and competition is fierce. “So, take the time to understand the market before you jump in,” Murray said. “Sound business practices are your best chance at success.”
Stay focused on your goals and the tasks you’re specialized in.
While developing your company, avoid succumbing to shiny-object syndrome, where you chase after every new trend and fad. Just because people are buying one type of edible today doesn’t mean they’ll be buying it tomorrow. The same goes for strains of flower or flavors of vape cartridges.
“Set your own goals and pace,” said Scott Reach, founder of Rare Dankness, a cannabis genetics and cultivation company established in Denver in 2010. “Focus on the road ahead. Lost time is lost money.” For Tim Cullen, CEO of Denver-based Colorado Harvest, a key challenge in running his vertically integrated company is the constant opportunity to improve in all areas—from marketing to merchandising to customer service and many others. “Find your focus, do your thing, hire out the rest of it,” he said. “You cannot do everything. Keep repeating that until you believe it.”
Tim’s true passion was plant production. He was comfortable in the garden, but there were other aspects of the business he knew very little about. “Bookkeeping was an area I knew was important, but I decided I could save a few bucks and do it myself on the cheap,” Cullen said. “In hindsight, this was a rookie move. (After mucking up the books), I had to bring in professionals to sort it out at a much higher cost than a part-time bookkeeper ever would have been.”
He’s found that same logic to be true about marketing, merchandising, legal, compliance and other areas. “I now view my position as more of a coordinator of a wide variety of specialized folks that work with me to create an outstanding experience for our customers,” Cullen said. “I could never have accomplished that alone.”
Be a stickler about complying with the laws and regulations.
One of the surest ways to sink your company is to get on the wrong side of regulators. That’s why industry insiders emphasize the importance of crossing your “t’s” and dotting your “i’s.”
Bob Eschino, the founder of Denver-based Medically Correct, which makes the popular Incredibles line of infused candy bars, said his job is to take care of his company, and that means following the law. “If you’re not compliant, you don’t have a company,” he added.
When it comes to business owners in emerging markets, Kyle Sherman, CEO of Denver-based cannabis software company Flowhub, advises business owners against trying to interpret laws themselves. “Make compliance a part of your business from Day One,” he said. “It’s absolutely critical to meet regulatory standards.” To do that, he recommends retail store owners build and document tight standard operating procedures for their employees and all those up and down the company’s supply chain. “Operators shouldn’t rely on one compliance person,” he added. “Instead, they should instill it throughout the company culturally.”
Denver-based cannabis attorney Rachel Gillette, who often helps clients with compliance-related issues, points out that running a marijuana company isn’t the same as running other types of businesses. “Everything business owners do has a regulatory overlay,” she said. Even traditional tasks such as setting up banking services is a minefield of challenges for a cannabis business given the federal government’s marijuana prohibition.
Build your brand by focusing on your strengths and developing a unique product.
To set yourself apart in a crowded field, your product-based company will live or die on the strength of its brand. Nancy Whiteman, founder and CEO of Boulder-based Wana Brands, suggests finding a product category in which you can excel—but don’t try to cover too much ground.
“First-mover advantage is real, but you still have to have a great product to succeed,” she said. “Make your brand stand for something.” Whiteman wanted Wana to be associated with quality and consistency. So, she had her lab test every batch of tincture so the company could dose its products precisely. “It really started our reputation for having products that are always consistent,” she added. Wana also hired a full-time training specialist and developed a range of training programs for budtenders and the general public to ensure the company was providing high-quality educational information.
Peter Barsoom, CEO of Denver-based edibles company 1906, suggests creating a product that is new and different to the current marketplace. 1906, for example, offers cannabis-infused peanut butter cups. “I would encourage people getting into developing industries to define your focus early on,” he added. “Then do it really, really well.” 1906 focused on quality and predictable effects with its edibles from the outset. It also branded its products as “fast-acting,” which helped to define the direction of the company’s offerings from the get-go.
For Lloyd Meador, co-founder of Boulder-based infused product company Marqaha, research can lead to good results for building your brand. “Learn everything you can in order to create a product line with a purpose,” he said. “Focus on formulations that are unique to your brand’s vision.”