Helping operators at commencement
One of the most common questions we get at iComply is, “How do I start a cannabis business?” The answer is often a lot more confusing than it is enlightening because the question itself is a loaded one.
“Starting a cannabis business” is, like any business, not easy. But, in cannabis, this question is also packed full of questions. Questions we ask clients who want to start a cannabis business:
- What is your budget?
- Which market?
- Who is your team?
- What is your experience and expertise in?
- What cannabis licenses do you want to get?
- What is your strategy?
- How much do you want to pay to acquire cannabis licenses that already exist?
- How do you manage cannabis compliance?
- How do you conduct due diligence?
- What is your competitive advantage?
Many of these questions help us relate to a client’s stage of development which determines a more definitive answer to the question of starting a cannabis business. Whether the client is an existing MSO or brand-new to the cannabis space, “pre-application” clients often have more questions than answers because they have yet to obtain the license they seek in any particular cannabis market they are looking to enter.
For all intents and purposes, let’s define Commencement Clients as “Phase II” operators. These are folks who have passed the initial pre-application phase and have been awarded a license in a particular market. For these folks, the answer to “How to start a cannabis business” is more nuanced than high level. While many of the above questions may still apply and are important, the biggest difference is that for Commencement Clients, there is a pressure to perform.
The starting gun has fired and the race is on.
Unlike most races, however, the cannabis industry is a marathon, not a sprint. So while some may be first to market, it does not mean they will win in the long run. To set a cannabis business up for long-term legacy success, we often discern the importance to be first with what their wider objectives are and balance that with the realistic expectations of the marketplace.
The pressure to get open is sometimes government-mandated and, in those cases, project planning the construction, redesign, and development of the licensed premises is a priority to obtain government approval and final licensing. In these cases, we recommend new commencement clients take their business on like they do edibles: Start low, go slow.
You can always add more, but it’s important to balance the industry expectations with the needs and abilities of the business itself. Phase I development, or the minimum needed to meet licensing, is often the ideal course of action with “trigger points” in the business plan by which one can benchmark when the new industry or market will demand expansion into more grow space, additional product lines in manufacturing, or more delivery vehicles, for example.
Simultaneously, during the project planning and construction phase, we recommend Commencement Clients to not remain idle in their business. There is plenty to do in the 90 to 180 days before opening which should be prioritized for the folks. Besides the basics for a commencement inspection by the government, defining phases of development, and hiring the starting staff, iComply recommends the following be built out and refined as much as the facility is and with just as much zest:
- Proposed Organizational Structure
- Roles and Responsibilities
- HR Handbooks and Policies
- Process Flow Charts
- Standard Operating Procedures
- HR Onboarding/Offboarding
- Cash Management and Financial Controls (AR/AP)
- Payroll Procedures and Technology
- Operations (Grow/Manufacturing/Delivery/Distribution/Dispensing)
- Logs/Forms/Reports
- cGMP/GAcP/GHP Integration
- Employee Training Manuals
- Based on SOPs/Policies Above
- POS Systems and Inventory Management
These are just some of the areas which have to be developed or adjusted for new markets as businesses enter the cannabis space for the first time or expand into a new license. iComply helps clients create and manage all of this prior to opening and we recommend at least 90 days to do so.
During this time, outside of the realm of compliance, operators should ask themselves when is the best time to open? Simply because one has passed final inspection and been approved for a license, does not mean one should open. If the market has a shortage of legal product, for example, having empty shelves may not be the best move to make. If one cannot obtain trim, then a manufacturer may not be able to meet sales orders with dispensaries. Growers cannot sell a crop that has not reached a consistent harvest schedule at the right yields.
Additional time may be required to allow the market to develop, to brand, market, and build a client base prior to opening in order to generate brand awareness and hype for your business. Finally, it is important to ensure that expectations are managed internally and externally on when your business may actually commence.
Sometimes, it may be necessary to stockpile enough inventory, assign SKUs appropriately in your POS, figuring out the right cure times and conditions, and otherwise practice receiving and managing inventory prior to opening the doors or turning on the extraction machine.
Once the business has been developed and defined on paper and the actual operating date defined in alignment with the reality of the industry, then we go to work on implementation. Around 2 to 4 weeks out from opening, businesses should be posting job descriptions, interviewing potential hires, determining the team, and training and developing Management prior to opening with mock processes and procedures and adjusting SOPs/Training or other materials appropriately.
Once proficient and practiced, Management can similarly train new hires and gather signatures from each employee for each procedure they are certified to perform. Sometimes this includes required training from the State or for safety reasons which should always be included in onboarding checklists for employees as part of their required training. Maintaining documentation and records of their onboarding process, training, and certifications is also important to be able to establish accountability and enforce compliance as needed.
Finally, as the newly minted cannabis business executes its game plan, it’s important to ensure there are measurements built-in and ongoing channels of communication open to adjust as necessary and to manage the business over the long term. Everything from sales, to marketing conversions, yields, compliance auditing, inventory reconciliation, and other Key Performance Indicators (KPIs) should be reported frequently to be able to best manage the business.
Given that these backbone components of every cannabis business must be strong in order to ensure consistent quality and ongoing success, iComply strongly recommends operators continually measure, refine, and adjust them on a regular basis with their first audits scheduled 30 days into operations.
Operators cannot know where they are going, how they should be going there, or what “there” means without knowing where they are. And, because new markets, rules, and staff change constantly, scheduling frequent measures is the only way to be proactive about managing cannabis compliance and operations.
Anyone with a license will likely “start a cannabis business”. However, in our experience, there’s a right way and wrong way to start. For those that we help through commencement, these pro-tips make a world of difference in what a cannabis business needs to succeed beyond inspection, when they determine entering the market, and how they implement their business to ensure a future of sustainable profits and to avoid potential pitfalls.
Mark Slaugh established iComply, the country’s oldest cannabis compliance firm, to help cannabis businesses navigate the complexities of regulated marijuana. He provides the leadership and forward-thinking that continues to set standards across the global industry.