Tips & insights for marijuana entrepreneurs from the industry’s largest business conference
Cannabis business executives offered scores of savvy tips, ideas and insights to entrepreneurs, industry professionals and investors at the annual fall Marijuana Business Conference & Expo, which took place in Las Vegas just after the November elections and attracted nearly 11,000 attendees.
Speakers touched on everything from upselling cannabis customers and avoiding predatory lenders to entering the recreational market and employing automation in a cultivation facility. The wisdom comes as both competition and new opportunities abound in the marijuana industry after eight states passed cannabis-related measures in November, other markets prepare to launch and the existing industry continues to expand.
Marijuana Business Magazine journalists collected many of the tips and insights shared in sessions aimed at retailers, infused products companies and growers as well as businesses seeking financing. Below are 10 of the many business takeaways from MJBizCon:
1. Consider Staying Small
Lilach Mazor Power – founder and managing director of Giving Tree Wellness Center, which operates a vertically integrated MMJ business in Arizona – highlighted the benefits of keeping a dispensary or recreational shop relatively small versus developing a massive superstore or opening multiple locations.
“A bigger staff means bigger problems,” Power said during a debate on the topic.
She also said entrepreneurs who grow their companies too big can easily lose sight of their core principles and forget the reasons they started a cannabis business in the first place. Additionally, staying relatively small can help dispensary owners focus on fostering personal relationships with patients, which can boost customer loyalty and strengthen the business.
“Stay personal,” Power said. “Get that brand loyalty.”
2. Reassess Your Atmosphere to Upsell
In discussing tips to upsell patients and rec customers, Rachael Speegle had a simple suggestion: Create an environment where people will want to linger.
Speegle, director of operations for the Verdes Foundation, a medical marijuana producer and dispensary in New Mexico, said the atmosphere of a dispensary or retail store can have a direct impact on the bottom line. If customers spend more time in your store, they are likely to spend more money.
And creating a welcoming, comfortable ambience doesn’t have to be expensive. Speegle said simply adding some textures through fake stone or laminate wood can go a long way. Conversely, metal and sharp edges make people less at ease, she noted, and therefore more likely to leave quickly.
3. Tell a Good Narrative
When beginning the license application process, it’s important for business owners to know exactly what story they want to tell, according to Hillary Peckham, chief operating officer of Etain, a New York medical marijuana business.
She said Etain was able to secure one of the five coveted MMJ business licenses in New York in part because the company’s executives had a strong, clear narrative and path forward.
“We had a really clear vision,” Peckham said. “The strategy we implemented was one we could actually deliver on. And that was really important.”
Tyler Stratford, operations consultant for MJ Freeway, a Colorado seed-to-sale tracking company, reinforced the importance of having a story to sell.
“What is your motivation?” he asked. “What is the story of the team you’re putting together?”
That’s what an application review board wants to know.
4. Beware of Loan Sharks
Marijuana companies seeking capital – from startups taking their first steps to mature firms eyeing an expansion – should be wary of predatory lenders wanting to exploit their ambitions.
“Predatory lenders are out there in droves,” said Truman Bradley, CEO of Seed & Smith Cannabis, a Denver infused products manufacturer and wholesale flower brand. “If it smells like a crappy deal, it probably is a crappy deal.”
How can you tell if it’s a bad deal? Check to see if the interest rate is too high and the time to pay back the loan is too short, Bradley said. Cash-starved cannabis companies should thoroughly vet potential lenders or investors before signing on the dotted line. It sounds like a no-brainer, but many marijuana companies have been burned by not performing their due diligence.
5. Prepare for High-Demand Periods
Learning how to effectively source materials is one of the biggest challenges for infused product companies seeking to meet short-term demand spurts or longer periods of sustained growth.
The first important step: Recognize that not all materials can be obtained with equal ease or difficulty, said Nancy Whiteman, co-founder and co-owner of Wana Brands, an infused products manufacturer based in Boulder, Colorado.
Some materials, such as equipment or a rare organic chocolate, require longer lead times and/or are not sold by many vendors. In these cases, orders should be placed well ahead of an expected high-demand spurt such as 4/20. But other materials, like flour, are easy to come by and don’t require advance ordering.
To keep costs down, more easily sourced materials should be secured through just-in-time ordering.
6. Plan for Growth Sooner Versus Later
Marijuana retailers in adult-use and medical states are poised to see accelerated growth as new markets launch and existing ones expand. If your business is planning to capitalize on this expansion, it’s best to start planning for growth now rather than wait until new markets start up or accelerate.
“You have to invest in capacity and growth before it happens, and that often means six, 12, 18 months of planning,” said Andrew DeAngelo, co-founder of MMJ dispensary operator Harborside, in Oakland, California.
What can businesses do between now and when the recreational markets launch? Study and anticipate how many more customers your store might get, then think about ways to make their experience a pleasant one, DeAngelo advised.
For example, expanding or redesigning your building is one obvious option to relieve crowding, while online preordering will hasten traffic through the store.
7. Be Careful About Mergers, Partnerships
Though young, the cannabis marketplace is already experiencing a notable number of mergers and acquisitions as small business owners give up, cash out or look to advance their expansion plans with the help of a partner.
“M&A is already happening,” Emily Paxhia, managing director of Poseidon Asset Management in San Francisco, said during a session for new investors in the marijuana industry.
But owners who see mergers as a good way to take their businesses forward should be cautious about relinquishing too much power in a partnership.
And, Paxhia added, investors should be careful that the companies they invest in don’t relinquish too much power to a merger partner.
“We’ve seen people rush into deals, and that can lead to pain because the decision was made hastily,” Paxhia said.
8. Invest in Science
Just as it is important for marijuana businesses to invest in legalization campaigns, it is also important to bankroll cannabis-focused science and research.
Despite growing evidence that cannabis has therapeutic value, clinical research studies are still lacking and many government officials, medical professionals and members of the general public remain skeptical.
Controlled, peer-reviewed clinical studies providing hard evidence about marijuana’s properties could help shatter that stigma, fostering greater public acceptance and perhaps federal rescheduling of cannabis as an illegal narcotic, according to speakers in the Marijuana Business Conference Science Symposium, held the day before the main conference.
These studies also would improve patient and consumer experiences. What’s more, the time is right for marijuana businesses to support research, experts said.
“We have a critical mass of scientists to make significant advances,” said Cindy Orser, chief scientific officer at DigiPath Labs, a cannabis testing facility in Las Vegas.
9. Focus on 4 Areas if Moving From Medical to Rec
In states that already have a medical marijuana industry but are now preparing for recreational (California, Maine, Massachusetts and Nevada), existing MMJ businesses will have to focus on four key areas: branding, scaling, sales and compliance, said Rachel Cooper, the director of operations for Monkey Grass Farms, a grower in Washington state.
Cooper said companies need to:
- Pay close attention to their social media presence for branding.
- Build out capacity to serve as many customers as possible.
- Utilize in-store promotions to spur sales.
- Consider hiring full-time compliance managers to stay on top of evolving cannabis industry regulations.
10. Embrace Automation
Automation is going to be a major factor for cannabis growers throughout the industry in coming years, a panel of experts said during a session focused on new cultivation technologies.
“Growing cannabis is very much a labor of love, and you reap what you sow. If you want to have top-shelf product … you’ve got to be in the middle of automation. You can’t do it all,” said Joshua Haupt, a Colorado master cultivator
But panelists also said you have to find the right balance, as too much automation can be a bad thing for a business.
Bart Schaneman, Omar Sacirbey, John Schroyer and Kevin Huhn contributed to this report.