Tips & insights for marijuana entrepreneurs from the DC spring conference
by Marijuana Business Magazine staff
What are the best sectors for investing in the cannabis industry? What’s the best way to operate a small grow room? What should you ask yourself before launching an infused product company?
Cannabis business executives, investors, consultants and current and former government officials addressed those and many other questions during the annual Spring Marijuana Business Conference & Expo, which took place in May on on the outskirts of Washington DC and attracted more than 3,000 attendees. In the process, the experts served up hundreds of valuable tips, ideas and insights during keynote speeches, panel discussions and presentations – not to mention one-on-one encounters.
The spring conference occurred at a time when the marijuana industry confronts a cloud of uncertainty under the new Trump administration. The gathering, in fact, occurred within miles of the White House.
Marijuana Business Magazine journalists collected many of the business insights and tips voiced at MJBizCon. Here are 10 takeaways.
1. Consider Falling MJ Prices When Investing
The cannabis sector is rife with investment opportunities. But what sectors offer the best investment picks?
Falling wholesale cannabis prices are a key factor to keep in mind, said Sumit Mehta, a founding partner of Mazakali, a cannabis business services firm in San Francisco. Falling prices will, of course, hurt growers. But they can benefit concentrates and infused product manufacturing companies, which use marijuana as a raw material. Consequently, those sectors are worth exploring.
In addition, businesses that help cultivators counter price drops through cost savings make the agricultural technology sector a favorite, Mehta said. Think businesses that help reduce electrical use, like specialized lighting companies, or labor costs, like trimming machine manufacturers.
“Companies that can provide those kinds of services will be in demand,” Mehta said.
2. Investment Do’s and Don’ts
Cannabis investors should keep in mind a host of factors when combing through potential opportunities. And they should remember that today’s investment climate makes for a buyer’s market.
Why? Big institutional investors are generally on the sidelines, and the need for capital among MJ firms remains strong.
“As an investor, you should be in the driver’s seat,” said Chris Leavy, co-chairman of MedMen, a cannabis-focused holding firm in Los Angeles.
But where should you start?
To begin, “avoid leftovers,” or companies that have already been shopped around without any takers.
Leavy also prefers investing in or acquiring companies that already have licenses versus those that are pursuing them. Pre-license companies are a much higher risk, while the return is not that much more than post-license companies, Leavy said. In other words, by investing in post-license companies over pre-license companies, you get almost as much return but with a lot less risk.
3. Learn to Say ‘No’
Negotiating is a hard but vital skill to learn for any business executive. A good place to start is learning to say “no,” a skill few possess.
“Most negotiating tactics are predicated on our inability to say ‘no,’” said Tony Perzow, CEO of the training firm You Suck at Negotiating.
For example, say a salesperson is trying to sell a product to a buyer. The buyer often responds by asking for a better price, additional product, or something else that sweetens the deal for them. Salespeople too often give in.
It doesn’t have to be that way. Here are a couple of tips on how not to fold under pressure:
When a buyer asks for something, try responding with what Perzow calls “the flinch,” a raised eyebrow, a look of surprise, an astonished laugh – something that shows the buyer you have confidence in your price and will resist.
When a buyer does ask for a concession, make sure you ask for something in return, such as a longer contract.
4. Be Honest With Your Banker
Be as transparent as possible. That’s the best thing any cannabis business owner can do to obtain and keep financial services through a bank or credit union.
So advises John Vardaman, a former assistant deputy chief of the money laundering section at the U.S. Department of Justice.
“Your bank needs to be able to account for every single penny of marijuana-related commerce that enters its institution,” Vardaman said. “Anything less than that and they’re going to be reluctant to take you on as a customer.”
Vardaman, who is now a vice president for the Arizona payment solution firm Hypur, urged cannabis executives to “think like a banker.”
“Anything you do wrong is a risk that’s felt by the bank itself,” Vardaman said.
“Opponents of this industry are always looking for examples of noncompliance as a way to undermine the legitimacy of state-legalized marijuana,” he added. “What we need to do is make sure we don’t give our opponents ammunition to turn the clock back.”
5. Consider a Cultivation Catalyst
Alecia Weisman, lead grower at Legion of Bloom in California, advised her peers to use catalysts in the cultivation process – something she feels is often overlooked.
“A lot of different things go into nutrient uptake,” she said. “It’s not just about nutrients, its often about biology.”
Nutrient uptake is a biogeochemical reaction that can be made more efficient by the addition of a catalyst, Weisman added. In fact, she believes that beneficial microorganisms and catalysts are just as crucial as high quality nutrients.
In environments with abundant light (outdoor or greenhouse), a nitrogen boost is very beneficial. Look for protein or amino-based nitrogen sources, such as fish powder (15-0-0.5), she advised.
6. Take Your Time When Drying
Cannabis growers should pay just as much attention to their environmental control efforts after the harvest as they do before it, said Jesce Horton, founder of the Oregon-based MMJ cultivation company Panacea Valley Gardens.
“You can have the most amazing growing process, but if it’s not done correctly after that, it can hurt,” Horton said.
Focusing on environmental controls during the drying process in particular is important. Horton recommends drying in a room with 50%-60% humidity and taking your time during this part of the process – possibly 10 days of curing or even longer, which “creates really good end products,” Horton said.
“We love to dry it as long as possible because you’re really maximizing the terpene profile,” he said, adding that growers should seek “a nice balance of a long drying and curing process without too much humidity in the room.”
7. SOPS Key to Success with Small Grow Rooms
If you opt to spilt your marijuana cultivation site into numerous small grow rooms, creating and following standard operating procedures (SOPs) is an extremely important part of the equation.
Your SOPs should cover everything from taking cuts to the flowering and harvest stages to drying and trimming, said Rick Fisher, executive vice president of operations and distribution at the California medical marijuana cultivation company Canndescent. You also need to create guidelines for changing your standard operating procedures – in essence, SOPs for SOPs – as business conditions warrant.
For those who are on the fence when it comes to small grow rooms, Fisher said his company has found that you can increase quality and consistency, mitigate risk and boost variety by going this route.
8. Educate New Dispensary Customers
When serving new patients at your dispensary, steer them toward professional, safe products. Newbies want a wide range of products to choose from, but, more than anything, they need solid information about what they’re buying.
“Consumers want to be educated about the products you’re selling them,” said Kimberly Cargile, CEO of A Therapeutic Alternative, a California medical cannabis dispensary.
The onus for that education is on your staff. Budtenders need to understand the cannabinoid system, the effects of different cannabinoids and terpenes, proper dosage and how each product should be administered. Your staff also should be well versed in the proper terminology.
“It’s very important to warn new consumers about the effects of a product.”
9. Social Media Do’s and Don’ts
When rolling out a social media program on a platform such as Facebook or Instagram, marijuana retailers and infused product companies must not:
- Promote overuse
- Feature anyone under 21 in any ads or promotional materials
- Use images that appeal to those under 21
- Offer discounts, price data or anything that can be interpreted as encouraging the sale of marijuana
Otherwise, you risk getting your social media account shuttered, according to Kyra Reed, founder of Markyr Digital, a California firm specializing in social media strategy and training.
Instead, infused product and retail companies should focus on educating customers about the benefits of cannabis and their products. “Your job is to educate your customers,” Reed said. Your customers will find value in the information you provide. Plus, it won’t land you in hot water.
Three other pieces of advice:
- Share good content from within your social media community
- Post daily
- Talk about your employees – with their permission
“Your employees are your best evangelist,” Reed noted.
10. Ask Questions Before Starting an Infused Product Company
Avis Bulbulyan, CEO of Siva Enterprises, a Los Angeles cannabis consultancy, said entrepreneurs should ask themselves eight questions before launching an infused products company:
- What state will you base your business out of?
- What are the laws concerning edibles in the state you plan to operate in?
- What is your business model going to be?
- Which market will you be targeting?
- Where do you fit in the cannabis ecosystem, and does your business have a dependency?
- What’s your plan for market entry, picking up shelf space, sustaining and evolving?
- What’s your one-, three- five- and 10-year business plan?
- What’s the end goal?
Chris Walsh, Omar Sacirbey, Bart Schaneman, John Shroyer, Kelly Schmeer and Roger Fillion contributed to this report.