Ancillary companies serving marijuana clients and mainstream customers must tread carefully – and take steps to prevent potential snafus
by John Rebchook
A national sales director for a lighting company transmitted an email blast telling clients she’d be attending a marijuana business conference. One of her emails landed with a thud in the inbox of a client in a state where marijuana sales are illegal, resulting in a complaint that the message was inappropriate.
As this professional and others have discovered, running an ancillary business can be more challenging if you’re juggling both marijuana and non-marijuana clients.
“Unfortunately, until marijuana is legalized at the federal level, there is still a stigma to it and you just have to deal with it,” said William Askinazi, a Maryland lawyer who serves mainstream clients as well as those in the cannabis industry.
Seeking to capitalize on the marijuana industry’s growth, ancillary companies that are involved in other industries increasingly are providing goods and services to cannabis growers, retailers and makers of infused products.
Executives from some of these companies say it’s a good idea to keep the two sides of the business separate but equal. That could mean, for example, setting up a website specifically for your marijuana clients or devoting a portion of your staff to handle cannabis businesses exclusively.
Below is a more detailed look at three ancillary companies and how they balance their marijuana and non-MJ clients.
Company: Nanolux Technology
Business: Engineers, manufactures and distributes horticultural lighting, environmental controls, ballasts and a full lamp line to hydroponic shops and electrical supply stores.
Headquarters: Petaluma, California
Preventive Measures
“We don’t share pictures of marijuana. We do not put (marijuana) plants in our ads,” said Emily Walter, Nanolux’s national sales manager – even though she estimates 98% of the company’s customers are in the marijuana business. She’s also careful not to send any information regarding marijuana to clients in states where cannabis sales remain illegal.
Past Mistake or Notable Development
Walter transmitted an email blast telling clients she would be attending a marijuana business conference in Chicago. One of the recipients was in a state where marijuana sales are illegal. That person complained.
“I never used the word ‘marijuana,’ but I did include a logo from the conference,” Walter said of the 2015 incident.
“It was my mistake, and I owned up to it,” Walter added. “We are all human and we make mistakes.”
The client forgave her.
Advice
“If you make a mistake like I did with the email blast, apologize immediately and take steps to make sure it will never happen again,” Walter said. “Maybe send a care package, a little gift, as a way to say you are sorry.”
Also, make sure you what know your clients’ needs are and then address them.
“Realize it is not a one-size-fits-all business,” Walter said. “Lighting for growing marijuana indoors in Colorado is totally different than the lighting needed for growing lettuce.”
Company: RW Group
Business: Accounting firm founded in 2009 that is just dipping its toes into the marijuana industry – although it expects MJ could ultimately account for more than 51% of its business.
Headquarters: Kenneth Square, Pennsylvania
Preventive Measures
The company hasn’t established a wall between its marijuana and non-marijuana segments, but going forward, its accountant and others who service cannabis clients will work exclusively for them – and not others.
“It’s not like we want to bifurcate our business, but we will have a department or a division where teams work exclusively with marijuana clients,” said Richard Wortmann, the firm’s founder. “It just wouldn’t make sense to have people working on cannabis 75% of the time and then spend 25% of the time with a broker-dealer client or something.”
Past Mistake or Notable Development
In April, Wortmann met with the junior and senior partners of an architectural firm. The junior partner mentioned he had been approached to design a grow facility and a dispensary – but he nixed the assignment.
Wortmann was concerned this would segue to criticism of his efforts to serve the MJ industry.
Quite the opposite: The senior partner turned to the junior partner and exclaimed: “What do you mean you turned away a client?”
Advice
Wortmann used this incident as an opportunity to educate the junior partner on myths surrounding marijuana – i.e., unsavory types typically purchase cannabis, or MJ leads to the use of harder drugs. He also discussed how medicinal marijuana can help patients without the side effects of opioids or other drugs.
“Some people in the business world have the same misinformation about marijuana as some legislators, so I like to use these opportunities to gently educate them,” Wortmann said.
He ran into a similar situation when a “very conservative” accounting firm decided not to buy or merge with his company because of his push to seek marijuana clients.
“They were scared about what their other clients would think. I said, ‘Why don’t you ask your clients?’”
Company: Askinazi Law & Business/Cannabis Law & Business
Business: Roughly 25% of the practice –– founded by William Askinazi – is currently devoted to the MJ industry, which is handled through the separately named entity Cannabis Law & Business. Non-marijuana clients have ranged from Fortune 500 companies to mom-and-pop businesses during past 34 years.
Headquarters: Potomac, Maryland
Preventive Measures
“I don’t think a Chinese wall would be exactly the right way to describe it, because a Chinese wall means you are going to compartmentalize your business because of conflicts of interests. I don’t see my marijuana clients as having conflicts of interests with my other clients,” Askinazi said.
He maintains a separate website for his MJ practice, Cannabis Law & Business.
“There are some clients out there who are looking for a lawyer who just does cannabis, so I want to reach them. On my regular website, I don’t highlight the cannabis aspect, but I do mention it,” he explained.
Still, he doesn’t want traditional clients to think he is hiding that aspect of his practice.
“I am a firm believer in full disclosure,” Askinazi said.
Past Mistakes or Notable Development
Askinazi and some partners are launching a 3,000-square-foot medicinal marijuana dispensary outside Washington DC. He insisted that being a partner in a dispensary will not be a conflict with others he advises in the industry. Askinazi said he is totally open about it with clients in and out of the MJ business.
Advice
Don’t hide the marijuana side of your business from your non-marijuana clients. You don’t want those in traditional businesses to learn from other sources that you have MJ clients, Askinazi advised. Be especially open and transparent with your non-MJ clients that you have forged business ties with an industry that remains illegal at the federal level, he added.
“Disclose, disclose, disclose. That should be your headline,” Askinazi said.
