Five Cost-Saving Strategies for Commercial Cannabis Growers

cost cutting

By John Schroyer

Growing marijuana on a commercial scale isn’t cheap.

Startup costs for cultivation sites can run well over $1 million in heavily regulated states, while monthly expenses can easily stretch into six figures, according to data from the 2015 Marijuana Business Factbook.

With wholesale markets in competitive states such as California, Colorado and Washington driving prices downward, controlling costs at professional grows is a must for cannabis cultivators that want to remain competitive.

To that end, Marijuana Business Daily consulted some industry experts to see what steps they rely on to control costs at their grows. Here’s what they suggested.

Invest at the Outset

While most businesses in any industry try to keep startup costs as low as possible, that isn’t necessarily the best way to proceed when opening a grow.

Creating a cost-efficient cultivation site often involves investing in technology and processes that may result in a big near-term hit, said Matt Sampson, owner of Washington State’s North Coast Growers.

Optimally, he said, growers need to be able to produce quality cannabis for $1 a gram.

“When we were planning and building out our first facility, we continued to make decisions along the way to make our facility more efficient to operate, even though in the end it resulted in our start-up costs tripling from our initial projections,” Sampson said.

That means spending money on technology that will reduce costs in the long run. For example, North Coast Growers put $30,000 into a state-of-the-art water system, which saves the company seven man hours a day. The firm also invested in a high-tech irrigation system.

Automate When Possible

Although machines won’t fully replace humans anytime soon when it comes to growing cannabis,  they can certainly help lower costs. Automated trimmers can both speed up the process and cut down on unnecessary labor expenses, said Tim Cullen, the CEO of the Colorado Harvest Company.

That’s one of the reasons he uses a Twister automated trimmer in his 55,000-square-foot cultivation facility.

“We still have some trimmers, but we used to have an army of them, and now we just have a couple of people who do it. That’s one place we were able to gain some efficiency,” Cullen said.

Luke Ramirez, a co-owner of Denver’s Walking Raven cannabis shop, also purchased a similar trimmer in early August for his grow. He estimates it’ll save his company 35% on payroll costs.

Cullen also paid for an Agrotech environmental monitor that keeps track of the temperature, adds nutrients to plants and tracks pH and acidity levels.

“There’s a lot of savings in automate some of that, but that being said, the production of cannabis is a very hands-on, people-oriented physical sort of a job,” Cullen said. “We’re never going to replace eyeballs on plants and people being in the production facility.”

Watch the Meter

As just about any professional cultivator will tell an outsider, energy consumption is often a grower’s biggest cost and concern.

In Oakland, for example, Dark Heart Nursery’s utility bill includes a provision that charges the company a sizable chunk more if it uses power at a certain time of day.

“If I accidentally leave my lights on for five minutes too long, that could be a two or three thousand dollar charge,” said Dan Grace, Dark Heart’s owner and president. “So making sure your clocks are synchronized with the utility company can be a very valuable effort.”

Considering where to set up a grow based on utility rates can also be a big factor, said Sampson, in particular because energy bills are around 12-15% of his company’s total operating costs.

“In the county we chose, Skagit County, our power rates are 5.5 cents per kilowatt hour, whereas the rates for the county next to us, San Juan County, are over 11 cents a kilowatt hour. In some places in Washington State, rates are over 15 cents. That’s huge,” Sampson said.

Maximize Labor Efficiencies

Aside from adopting technology that helps reduce payroll costs, cannabis cultivators can take numerous steps to bolster employee productivity.

“It’s really about labor,” Grace said.

Grace said he relies a good bit on 5S, a Japanese workplace efficiency model that focuses on optimizing organization and work flow. One actionable tip: Make sure workers have everything they need within arm’s reach. That cuts down on movement and time waste.

Ramirez added that investing in a cultivation workforce can also pay dividends and save money over time.

“I’d recommend putting growers on some type of salary, as well as bonuses, so they get paid if they produce a certain amount of product and if that product has a certain level of quality as well,” Ramirez said. “You can really gobble up a lot of dollars on the staffing side if you don’t have that dialed in.”

Pay Attention to Details and Be Creative

“There are a million different things” you can do to cut costs – you just have to get creative, Ramirez said.

One of the best pieces of advice he has is to simply keep one’s eyes and ears open for cost-saving possibilities. For example, Ramirez partners with other companies to order supplies – such as nutrients – in bulk.

“Team up with a different grower or company that’s using the same product, and have one big mass order,” Ramirez suggested.

Cullen estimated he saves tens of thousands of dollars a year by avoiding brand-name nutrients, opting instead for cheaper brands that are just as good.

“There are brand names that are really expensive, but the plant doesn’t care…. if it came from a cheaper source,” Cullen said.

Dark Heart’s Grace added that even small things, such as paying attention to the condition of light bulbs, can turn into major money savers.

“One thing I’ve seen over and over again in grow rooms is bad lighting,” Grace said. “People are not checking their lighting levels, they’re not replacing their bulbs on suitable schedules, or sometimes, they have lenses, and they’re just not cleaning the lenses frequently enough. To me, that’s one of the biggest no-brainers.”

John Schroyer can be reached at [email protected]

17 comments on “Five Cost-Saving Strategies for Commercial Cannabis Growers
  1. Christine on

    Good article. To be remain competitive in this marketplace, the successful growers will have to automate their cultivation process. This is the only way to optimize operational efficiencies and reduce labor costs.

    Reply
  2. Jorge Cervantes on

    This article touches on some of the subjects that I have discussed for the last 32 years in my books (more than 1,000,000 sold), YouTube videos (10,000,000 views), articles in more than 20 magazines in 10 language, website and social media.
    I sent numerous emails to the Marijuana Business Daily but have yet to receive a reply.

    Reply
    • Devmani on

      Dear Jorge Cervantes, so nice to meet you here on this forum, and I can tell you personally how much I value you and your work. Your publication “The Cannabis Encyclopedia” is the best, most comprehensive, useful, practical, educational and good to read book about the industry and Cannabis out there. Thank you from the bottom of my heart for doing what you are doing, you show your love through your work. Thank you.

      I too like the information in the article, but am questioning one point, and wanted to ask your valued opinion: I know that I am what I eat. And I thought that this applies to plants too. Nutrients are not nutrients, the source is important, the “life factor” too. So, here I would disagree when it is stated that using anything, most important cheap. But I am not educated about this issue, so I am not sure.

      Good vibes your way !

      Reply
      • Jorge Cervantes on

        Organic nutrients contain a carbon molecule or are rock powders that are not heated or altered chemically. Salt-based nutrients are most often man-made/altered. Organic nutrients are taken up by plants more readily given the proper soil biology. Salt-based nutrients often kill soil life and excesses are flushed down the drain to pollute ground water.
        I prefer organic nutrients that enhance the chain of life.
        Organically-grown cannabis is the way to go. I have much more information in my new book, the Cannabis Encyclopedia.

        Reply
    • moldy on

      Thanks for all your help over the years! Your book was instrumental in my start up grow over 10 years ago. Your website is also very helpful. Thanks again!!

      Reply
  3. Eric Riccardi on

    NextAire Gas Heat Pumps will eliminate 90 percent of the electricity used for space cooling, using natural gas as the primary energy. In most locations this ends up being a 50 percent reduction in operating cost.

    Reply
  4. Damian W Solomon on

    I just covered this topic in a discussion panel in NYC for the NCIA Fall Cannabis Summit.
    It’s great to see others share the same understanding of efficiency in controlled environment growing systems.

    Reply
  5. ghost on

    I dont think $1 gram is reasonable because of skilled labor costs.

    good labor is kinda expensive and people who really know their grass are relatively hard to come by and wont be super cheap. now you can grow dirt for $1 gram with poor skilled labor but the quality of the product wont be high and fact it will probably be low. so shooting for $1 gram in a competitive market probably wont be as profitable as shooting for something more reasonable ble

    Reply
  6. Donally Harrison on

    I believe that plants do care about the quality of nutrients. Organic and vegan inputs produce healthier plants, and tasty high quality cannabis. It’s the difference between fast food and mindful nutrition.

    Reply
  7. Shaun Parks on

    A lot of growers seem stuck in this mindset that as quantity goes up, or automation becomes more commonplace, that quality has to suffer. To say that mj produced at $1 per gram is going to be dirt is s prime example of this mindset. I appreciate this mindset because all who share it will not be in this game for much longer and that means less competition for those of us that can produce quality at that price. In a couple years $.50 per gram will be the number people are shooting for.

    Reply
  8. Damian Solomon on

    I agree with Shaun, companies that can’t produce with efficiency will not survive. I would say that $0.50/gram is a current number to shoot for. It’s my number for sure. High tech greenhouse growers will achieve this by increasing yield and reducing cost….

    Reply
  9. Mountzioncollective on

    My collectives 5000 square foot outdoor/greenhouse hybrid operation is is currently just under the $1 a gram mark, but in 2 years we will be fully invested in infrastructure to support 7000-10k square feet and then we will be closer to $.40 cost a pound. No need to pay skilled labor, that’s me and the wife I only need 1 helper and trimmers.

    The product

    Greenhouse at high altitude in Meditterean dry climate.

    Climate controlled slow hang dry

    HAND TRIMMED & employee paid fair wage

    Small batch 1/2 gallon mason jar cure of every bud

    Certified kind and naturally grown.

    Grown in artisan fashion.

    Strains: pure sativas and pure indicas. When I say pure sativa I mean long flowering low yielding connoisseur grade cannabis of the upmost highest quality, not your high yielding bullshit indica filled sativas that propagate the market. Yes that includes Durban poison which is the closest thing you can find in dispensaries these days, but not for long 🙂

    I look forward to driving indoor out of business. I can do all of this quality for a LONGTERM wholesale price of $300 a pound, though $500 is what I’ll be shooting for, good luck boys!

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *