How to steer your marijuana business through an economic downturn

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U.S. marijuana recession, How to steer your marijuana business through an economic downturn

(This is an abridged version of a story that appears in the July issue of Marijuana Business Magazine.)

The legal cannabis industry continues to mature, which means the sector is confronting the accompanying growing pains.

That includes facing its first recession.

According to the National Bureau of Economic Research, the United States officially entered a recession in February, the result of nationwide stay-at-home orders and an enormous economic downturn spurred by the COVID-19 crisis.

The offshoot?
  • U.S. businesses have lost more than 40 million jobs.
  • The unemployment rate was at 14.7% in April and remains high, even after May’s unexpected decrease to 13.3%.
  • Unemployment has not reached this magnitude since the Great Depression.

Those stark figures aren’t the only indicators of widespread economic weakness.

The Washington Post noted in June that nearly 50% of all commercial rents weren’t being paid.

And the $600-per-week unemployment stipend being paid to millions of Americans will end soon. That funding loss could lead to more of defaults on credit cards, mortgages and other loans.

But not everyone is experiencing dire straits. Consider the cannabis industry.

While some marijuana businesses are eliminating employees, selling off assets and halting expansion plans, others are hiring and acquiring other companies.

Regardless of the situation in which you find your cannabis business, you can expect major change when the recession subsides.

“I think you’ll start to see the emergence of five to seven large, well-capitalized players,” Erich Mauff, co-founder Jushi Holdings, a multistate operator in Florida, told Marijuana Business Magazine. “I think there’s going to be a fair amount of blood on the streets.”

Others aren’t so dour and see the current economic situation as a norm for the marijuana sector, where uncertainty reigns.

“We have catastrophic change looming around the corner almost every day – whether it’s a new labeling requirement or some prohibitive, draconian law that’s imposed on us,” said Ted Whitney, chief operating officer of Nug, a California-based, vertically integrated marijuana business.

“The recession is just another one of those challenges.”

During these uncertain times, it’s easy to feel lost.

To help cannabis entrepreneurs steer their companies through this economic quagmire, Marijuana Business Magazine spoke with cannabis executives about recession strategies.

Those conversations resulted in numerous tips, insights and advice that include: