Keeping promises, determining legit clients crucial to sustainable growth for cannabis-focused construction company
by Bart Schaneman
In the cannabis industry, where people have multiple irons in the fire and can often get distracted, professionalism sets a firm apart.
Meeting deadlines. Sticking to a schedule. Following through on promises. It’s all important.
“It seems silly to say, but just do what you say you’re going to do,” said Nathan Mendel, founder and president of Your Green Contractor, a construction firm focused on the cannabis industry.
The company learned the importance of this on its very first cannabis project, which involved making a small addition to an existing dispensary in Denver. Your Green Contractor received a proposal, discussed the schedule for the addition and decided it could finish the project in three weeks.
The dispensary owner was surprised – and of course pleased – when the company finished on time, as his previous contractor had quoted him six weeks on a project that wound up taking six months.
Mendel said his goal is to run highly professional projects, and sticking to a timeline is a big part of that.
“That’s just the way every project should be run,” he said, adding that meeting deadlines on construction projects is particularly important. “If you tell a dentist you’re going to be open three weeks from today, (he) has a lot riding on that.”
In 2011, Mendel developed Your Green Contractor into a marijuana construction firm specializing in building-out, remodeling and upgrading custom kitchens for infused products companies, extraction facilities, dispensaries, greenhouses and warehouses.
He took the knowledge he gained working for a commercial general contractor that built nursing homes and medical facilities and applied it to cannabis.
From that previous work experience he carried over a focus on safety, both for the workers in the facilities and for the consumer. While the company has no control over what is sold in a dispensary, it has learned how to make other facilities safer, such as grow sites.
In the early days, grows were overloading their electrical capacity and burning down. So Your Green Contractor began evaluating the purpose of the equipment to ensure that everything would be used as intended.
A grow house isn’t like an office building where you have outlets dispersed across the floor for the cleaners to plug in a vacuum.
“Don’t put an electrical outlet in if it doesn’t have a purpose,” Mendel said. “If you put the plug in it’s going to be used to plug in a light,” and it needs to be designed to meet the capacity.
Safety is an internal focus of the company, but it has helped Your Green Contractor strengthen relationships with customers as well.
“Just in conversations we have with clients and potential clients, the sense they get about how seriously we take safety – both for those working in the facilities as well as the end-users of the products – tends to give people a comfort level that we have their best interests in mind as we build these facilities,” Mendel said.
By January 2015, Your Green Contractor had established a solid reputation in the marijuana industry and was getting about one call a day to work on a project. That’s a lot for a company that generates six figures or more from each deal it cements.
“It’s probably closer to two calls a day now,” he said.
Out of necessity, the company has had to refine its process and be more selective about its clientele.
“It comes down to who’s real,” Mendel said.
When making that determination, Mendel’s first question is always, “Do you have any money?”
He comes into contact with hundreds and hundreds of entrepreneurs who have “enormous ideas” but little financing to fund the real estate portion of their plans. They don’t have a lot of places to get help, and brokers who help cannabis companies line up property don’t have a good idea of how much it’s going to cost.
As the industry matures, cannabis businesses are finding they have more and more options from non-traditional lenders. But sometimes they underestimate how much a construction project will cost and therefore don’t raise enough money to fund it.
“One of the things folks need is just a realistic idea of what they need to ask for,” Mendel said.
If the client is worth the time, Your Green Contractor will begin by providing them a cost estimate. The company often gets involved early in the project with a conceptual drawing and tries to make sure the client understands how much money it will need.
“You can’t go back to your investors and say ‘oops! I made a mistake! I need another quarter million dollars,’” Mendel said. “That does not go over well with anybody.”
Mendel has seen people who have run out of money with only 5% of the project completed.
A good rule of thumb is to get an initial construction estimate from a contractor as early as possible. Then, they should add 20% as a contingency.
Once Your Green Contractor decides a particular client is legitimate, it then takes into account the project’s location. The farther away from Your Green Contractor’s base in Colorado, the bigger the project needs to be to justify the time and costs.
Navigating widely varying regulations has been a challenge for Your Green Contractor as it expands into other states, but the company’s beginnings in Colorado has helped with that, Mendel said. Because Colorado’s rules vary by jurisdiction, the company learned from the outset to check building codes early and often.
Dealing With Newcomers
The industry is still new enough that many entrepreneurs – and their investors – often don’t know much about the business.
Mendel said he had a prospective client in Illinois ask him, “Is this product similar to mushrooms? Does it grow in a cold, damp environment?”
As in the case of the electrical lights in grow houses, Your Green Contractor has learned to ask more questions, often “Why are you doing that?” and “Have you thought about this?”
Mendel had a woman call saying she wanted to build a dispensary the size of a Wal-Mart.
“I asked, ‘Did you mean Wal-Mart or Walgreens?’” Mendel said. “She said ‘I said Wal-Mart.’”
The woman wanted to carry every marijuana strain on the planet. Mendel advised her that even if she wanted to carry every strain she didn’t need 100,000 square feet.
They couldn’t come to terms so he recommended a consultant.
While people are willing to take risks to enter the industry, Mendel said it’s surprising how little risk those same people will take when it comes to new technology. If they’ve done their research and are convinced, say, that HID lights are the best way to grow, then it’s often difficult to move them off their plan to try a new, improved lighting system, such as LED.
Mendel concedes that there is some wisdom in that. “It’s a fine line between the cutting edge and the bleeding edge,” he said.
But to gain a competitive advantage, you have to be willing to try new methods. He said companies in the cannabis industry – particularly growers – should continuously experiment with new techniques and equipment on a small scale first. If it works, then consider implementing it across your company.
Since starting out in 2011, Mendel’s watched with interest as the industry has evolved. Projects are getting bigger. Owners are getting more sophisticated. He observed one operation grow from 3,000 square feet to 10,000 square feet to 50,000 square feet.
“It’s fun for us to get to watch that kind of evolution from the inside,” he said.
He added, though, that trying to make any sort of prediction regarding the future of the industry prior to seeing who will lead the next federal administration in 2016 “is crazy.”
As the industry expands, Mendel wants to grow his business at a comfortable rate. It is certainly not going to grow faster than it can keep up from a quality standpoint, he said.
That focus on quality is a key component to his business ethics.
“We’re looking for people who are serious, not hobbyists. Not people who are looking to grow their own weed just so they can smoke it,” Mendel said. “At the end of the day, the product is a crop and it ought to be managed as one.”