THE CANNABIS CONVERSATION: Professionalizing and Formalizing Your Cannabis Grow Operation | Lost Coast Outpost
Since the legalization of recreational cannabis in 2016, growing weed here in the Golden State has become increasingly complicated. Compliance costs and competition have increased dramatically, while bulk flower prices have fallen. The relatively idyllic and romantic lifestyle enjoyed by family farms for decades is quickly turned upside down. Multi-billion dollar deals are now commonplace in the industry, with major players in the pharmaceutical, tobacco and beverage industry entering the space and laying claim to their claim.
Humboldt County, long recognized as the engine of global culture, is now a takeover target. Reports of “distressed outside assets” are now being discussed in corporate boardrooms, as are strategies for moving in, buying farms cheaply and laundering the Humboldt brand. Our history, which has taken decades to unfold, risks being turned upside down in just a few years.
To survive and thrive in a new business paradigm, family farms need to improve their business and farming skills. As someone who has engaged dozens of commercial cannabis growers through my financial advisory platform, it has become clear that many small operations could benefit from professionalizing and formalizing their operations. This can help farmers stay in the game and capitalize on the fastest growing industry in the world.
For decades growing cannabis profitably in California was easier. Because of this, operators have never had to bother with many of the business planning functions so common to other industries. Things like business plans, mission and vision statements, target markets, and product diversification weren’t really on the minds of people operating in the space. You could buy rural land cheaply, grow tons of decent grass, sell it for high prices, and make a wonderful living. There was a lot of work to do and the risk of incarceration and theft was real, but you didn’t have to be a genius to be a successful grower. Humboldt, like neighboring communities, hit many millionaires starting in the mid-1990s.
Businesses and investors have taken notice. Now that billions of dollars are pouring into the industry, competition is fierce and farmers must become savvy businessmen if they want to survive. They must formalize and professionalize their operations to achieve lasting success. The first step in this process is to create a written business plan to help guide the operation with clarity. The second is to create an operating plan that guides the daily workflow to control quality, improve results, and generate the consistency needed to build a successful brand.
A business plan doesn’t have to be intimidating. It can be a real joy to create, especially for those who really enjoy growing cannabis and competing in a growing industry. This is your chance to be creative and identify how you want to operate and where you want your business to go.
When creating your business plan, you must first describe your business in detail. Things like your vision, mission, and value proposition are included here. What problems are you trying to solve? What market needs are you trying to meet and why/how can you meet them better than others? What do you hope to achieve with your business, in other words, what is its meaning and purpose?
Your plan should also include market analysis. Many use a SWOT analysis which outlines your specific strengths and weaknesses as well as the opportunities and threats your business faces. In the case of cannabis, market analysis should talk about increasing social normalization and competition, changing consumer needs and preferences, product proliferation, changing prices and a developing national and global market, among others.
The business plan should also detail the organizational structure of your business. What type of entity are you, a corporation, an LLC? What about the structure in terms of employees, management and outsourcing of critical business functions like accounting and human resources?
Product orientation and marketing/sales are often the bread and butter of the business plan. Are you competing for storage space with high-end flowers, seeking celebrity endorsements, or growing biomass for extractors and other value-added supply chain participants? Do you focus on cannabis as a medicinal, lifestyle or recreational product? How are you going to bring your product to market? What distribution platforms will you use and will they provide acceptable sales velocity and revenue? How does your operation help distributors meet their customers’ needs and do you meet them better than others?
A natural consequence of this section of the business plan is finance. Using reasonable numbers for production, prices achieved for a product, and a detailed cost breakdown, how are things going? At what time of the year will you break even? How much do you need to set aside after harvest to fund the next season’s operation? How profitable is your business? What changes can be made to improve financial performance?
Once completed, you will be proud of the plan created. It will guide your organization forward and can always be adjusted as needed. Once commercial lending finds the cannabis space and mergers and acquisitions continue in the years to come, having a solid plan and a proven track record of success will show your professionalism and help you stand out from the crowd.
A plan of operations is also essential to your continued success. This plan should outline your farming process in exceptional detail. Everything you do to create a product, from start to finish, needs to be written down. This not only helps improve consistency and predictability, but also allows you to effectively transfer your knowledge to workers or potential suitors.
I build a master plan in January of each year that outlines planting and harvest dates, cloning dates, on-farm purchases, and other pertinent information. From this basic plan, I create a weekly schedule every Sunday with the action items needed to keep me on track for the week and the season. I enjoy the process because it clears my head and allows me to cultivate with more confidence than I otherwise would. It is extremely beneficial in terms of dictating workflow, improving efficiency and creating accountability. Was the job done or not? If not, why not? The calendar helps avoid distractions and avoid forgetting important details. Many farmers are paranoid about documenting their “trade secrets” and workflow, but failure to do so will hamper your ability to scale or grow your operation. The portability of your winning systems will help drive business value and become increasingly valuable in a market dominated by consolidation and mergers and acquisitions.
Although somewhat time consuming, professionalizing and formalizing your operation is a must. Failure to do so will only hasten its demise and make it easier to transfer wealth from your pocket to company coffers. As margins continue to compress and excess profits or economic “rents” are priced out of the cannabis supply chain through increased efficiency and increased competition, your cultivation business must operate like a well-oiled machine. Careful planning, creative marketing, and a strong focus on quality and cost control can help your business survive the tough times ahead. Executing your plan daily coupled with love, faith, unwavering commitment and authenticity will help you win the hearts of consumers and allow you to continue operating in the industry you have helped build. to create.
Jesse Duncan is a permanent resident of Humboldt County, father of six, retired financial advisor, and full-time commercial cannabis grower. He is also the creator of NorCal Financial and Cannabis Consulting, a free platform that helps smallholder farmers improve their farming, business and financial skills. Please check out his blog at, his Instagram at jesse_duncann and connect with him on Linkedin.