The legalization of cannabis in several states ensures industry regulation. As the cannabis industry becomes increasingly regulated, businesses follow the procedures and processes of a legitimate business.
For cannabis business owners, especially those without a financial background, strict financial regulations will be a challenge.
Today we’ll share several helpful tips from cannabis industry experts on how to avoid common business mistakes and be financially successful in the industry.
Create a Business Strategy
Rather than taking a “go with the flow” approach, start by defining your business strategy. What are your long-term objectives? Determine if you want to scale your operation or simply do it out of passion and to make some additional revenue. The cannabis industry has many different components, so it’s vital to narrow your focus. The more clear your niche is, the better chance you have to grow.
Cannabis taxes are complicated. Avoid tax complications by registering your business as a separate entity from your personal taxes. You must also register your business for an Employer Identification Number (EIN).
Track and analyze your KPIs, or key performance indicators. Metrics help you find areas to improve and allow you to see where you are increasing operating costs. Third parties, like investors, will also look at these metrics to evaluate your business. Know and be able to explain your metrics. Software is a huge help when it comes to metrics, as many enterprise resource planning systems will automatically track metrics. Instead of focusing on just revenue, keep an eye on your expense obligations (including taxes).
Miscommunications can lead to costly mistakes that were completely avoidable. Instill company-wide policies for purchasing procedures and operations. Make sure you have internal controls in place, like time logs and dual-approval for cash-handling and purchasing.
Nail Your Branding
Yes, even for cannabis and cannabis products, people care about branding and packaging. Brand correctly. Know exactly who your customer is and how you want them to feel about your product. Your brand should tie into your vision and your overall strategy.
Keep Finances in Order
An experienced CPA and lawyer can save you from a whole lot of complications. Working with a professional can help you avoid costly mistakes and ensure compliance with your local and state laws. One of the best investments you can make for your cannabis business is a good financial advisor and lawyer.
While it definitely takes some planning and careful tracking, it’s very possible to be financially successful in the cannabis industry.