02 October 2022 |

3 problems the cannabis industry can fix today

By Kaitlin Domangue

There are so many problems in cannabis that are out of our control.

Not everything is, though. There are 3 present & common problems that are within the operator’s control. 

Rejecting traditional business practices 

If you’ve been around the legal cannabis space long enough, you’ve probably heard about “suits vs. roots.” 

It’s the idea that traditional, corporate professionals and legacy cannabis operators are against each other. Suits vs. roots. 

Legacy operators typically reject corporate professionals because there is a deep, painful history associated with the cannabis industry. 

Many believe that Corporate America doesn’t acknowledge that, but rather focuses solely on how to make a profit. 

It makes sense that legacy operators would feel this way. Additionally, corporate cannabis has shown its crappy side more than once. 

In spite of that: I maintain that the two groups can work well together. In fact, blending the two instead of competing is the recipe for success. 

Let’s just be real. 

Most legacy operators don’t come from a traditional business background. Some are resourceful enough to figure it out and make it work, but there are plenty who can’t. 

And the cannabis industry isn’t just another business. We have several additional challenges to tackle. Accounting woes, legal hurdles, compliance challenges: you name it. 

On the corporate side, there are several C-suite executives who don’t know a thing about growing cannabis or what consumers like. So that’s where legacy operators are helpful. 

And guess what? Neither party should feel bad about what they don’t know. 

Corporate people are good at making money and maintaining a high standard of operations – let them. Legacy operators are great at understanding the consumer and growing great cannabis – let them. 

You need a tenured, traditional business mind AND a deep understanding of cannabis in order for your operation to be successful. 

Don’t have one of these things? Find a partner and join forces. Blend the best of both worlds and see your operation flourish.

Entering bad partnerships 

… Which brings me to my next point: partnerships.

I’ve seen this before with my own eyes and have heard of even more. 

In the case I know about: a company entered a deal with another company and it went bad. It legitimately ruined the company and they ultimately had to sell because of this bad deal. 

In the case I’m speaking of, the license holders didn’t know much about production and hired an outside group to handle that for them. 

The outside group and the license holders clashed and the outside group damaged the brand & its reputation within the industry, with operational challenges and even crimes at the facility.

And – this story is not unique.

The cannabis industry is a hard place to succeed and our world is fast-moving. People want partnerships and they want them fast so they can open for business. 

You’d think that people with a traditional business background know how to spot a bad partnership, but oftentimes they don’t because they don’t know anything about growing cannabis. They’re easily tricked. 

And of course, legacy operators without traditional business backgrounds may not be able to spot some of the red flags that would alarm someone from Corporate America. 

In the case I’m speaking of, the outside group was hired because of a recommendation from the operator’s friend who used the same group and they were great for that person. 

The operator didn’t do further research, took the friend at their word, and ultimately regretted it. 

So yes, blend suits and roots. But make triple sure you’re partnering with the right people. Vet their background, ask for case studies, contact past clients and understand exactly who you’re working with. 

At the end of the day, you might not be able to identify a bad partnership even if you’ve done your due diligence. 

This is where an exit plan must be part of the agreement if the deal doesn’t work out. 

Don’t assume it’ll all be peachy forever and make it hard to leave the partnership should things go awry.

Running before we walk 

There’s a lot to celebrate in cannabis today. Here are a few: 

  • More than half of the U.S. has a legal cannabis market. 
  • The industry is worth billions of dollars. Some (not all) have been released from prison for cannabis crimes and their records expunged. 
  • People damaged by the War on Drugs have been able to reclaim the cannabis space and make a living operating their own business. 

These accomplishments are nothing to gloss over. 

But remembering there’s still plenty of work to be done is crucial to sustainable success in cannabis. And we need to put our heads down and actually do that work. 

There’s no better example of preemptive celebration than the case of former MedMen executives Adam Bierman and Andrew Modlin. 

I wrote about MedMen’s downfall here, which goes into more detail, but the executives spent frivolously using company funds. Expenses included: 

  • 24-hour armed guards for founders and their families
  • Private jets
  • Cadillac Escalades and Teslas
  • $300,000 therapist on staff, who was actually Bierman’s personal marriage counselor 
  • Massage therapists

This is an extreme case and the MedMen executives aren’t exactly the cannabis industry’s favorite people, so this behavior isn’t often replicated. 

The sentiment, however, remains true for several companies: improper spending. 

A cannabis company might be making millions of dollars, which is fantastic! But the industry is unpredictable and tax write-offs are nearly non-existent. 

Excessive, frivolous expenditures are the last thing any cannabis business should be doing. 

I wonder how Bierman and Modlin’s spending habits would have changed had they known they’d eventually be ousted out, practically by an angry mob, of the very cannabis company they founded together. 

Running before we walk doesn’t just come from spending, but what we focus on, too. 

We have no idea what the industry will look like in 10 years and some cannabis companies are cementing their plans for expansion or growth based on their current success. 

There are very few cannabis companies in the position to make such grand and long-term plans. 

Just 42% of respondents reported being profitable in a recent poll surveying nearly 400 operators. Some of these operators with grand plans, realistically, will have closed their doors by the time their goal date arrives. 

And in terms of preparing for consumer preferences: we have no idea what to prepare for. 

Every cannabis market is different. Different brands, different categories, everything is different. And mostly everything is less than 10 years old. 

Don’t forget that cannabis is still federally illegal, either. In 10 years, we could have legal cannabis or we – God forbid – might not. We don’t know. 

So how do we even begin to make grand & celebratory business plans? 

The only plan we should be making is the plan to be flexible, tenacious, and relentless as we operate in this industry over the next several years. 

We are still in the gritty phase of cannabis operations. Much less gritty than the days of no legal markets, of course, but we aren’t out of the woods yet. 

Let’s celebrate how far we’ve come without getting lost in the excitement and forgetting how much further we have to go.