Cannabis 2023: Survival is the 'New Black'
“This ain't no party, this ain't no disco. This ain't no fooling around. No time for dancing, or lovey-dovey. I ain't got time for that now” Life During Wartime, The Talking Heads
Many cannabis companies are facing the balance of 2023 and 2024 with a great deal of trepidation. The number of business failures (some were leading firms) grows weekly. Unprofitability continues to plague the sector, with up to 75% of all companies losing money. Serious macroeconomic, funding and industry headwinds are not relenting - and may even get worse. And don’t count on regulatory or tax relief any time soon.
For most operators, it’s time to get real. Leaders need to adopt a survival mindset and prioritize unsexy (for the sector) things like free cash flow, operational agility and cost reduction. Unfortunately, too many firms have taken far too long to make the requisite changes, whether out hubris, naiveté or being a ‘deer in the headlights’.
For most firms, the only thing that’s going to save them is to outlast their peers. Unless you have access to lots of cheap capital (i.e. a long runway), you won’t innovate or brand your way out of this mess.
Its time to psychologically reset, channel your latent Darwinism and focus on practical survival strategies that can generate short-term financial wins.
Here are 8 'must-do' tactics that prioritize costs and clarity:
> Cost Reduction
1) Finally purge that excess inventory, ugly write down be damned.
2) Prune your workforce. My analysis shows that many firms are overstaffed on a revenue/worker basis. But use a scalpel not a chainsaw so as to not degrade core capabilities or harm your culture.
3) Optimize procurement through negotiating deeper supplier discounts, adding procurement controls and reducing the number of vendors.
4) Take the company private if you see little prospect of a share price lift. This will save big time compliance costs and shield you from predatory short sellers and online investor trolls.
> Business Clarity
5) Pick a strategic lane where you can win. Exit unprofitable or long time-to-revenue markets.
6) Outsource non-strategic and underutilized operations. A 3rd party contact center like HelloMD can handle inbound and outbound customer education to drive higher retention (+40% in cases), while you focus resources on what’s makes you special. Extraction operations could move from a fixed to a variable cost by using an ‘extraction-as-a service’ firm like extractX
7) Get your financial management house in order. Too many businesses fail to undertake table stakes financial activities like real time reporting and budgeting.
8) Cut organizational, IT and product complexity to speed up execution and unlock waste.
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