I get asked cannabis business questions…

On a variety of important topics in my consulting practice.  With 300 cannabis projects under my belt, my mission continues to revolve around sharing best practices thinking and fostering professional dialogue.

Below are actual client questions. Please keep in mind my responses are abbreviated and the final answers would always be situation and company-specific.

> Strategy:  What is the key competence a cannabis firm must have right now?

Execution. I am not saying other things like new product development, raising capital or maximizing employee engagement are unimportant. They are. However, your competitors are also focused on these things.  Out executing them is the key to you winning.  To execute with excellence, businesses will need to look carefully at their management practices, resource allocation and IT systems to ensure they have the right foundation for operational success.

> Growth:  Is all growth, good?

No.  Fundamentally, this is a good time for firms to reconsider how they will compete. If they don’t have a low-cost structure and the required scale a market share-based strategy will be dangerous.  It will worsen your cash flow and exacerbate your unprofitability. Right now, your growth strategy must prioritize differentiated products that deliver profitable revenues that are sustainable over time.  That may necessitate pivoting to a niche-focused market strategy.

> Cost Cutting:  Where are best places to cut costs? 

You fish in the lakes with the most fish.  In the short term, the cannabis ‘fish’ is in labour costs, energy usage, marketing and inventories. Longer term, fertile cost savings can be found in decreasing operational complexity, real estate rationalization, product input harmonization and SKU streamlining.  However, you want to be cutting fat not the core capabilities that will drive future performance.

> Innovation:  How does a firm become more innovative?

This question belies a simple explanation. Fostering innovation is a multi-factorial process, with a dollop of luck thrown in. The most innovative companies I have seen and studied regularly look for unmet consumer needs, are highly collaborative and treat innovation as a process not simply the result of a good idea.

> Funding:  How do I improve my chances of raising new capital in this market?

Make no bones about it, equity investors now look for multi quarter profitability as well as healthy margins and cash flows.  It is similar for debt funders with the added need for securitized assets and tight covenants. And, all potential funders want to see up-to-date financial statements and corporate documents.  

In the future, I will be delighted to answer more questions.  Feel free to send more over. And Happy Holidays.

#growth #costcutting #funding #innovation #capitalmarkets #strategy