When faux, conflicted experts ride into cannabis town

“An expert is a man who doesn't make the slightest error on the road to the Grand Illusion.” Marshall McLuhan

My mother taught me that you can take the measure of a person by seeing who their friends are.  The same analogy was true in the early days of the cannabis industry – and continues to this day.  Cannabis firms are significantly impacted by the advice and service they get from experts i.e. professional services firms and banks.
  
It is not always pretty. Without naming names, there is a direct link between some expert’s poor advice & service and the costly, embarrassing gaffes (strategic, compliance and financial) committed at many cannabis firms.
  
In my 280+ consulting project, I have seen-

> Investment banks: over-hype the sector to attract naive investors; neglect doing proper due diligence on their cannabis clients; invent bizarre concepts like funded capacity and; aggressively push dodgy financings and transactions (e.g., SPACs)

> Market research companies use dubious analysis to foist inflated and incorrect numbers (e.g, unattainable total addressable market sizes) on a data hungry, gullible industry.

> Accounting firms fail to: invest the time to understand the sector; properly employ accounting standards and treatments like IFRS (which led to large impairments & write downs) and; be sufficiently efficient to complete audits and statements on time.

> All types of consultants with embellished cannabis CVs, faulty strategic assumptions (e.g., cannabis = the alcohol industry) and generic prescriptions, not to mention having little knowledge of the plant and regulations.

Of course, many corporate travails are not impacted by experts.  Most providers are competent and do not act in bad faith.  And senior management/Boards are ultimately responsible for their firm’s performance even if they are acting on external advice.

Going forward, how can businesses avoid issues with their service practitioners and advisors?

1) Educate your partner on your business and the current state of the industry;

2) Get your administrative house in order, including your data and staffing;

3) Mitigate the provider’s inherent biases and motivations.  Experts need to earn your trust with transparency and commitment;

4) Don’t’ be seduced by the big brands or the need for fancy ‘window dressing.’  What matters is the team doing your work. Make sure they have verifiable cannabis experience;

5) Look for ‘tells’ that suggest poor fit.   Does the provider emphasize their brand or size but not their cannabis credentials?  Are they good listeners?  Do they overuse jargon and speak obtusely?

It does take a village to build a successful company – and bring it down. Make sure your providers are truly ethical and expert.

#accountants #bankers #lawyers #professionalservices #consultants #risk #service