How to Build and Run a Successful Cannabis Cultivation Business

cannabis cultivation

The North American cannabis industry is constantly in flux.  This unpredictability makes it difficult for cultivation businesses to keep up with evolving regulations, adapt to changing consumer demand and ensure profitability.

To address these challenges, CannaBusiness ERP recently took part in a masterclass on running a thriving cannabis cultivation business. In the webcast, which was put on by the Business of Cannabis, CannaBusiness ERP experts joined the CEO of Pure Greens and the COO of Bridge West LLC to discuss how to build a successful cultivation business with the right people, processes and technology in place.

Below, we outline five tips from the webcast to help cultivators on their quest to success:

1. Ensure Consistency

According to Sterling Stoudenmire, CEO of wholesale cultivation company Pure Greens, the cannabis industry is largely commodity-driven, which means that it’s essential for cultivators to be low-cost operators. While product quality is, of course, important, consumers are not looking for the highest quality product in the market. Instead, they’re looking for consistency at a fair price.

To find success as a cultivator, Stoudenmire and his team focused their time on building their operations based on the following criteria: reliability, consistency, repeatability and predictability. Though other cultivators in the industry consider themselves “artisans” or high-end cultivators, Stoudenmire explains that the market hasn’t rewarded those types of behaviors. Alternatively, product consistency and availability has been a major differentiator for cultivation businesses like Pure Greens.

So how does Pure Greens ensure this consistency? Stoudenmire attributes much of the company’s success to creating a scalable enterprise consisting of systems, processes and training that can be leveraged as new markets appear. Pure Greens’ ability to take its current workforce and processes and go after new and emerging markets has helped it grow from its original 20,000 square foot facility to multiple greenhouses, which almost tripled its square footage.

2. Have a Plan in Place

Stoudenmire and the Pure Greens team were very deliberate about being pragmatic with their processes from the beginning. To do this, they implemented a number of software solutions, including CannaBusiness ERP, to help the company build its business around best practices already incapsulated in an industry-specific Enterprise Resource Planning (ERP) solution.

Instead of spending time figuring out how to invoice a customer, for example, the team let their systems take care of that work and focused on things like properly tracking and accounting for costs using the technology they had in place. Once they had a framework set up, they stayed true to the process, which helped ensure product consistency and helped the company scale its operations. When new employees are onboarded, there’s no massive training effort, since processes are institutionalized across the business. And when new opportunities arise, the company can take this established framework and move it to another location.

3. Continuously Measure Yourself

Successful cultivators need visibility and control of their operations. For the team at Pure Greens, access to organization-wide data allows the company to understand what’s really happening out in the greenhouse, during production and beyond. According to Stoudenmire, visibility into data and the ability to constantly measure performance helps the team answer questions about the health of the business as a whole.

While Pure Greens stays true to its internal processes, Stoudenmire and his team also understand that the business is constantly evolving and every process is subject to review at all times. To maintain lean operations throughout the organization, people are constantly being moved around the facility to adapt to changes within the industry and within the business itself. Without the ability to measure performance, Stoudenmire and his team wouldn’t be able to determine the success of their operations and how to continue to grow.

4. Stay Informed

Cory Parnell is the COO of Bridge West LLC, an accounting firm that focuses solely on the cannabis and hemp industries. Parnell works with companies to minimize the effects of IRS 280E, gain control of inventory, prepare audited financial statements and address the industry’s most unique and evolving issues.

Parnell explains that successful cultivation businesses need to stay informed on changing industry trends, regulations and tax reporting. Because the line between following current regulations and experiencing legal consequences due to compliance issues is so fine, it’s critical that cultivators stay informed of the evolving regulations. Parnell recommends being informed but staying the course in terms of your operations, since industry change seems to take time to implement.

Let’s consider cannabis banking laws as an example. In June 2020, only 695 banks and credit unions were servicing the cannabis industry, even though the North America legal market was worth $16 billion in 2020. The lack of banking options has left cannabis operators stuck with huge amounts of cash on hand, making them prone to theft, fraud and tax evasion issues. In 2021, though, reforms like the SAFE Act, which creates protections for banks that provide financial services to legal cannabis companies, and California Assembly Bill 1525, which provides legal and financial relief, have been put into place. Parnell anticipates even larger cannabis banking reform to take place later this year, changing the way cultivators manage their financials.

5. Utilize the Right Tools

Cultivating is complicated. From production scheduling to managing strain profiles, grow rooms and harvesting, without the right tools in place to optimize operations, cultivators could be wasting time, valuable resources and money.

Instead of relying on Excel spreadsheets or multiple versions of software to manage operations, an all-in-one industry-specific solution like an ERP system allows cultivators to control finance, operations, seed-to-sale, compliance, quality and traceability from a single platform. This gives cultivating companies the control, visibility and insight needed to keep up with evolving industry challenges and to help them stay ahead of the competition.

CannaBusiness ERP includes the features leading cannabis cultivators use to run their operations. The software is built to address industry trends and to answer the need for a cannabis- specific solution that is user-friendly, flexible and ensures full traceability and compliance. To listen to our recent webcast on Building and Running a Thriving Cannabis Cultivation Business, click here. For more information on how CannaBusiness ERP can help cultivators find success, reach out to us. We’d love to chat.

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