By Derek John
CEO, Budding Financials
The cannabis industry is booming. Since Colorado pioneered legalization in 2014, consumers have been demanding product and entrepreneurs have been working to keep up with demand.
The marijuana market hit nearly $3 billion in 2014, and shows no signs of slowing down. But the entire industry is at risk.
Unlike in most other industries, the entrepreneurs at the forefront of the marijuana market haven’t been given the support needed to succeed. Despite massive growth and huge revenues, marijuana companies are left to their own devices when it comes to two of the most important elements for protecting and growing their business: finances and compliance.
Ask any entrepreneur and they’ll tell you that financial management – or lack thereof – can make or break a business.
For most, the first step in starting a business is getting a bank loan or summer payday loans or basic account. But banks won’t touch cannabis companies. As a result, entrepreneurs are using “creative” approaches for cash and inventory management.
In an industry where Colorado alone raked in more than $900 million in marijuana revenue last year, these business owners are often relying on vaults of cash buried underground in undisclosed locations.
Like in most businesses, marijuana entrepreneurs are usually experts in their craft – not in financial planning. Left with no bank support and less than ideal options for cash and inventory management, most have little ability to forecast or make adjustments needed to scale.
Add to those challenges the fact that those in the marijuana space face one of the most complex regulatory landscapes. It’s a daunting and time-consuming task and it often falls on the shoulders of the business owner, pulling attention away from other aspects crucial to success, from customer service to marketing.
But done poorly – or not tended to at all – and these companies are shut down.
And consumers are paying the price.
Today, the consumer experience suffers from this lack of tools and support.
When you walk into a dispensary, you’re likely greeted by barred windows and heavy security at the door. It can be an intimidating experience, especially for first-timers. That perception and the resulting stigma are turning away would-be customers.
With the industry reliant on cash only, customers that don’t come prepared are also left paying steep ATM fees in order to access the product they came for.
What’s more, while most customers support local businesses with their cannabis purchases, the industry isn’t structured in a way to help smaller, independent shops succeed. These massive barriers to scale give bigger companies – with bigger budgets and a slew of resources – a prime opportunity to put your local businesses under.
At Budding Financials, we’re helping cannabis entrepreneurs tackle these daunting challenges to take better control of their finances and their long-term success. Through our suite of financial and compliance services, and an upcoming software platform, we’re doing our part to secure the viability of an industry with huge potential. It’s time for cannabis consumers to do the same. Be advocates of the businesses you depend on, and help them get the support they need to succeed.