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Preparing Your Cannabis Company for Investor Scrutiny – Cannabis Business Executive

Our industry is at an inflection point, which means your business probably should be too. Investors who have been waiting on the sidelines can no longer ignore the progress made and the opportunities now available to them. More than a third of US states have legalized marijuana for recreational use while 37 states consider it legal for medical use, and the move towards federal legalization looks promising (albeit slow). The legal cannabis market in North America, valued at $12.4 billion in 2021, is expected to grow at a compound annual growth rate of 16.6% through 2028, according to Grand View Research.

Where do you see your business on this growth trajectory? If you anticipate needing to seek funding to keep pace and achieve your future goals, now is the time to prepare. Your ability to progress may depend on the value investors place on your business.

The thing is, despite growing investor interest (consider the $100 million raised by cannabis e-commerce startup Jane Technologies in a Series C funding round last year), the getting funding is always a challenge – in any industry: this industry is maturing, you are no longer unique as a “cannabis business”. Investors are looking for viable, promising companies that have substance, with leaders who have the ability to operate and grow a business and who they can trust.

Achieving this level of “investor readiness” often requires significant introspection and streamlining of your operations, including the finance and accounting function so that you have a clear, compelling, consistent and truthful story about your business. Consider these steps as you prepare to attract and convince investors.

Clean up your operations

Your dispensaries may look sleek and beautiful to customers, but what’s going on behind the counter? Can finance and accounting confidently tell how much cash you have? Are bills paid on time? Do you have a monthly closing process? Behind-the-scenes inefficiencies can lead to delayed and/or inaccurate financial reporting, and investors will pass you by even implying that your company has this problem.

Finance is the language of business, and your financials are the start of your story that you’ll tell investors, to help them understand your company’s history, its current iteration, and how far you can go. Numbers don’t tell investors much by themselves and yet the first step is to have a version of the truth that represents the state of the business. Once you have a version of the truth, you need to put it into context and compare where you stand to others and how far you’ve come.

Prioritize problem areas

Now that you have a version of the truth about the state of your business and a view of how you stack up in the industry, you’ll need to prioritize which areas of your business are experiencing issues that need to be addressed first. Typically, no one can cover everything, yet understanding what investors expect to see will help guide you. What will matter is having access to financial and accounting resources and expertise (in-house or outsourced) so that investors see that you have up-to-date, accurate and timely financial information to guide your decision-making process. decision-making and planning.

Sometimes you have to take a step back to notice issues that could be holding your business back. An independent assessment of your operations and business/financial management helps put all parties involved on the same page, can reveal strengths and weaknesses, and help you prioritize changes that will lead to a better understanding of the business. ‘business. You might be surprised at the actual cost of each product you sell. Your cash burn rate may be higher than you thought. Such information could make or break a business in the early stages.

Create a business plan that speaks to everyone

Investors not only invest in your business concept, but also in your knowledge. To feel confident, they need to understand where you’re coming from, including what you see in the market and your business’s place in it. Your business plan gives you the opportunity to do this, but it should be clear to a range of constituents. All interested parties in your business (not just investors, but also employees, customers, suppliers, etc.) all speak a different language, whether they are deeply involved in the industry or looking to s involve more. , integrated view knowing what is important for each stakeholder.

Why are you looking for funding? What is your vision and plan to get there? What are your financial goals over the next three to five years? What is your distinction in the market? Your business plan is where you can show that you know your customers, your product, and the skills and resources the business needs to achieve your vision. A vision without a plan is only a chimera.

Start asking the tough questions

Is it time to increase hiring? How can you scale the business to meet future demands? If you dream of expanding to another part of the country or even outside, how many dollars will it cost you and what will you lose if you don’t make such a strategic move? Many difficult questions need to be asked and you need to know how to find the answers. By following the steps in this article and closing the knowledge gaps that are preventing you from getting the information you need, you will be one step closer to being “ready for investors”.

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