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ASAPI
Apr 20, 2007
I invented the line.



Mods, if this is the wrong place, kindly point me in the correct direction.

Cannabis industry goons, I have questions.

I've always wanted to own my own business. Cannabis products are something that I "believe in" and feel would make for a good business. The problem is I "feel" it, I am having a hard time proving it. I've been slowly researching things, reading, learning, starting to put together ideas that will become a business plan. I have hit a wall.

For reference, I understand the basics of retail and business management/planning. I'm no expert, but I'm not afraid to look up my assumptions and verify everything. I also (mostly) possess the ever elusive "common sense."

The industry seems to be a license to print money. General industry information available for "traditional" cannabis products (Marijuana and its products) and "non-traditional" products (hemp derived, Delta 8, 10, etc) seem to confirm this (despite the "non-traditional" products being fairly new). How wrong am I?

Is there a good source of marketing data? If so, where?

How does this business compare to normal retail? Is it closer to a convenience store? A liquor store? An apple store? To me, it seems like there are three main models: the cabinet in the gas station that gets unlocked by the clerk who knows nothing, the "tobacco smoking accessories" store that sells the products in addition to their normal wares, and the high(er) end dispensary (Or CBD/Delta 8 "wellness lounge" in "non legalized" states) that offers a more "targeted" experience. Do we know which works the "best"?

What do these places spend on marketing? What does it cost to gain a new customer? Do the products sell themselves, more or less?

Is there a difference in payroll? Are wages average for retail? Higher? What about inventory costs? I've seen some franchises that vary widely on start up costs. Is it even worth it to go with a franchise?

What surprised you the most when starting? Good and bad? What did startup costs look like (for your area)? Where do you get your information? Is there a community I could join to learn from others? Is it a secret cabal that requires a sacrifice to get in?

I have sooooo many questions, I don't know which ones to ask first. Thanks in advance to everyone.

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Elephanthead
Sep 11, 2008




Toilet Rascal

You can probably get part time jobs at a couple of them. The market seems reaching maturity with a lot of well funded operators but I’m sure it is a gold rush in states that newly legalize. You probably need connections to be a dispensary in those states. A couple of years ago we did a huge equipment lease for thc recovery equipment from the waste greens because pharmaceutical suppliers wouldn’t sell for a suitcase of cash. 50% interest rates were no problem for the growers.

Elephanthead fucked around with this message at 17:57 on Jan 21, 2022

ASAPI
Apr 20, 2007
I invented the line.



Elephanthead posted:

You can probably get part time jobs at a couple of them. The market seems reaching maturity with a lot of well funded operators but I’m sure it is a gold rush in states that newly legalize. You probably need connections to be a dispensary in those states. A couple of years ago we did a huge equipment lease for thc recovery equipment from the waste greens because pharmaceutical suppliers wouldn’t sell for a suitcase of cash. 50% interest rates were no problem for the growers.

50%? drat.

Are there effectively two supply chains: one for pharma, one for recreation? How does this story compare to now where you are?

KYOON GRIFFEY JR
Apr 12, 2010



Runner-up, TRP Sack Race 2021/22

you would get answers to a lot of your questions if you got a job with an established cannabis business and without that experience it will be very difficult for you to secure funding to start your nascent weed empire

Dilber
Mar 27, 2007

TFLC
(Trophy Feline Lifting Crew)


I work corporate at one of the larger MSOs heading up specific business functions inside of marketing and reporting directly to the head of marketing and C-suite. Do not open a dispensary if you haven't been able to find the answers already to most of these questions and have not worked in the industry in a corporate job learning about how stuff works. The answer to your questions is different in every state.

Are you in a limited license state? If so, do you have the cash reserves to get a license and don't mind losing a bunch of money if you don't get it? Are you applying as a social equity license holder? Do you have any connections to big MSOs that can provide cash in exchange for equity to get into a new state? Do you have an understanding of whether your municipality will allow more dispensaries in the area? Do you have a cannabis attorney and CPA that'll help you deal with all the insane compliance and tax laws? Do you know a cannabis real estate agent? Most agents won't touch cannabis because of how limited the options are for them. One such little twist is you are generally stuck looking at buildings where no mortgage exists because federally backed landlords will not take you.

On a marketing level: Do you understand how cannabis marketing works, and which players won't allow you to even advertise? LinkedIn is by far the most cannabis friendly social media site, and a lot of others either constantly shut you down or you can't run ads / deals on them. Anything on facebook/insta showing deals gets killed. Random hashtags get your account killed. You can't work with GoogleAds.

On a personal level: Are you planning on moving and needing a new mortgage? You can get that as W2 employee, but as an owner - operator none of the income counts. Are you ready to potentially lose your bank account? Do you have a way to transport your tax in cash to the local IRS branch office? Do you understand how 280E impacts P/L statements?

I'm guessing you aren't looking at a vertically integrated state since you didn't mention anything around production. Do you know the major players in your state, what they produce, and what sells locally?


To answer some of the specific questions:

1. BDSA and Headset are the two major players in the space from a retail market share perspective. Both of them have major issues, and I cannot wait for Nielsen or NPD to come in and do it better (and I never thought I would say that). They are also can be very pricy if you don't have a retail feed to share with them to get a discount. You can also get the Cannabis Benchmarks Spot Price report as well to get a better understanding of wholesale flower pricing.

2. This really depends on the state. There are different regulations by state, municipality, etc etc. Certain municipalities won't even let you do local advertising or run deals in your store at all. There is no "best". It all depends on your target market. Do you have any idea for the demos in your area?

3. Cannabis generally spends less on marketing. Most of the large MSOs are in the 1-1.5% of revenue which is TINY compared to most businesses. Cannabis brands are generally not developed and sales are a result of footprint. This is starting to change, but most of the brands are absolute rear end. You'll be working with specialty digital advertisers that are not generally good at their jobs, but understand where you can / cannot advertise. Optimizing your GMB page is key, as is SEO. The products both do and don't sell themselves depending on the state. Vertically integrated limited license states are still constrained by supply and stuff sells out all the time, but not so much in other states. You also need to understand you won't be able to do much demand planning on an inventory perspective like you might think you want to, especially as a single dispensary. Crop Failures, issues with testing, extraction, etc etc lead to supply getting real weird. You might want specific strains of flower, but if they had a flower room issue you might never get it again.

4. Depends on the company. On the corporate side, salaries can be pretty decent but benefits struggle a little. Retail pays generally retail wages, but everyone needs a level 2 state background check. Who would you be franchising from, and why would their brand help you? Your raw margins will look great, but with 280E impacting taxes you can't expense most of the stuff you normally would so it's entirely possible to have a very high positive FCF and be losing money.

5. Join a Cannabis company and learn. Cannabis moves at lightspeed due to regulatory and compliance changes, along with the fact that the entire industry is in hypergrowth. Stuff needs to pivot on a dime. Expect to be working a lot.

If you are in California, don't join the industry. There are MAJOR issues there, Oregon, and Oklahoma.

ASAPI
Apr 20, 2007
I invented the line.



Dilber posted:

I work corporate at one of the larger MSOs heading up specific business functions inside of marketing and reporting directly to the head of marketing and C-suite. Do not open a dispensary if you haven't been able to find the answers already to most of these questions and have not worked in the industry in a corporate job learning about how stuff works. The answer to your questions is different in every state.

Are you in a limited license state? If so, do you have the cash reserves to get a license and don't mind losing a bunch of money if you don't get it? Are you applying as a social equity license holder? Do you have any connections to big MSOs that can provide cash in exchange for equity to get into a new state? Do you have an understanding of whether your municipality will allow more dispensaries in the area? Do you have a cannabis attorney and CPA that'll help you deal with all the insane compliance and tax laws? Do you know a cannabis real estate agent? Most agents won't touch cannabis because of how limited the options are for them. One such little twist is you are generally stuck looking at buildings where no mortgage exists because federally backed landlords will not take you.

On a marketing level: Do you understand how cannabis marketing works, and which players won't allow you to even advertise? LinkedIn is by far the most cannabis friendly social media site, and a lot of others either constantly shut you down or you can't run ads / deals on them. Anything on facebook/insta showing deals gets killed. Random hashtags get your account killed. You can't work with GoogleAds.

On a personal level: Are you planning on moving and needing a new mortgage? You can get that as W2 employee, but as an owner - operator none of the income counts. Are you ready to potentially lose your bank account? Do you have a way to transport your tax in cash to the local IRS branch office? Do you understand how 280E impacts P/L statements?

I'm guessing you aren't looking at a vertically integrated state since you didn't mention anything around production. Do you know the major players in your state, what they produce, and what sells locally?


To answer some of the specific questions:

1. BDSA and Headset are the two major players in the space from a retail market share perspective. Both of them have major issues, and I cannot wait for Nielsen or NPD to come in and do it better (and I never thought I would say that). They are also can be very pricy if you don't have a retail feed to share with them to get a discount. You can also get the Cannabis Benchmarks Spot Price report as well to get a better understanding of wholesale flower pricing.

2. This really depends on the state. There are different regulations by state, municipality, etc etc. Certain municipalities won't even let you do local advertising or run deals in your store at all. There is no "best". It all depends on your target market. Do you have any idea for the demos in your area?

3. Cannabis generally spends less on marketing. Most of the large MSOs are in the 1-1.5% of revenue which is TINY compared to most businesses. Cannabis brands are generally not developed and sales are a result of footprint. This is starting to change, but most of the brands are absolute rear end. You'll be working with specialty digital advertisers that are not generally good at their jobs, but understand where you can / cannot advertise. Optimizing your GMB page is key, as is SEO. The products both do and don't sell themselves depending on the state. Vertically integrated limited license states are still constrained by supply and stuff sells out all the time, but not so much in other states. You also need to understand you won't be able to do much demand planning on an inventory perspective like you might think you want to, especially as a single dispensary. Crop Failures, issues with testing, extraction, etc etc lead to supply getting real weird. You might want specific strains of flower, but if they had a flower room issue you might never get it again.

4. Depends on the company. On the corporate side, salaries can be pretty decent but benefits struggle a little. Retail pays generally retail wages, but everyone needs a level 2 state background check. Who would you be franchising from, and why would their brand help you? Your raw margins will look great, but with 280E impacting taxes you can't expense most of the stuff you normally would so it's entirely possible to have a very high positive FCF and be losing money.

5. Join a Cannabis company and learn. Cannabis moves at lightspeed due to regulatory and compliance changes, along with the fact that the entire industry is in hypergrowth. Stuff needs to pivot on a dime. Expect to be working a lot.

If you are in California, don't join the industry. There are MAJOR issues there, Oregon, and Oklahoma.

Thank you very much for taking the time to write this. It helps a bunch and explains many of the "holes" I have found and my poorly worded questions.

I am very much in the beginning phases of even considering making a move. Working in the industry, learning more before taking the step of opening a place is the plan (if I get that far). It just felt like the initial gathering of information was very... light on useful things.

How long have you been in the industry? The effective people you work with, are they mostly retail vets, new to cannabis, or fairly spread out in terms of skill set?

Again, thanks for taking the time to answer, its helped out a bunch.

Dilber
Mar 27, 2007

TFLC
(Trophy Feline Lifting Crew)


ASAPI posted:

Thank you very much for taking the time to write this. It helps a bunch and explains many of the "holes" I have found and my poorly worded questions.

I am very much in the beginning phases of even considering making a move. Working in the industry, learning more before taking the step of opening a place is the plan (if I get that far). It just felt like the initial gathering of information was very... light on useful things.

How long have you been in the industry? The effective people you work with, are they mostly retail vets, new to cannabis, or fairly spread out in terms of skill set?

Again, thanks for taking the time to answer, its helped out a bunch.

It's a mix. The industry is currently importing a LOT of talent from elsewhere. It's a nice mix of people that are legacy cannabis, people promoted internally, and talent imported. I came from Office Supplies, for example. Our regional marketers came from beverages, alcohol, cigars, etc etc. Our Ops people are a nice mix as well. Growers / extractors, and R&D come from cannabis while a bunch of other leadership comes from places like automative where their processes are useful for us. On the retail side, retail leadership generally came from leadership at other retail.

I'd state that the people that came from other businesses are significantly better at their jobs than those that are legacy or early retail in cannabis. All the large companies are still essentially billion dollar startups, and its getting really important to put in processes and SOPs which the legacy cannabis people just...don't understand.

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ASAPI
Apr 20, 2007
I invented the line.



Dilber posted:

It's a mix. The industry is currently importing a LOT of talent from elsewhere. It's a nice mix of people that are legacy cannabis, people promoted internally, and talent imported. I came from Office Supplies, for example. Our regional marketers came from beverages, alcohol, cigars, etc etc. Our Ops people are a nice mix as well. Growers / extractors, and R&D come from cannabis while a bunch of other leadership comes from places like automative where their processes are useful for us. On the retail side, retail leadership generally came from leadership at other retail.

I'd state that the people that came from other businesses are significantly better at their jobs than those that are legacy or early retail in cannabis. All the large companies are still essentially billion dollar startups, and its getting really important to put in processes and SOPs which the legacy cannabis people just...don't understand.

Again, I can't thank you enough for taking the time to answer my questions.

Thanks for shedding some light on the maturity of the industry. I was half expecting that the larger and/or older places would have been further along on the process and SOP dept, especially with the money being poured in.

You have given me more to think about and consider. It is really helping me focus my thoughts.

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