Header Right

How to Build Investor-Ready Financials for Your Cannabis Business

by

You’re operating a cannabis business, which means you’re selling products that are in high demand. In fact, you may find your cannabis company is doing quite well, given the current market.

But this alone isn’t going to give you the rapid growth you wish to obtain. To do this, you’re going to need the help of investors. By building up your capital, you can open more locations around your city or state.

However, to get investors on board with whatever growth plans you have, you’re going to have to get your financials in order. This way, you can prove your cannabis business is worth the investment.

Let’s take a look at how you can do that.

Measuring the Success of Your Cannabis Business

How well is your cannabis business doing? On the surface, it may appear to be doing great. After all, products are flying off the shelves and you’re getting a steady flow of customers day after day.

But this doesn’t mean much if you don’t have hard proof of your financial health. To obtain this, you’ll need to perform an analysis of your finances. Here’s an overview of how you can do that.

Start Collecting the Right Data
There are key data points you want to collect about your business to determine its financial well-being. You can use tools like a robust POS/Sales system and a CRM (customer relationship management) platform to simplify this. Together, you can gather information about your sales and customers.

For example, if you’re a cannabis dispensary, you can gather data like:

  • Customer frequency
  • Average spent per transaction
  • Labor %
  • Gross margin of each product
  • Contribution margin per product
  • EBITDA

And if you’re a cannabis manufacturer, you can collect information like:

  • Yield
  • Manufacturing cycle time
  • WIP inventory/turns
  • Throughput and capacity utilization
  • EBITDA
  • Gross margin
  • Cash-to-cash cycle time

Then if you run a cannabis delivery service, you’d track metrics like:

  • Distance between deliveries
  • Time between deliveries
  • Fulfillment turnaround time

This may seem like a lot (which it is for the inexperienced). In this case, we recommend working with a CPA well-versed in the cannabis industry.

Look at Financial Trends
Investors don’t care about single points in time when you made substantial amounts of money. Instead, they want to see lines and charts showing ongoing trends in sales.

So if you want to impress a group of investors, you should focus on showing your revenue for a year or so versus pointing out different time periods you saw high revenue.

Compare Your Trends with Similar Cannabis Businesses
It’s not ideal to compare your small-town cannabis shop’s financial trends with a high-end cannabis boutique in Los Angeles. This will make your cannabis shop appear to be worse off, even if it’s doing quite well within its locale.

So if you’re going to do comparisons, look for cannabis businesses in your area or cities similar to yours.

Creating Your Investor Pitch Deck

Alright, so it’s time to wow (or at least woo) investors into financing your cannabis business. To do this, you’ll need to create what’s called a pitch deck.

This should be a slideshow or presentation that consists of the following:

  • An intro highlighting your company name, logo, presenters and their titles and contact info, and photos of your product or service.
  • The problem you’re looking to address, how it’ll benefit your customers, the desired future state of your business, and the initial market scale.
  • The solution to your problem, the benefits it offers, the timeline to develop/design, and a template of the product design.
  • Your business model explaining concisely where the money is going (lending, ads, licensing, direct sales, subscription, etc.), and the value you’ll bring to customers.
  • Overview of the market, such as the size, future growth, target customer, product positioning, market trends you can leverage now, and other applications for your products.
  • How you’ll market your product to customers (one or more strategies), the length of the sales cycle, and how you’ll attract your first customer.
  • Pricing model for your products/services, which covers the cost to product/develop, sales price to customer, cost/margin calculation, and analysis of competitor prices.
  • Competitive analysis using a table/chart to compare your solution to others on the market.
  • Social impact of your product/service, your company’s values, and how your business will shift the marketplace.
  • Your team, their skills, knowledge, experience, and resources.
  • A conclusion that wraps up your presentation includes next steps for your company, and how to reach you.

Prepare Your Financial Report with the Help of a CPA

Running a cannabis business is a major feat. You’ve learned a lot about what it means to be a company owner, but you may not have the skills to create a thorough financial report.

With the help of a cannabis CPA, you can gather all the necessary intel needed to prove to investors your company is worth investing into. If you’re ready to get your investor deck in order, then contact us today to partner with a CPA experienced in the cannabis field.

Congress Passes $900 Billion COVID Relief Package Including Critical Tax Provisons

by

 

Late Monday evening, Congress overwhelmingly approved another massive $900 billion COVID relief package for individuals and businesses. Major points of the relief package, which by the way passed the Senate by a vote of 92-6 and also the House by a vote of 359-53, include $600 payments to individual taxpayers that have adjusted gross income (AGI) of $75,000 or less (or $112,500 AGI for heads of households), payments of $1,200 to joint filers with AGI of $150,000 or less, and an additional $600 payment for each qualifying child.

Now for businesses, extra time is provided for paying previously deferred payroll taxes, Paycheck Protection Program (PPP) loans version 2 is available, and borrowers with PPP loans would now be allowed to take deductions for expenses paid with PPP loan proceeds. PPP loans will continue to be at the rate of 2.5 times your monthly except for those in industries that Congress deemed more vulnerable during the pandemic. PPP loans will amount to 3.5 times the monthly payroll for businesses in industries such as the hospitality sector.

The legislation also includes extensions for numerous expiring tax provisions for both individuals and businesses. More information will be to come as the 5,600 page bill gets signed into law.

What Do We Do Now

Speak with your CFO/CPA/Advisor on next steps that your business should take to prepare for the application as well as long term effects. We are still awaiting official signing into law, however let’s be proactive and begin planning with the consideration of what financial institution to approach in the lending process.

Links to Legislative Source Text

The relief package’s tax provisions and the PPP extension appear in three separate bills that were part of the 5,500 page Consolidated Appropriations Act, 2021 as follows:

(1) The extension and modification of earlier Covid relief provisions from the Families First Act and the CARES Act are in the Covid-Related Tax Relief Act of 2020.

(2) The Paycheck Protection Program extension is in the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.

(3) Tax extenders and various other tax provisions are in the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

7 Advantages of Budgeting for Your Business

by

 

When you own a business, you’re responsible for maintaining its profitability. Otherwise, you risk tanking your company and everything you worked so hard to build.

This holds true for both large and small businesses. The good news is you don’t need a finance department to manage your budget. One option is to hire a business accounting expert to assist you.

With proper budgeting, you can ensure your business stays afloat financially. If you’re not already keeping track of your finances, then you’ll find the following helpful.

Let’s take a look at some of the advantages of budgeting for your business.

1. Promote Your Business’s Long-term Success

Operating your business on a day-to-day basis isn’t the way to success. You’re just bobbing and weaving and rolling with the punches as they come.

But what happens when a hit lands, knocking the wind out of your company? Bouncing back financially can prove difficult, if not impossible.

With budgeting, you’re taking the long-term success of your business into consideration. This way, even if you’re not meeting short-term goals, you can stay on the path to reaching your annual goals.

2. Know (Don’t Guess) the Profitability of Your Company

At the end of each year, you file business taxes. You can see after crunching all the numbers that you’re earning a profit.

But how and from where? With budgeting, you take a closer look at where the money flows in and out of your business. And with this analysis, you can identify expenses to cut back on and investments to make to drive forward profits.

3. Review Assumptions to Ensure Future Profits

When you first started your business, you included a list of assumptions in your plan. But these can change over time.

Re-evaluating assumptions makes it easier to forecast future revenue based on current conditions. Relying on old assumptions can potentially place your company in a stalemate.

So doing this regularly is critical to keep your business on the path towards profits.

4. Align Employee Performance with Business Goals

Your employees are the backbone of your business. As long as they’re performing well, your business will perform well.

So it’s vital to assess the performance of your employees to ensure they’re doing their best. The best way to guarantee this is to invest in their continued training and providing the tools and resources they need to succeed.

Make sure to give employee feedback routinely, so they know what improvements to make to boost productivity.

5. Better Plan Your Business Funding

It’s no secret — businesses rely on money to continue operating. This requires proper budgeting to determine how much money you can set aside and save. And how much you can dedicate towards investments.

Investing your business income is an excellent way to generate passive income for business operations. Your treasurer (or whoever runs your finances) will need to see budget plans to determine whether to invest in short-term or long-term accounts.

6. Determine Which Assets to Invest In

Speaking of investments, you’ll need to identify your business’s cash allocation to determine how much you’ll have to re-invest into your business. Your managers will have a better idea with a proper budget plan in place.

With this, they can see how much cash is available after expenses that can be used to invest in working capital and fixed assets.

Maybe this will be the year you expand your operations and open up another location.

7. Find Bottlenecks Holding Your Business Back

If you don’t look into your financial data, you’ll surely miss your cash flow’s underlying issues, such as bottlenecks.

With budgeting, you’re poring over finances and analyzing where money flows in and out (and how quickly). So you may notice a particular project, department, or other factor is eating up more money than it’s generating.

Use this time to decide whether to expand the capacity of the bottleneck so it can flow seamlessly. Or to find ways to work around it. You may even decide to eliminate the problem to free up cash to be used in more profitable areas of your business.

Start Budget Planning with the Help of Financial Experts

There’s no reason to dive into your finances with little to no knowledge of budgeting. Instead, you can use the assistance of financial experts well-versed in business accounting.

This is an optimal solution for small businesses that may not have a finance department on hand to rely on.

If you’re looking to start taking advantage of all budgeting has to offer, then get in touch with our team today!

Property Managers: How (& Why) You Need to Be Forecasting

by

Have you ever had a steady increase in rental income from your properties?

Each year, your occupancy rates grow, and with it, your revenue. Business is great.

But what happens when you start to see the opposite — a steady uptick in vacancies and decreased income?

Likely, you begin to wonder where you went wrong.

But rather than allowing situations like this to hinder your PM business, you need to become proactive. With forecasting, you can anticipate issues like this or even stop them from reoccurring.

If you’re not already using forecasting in your property management business, then it’s time to start.

Let’s take a look at how you can do so.

First, Why Should PMs Regular Forecast Revenue?

When you first come up with a business idea, what do you do?

You create a business plan filled with all sorts of research and data you gathered for your industry. With a business plan, you have a keen look into what it’ll take to build and grow your startup.

But what about after years of being in operation? Do you stop future planning?

Not at all.

With property management forecasting, you can stop being reactive and start being proactive. While we can’t always control how the market behaves (something COVID-19 has taught us), you can plan weather storms when they arise.

The beauty of forecasting is it enables you to understand how to improve future performance by looking back at historical data. For example, you can see what made certain years more profitable than other years, so you can duplicate that success.

What Components Are Needed for Proper Forecasting?

Forecasting isn’t magic — you can’t pull numbers out of thin air and expect to garner those results. The whole philosophy behind forecasting is pure data — and lots of it.

So let’s take a look at the necessary components for building a forecast (the right way).

Accuracy is Everything

Again, it all comes back to your data. Without data, it’s impossible to accurately forecast anything (vacancies, revenue, etc.).

So you need to be tracking all of this information, so you can go back and analyze each year under a microscope.

Use this information to determine seasonality and patterns that (negatively and positively) affect your income throughout the year.

Complete Outlook for Your Business

You know your property management company better than anyone else. Use this knowledge to paint an outlook that pertains to the specifics of your market.

For instance, a PM business with Airbnb rentals will look much different than an agency that hosts residents all-year-round. Those in the vacation rental industry will see more seasonality and may have larger disruptions when events like COVID-19 occur.

Use what you’ve learned over the years to depict what’s likely to happen in the near future.

Flexibility is Vital to Being Prepared

It doesn’t matter how much data you have — you may still get your forecasting wrong. There are many ways your year can change, so it’s critical to be flexible with your projections.

Be ready to shift your forecasts based on news and events that can impact your industry.

Realistic Isn’t Anti-Hope

Being realistic with your forecast numbers is vital to your success. While it’s good to have high hopes for your PM business’s performance, you don’t want to make your goals unachievable.

This will only set you up for failure, and when it happens, it’ll hurt your business ego.

So be sure your forecasts are realistically promising (based on past performance).

Use Multiple Scenarios

It’d be great if each year could go one way and one way only. But the pandemic has shown things can get ugly and fast at the drop of a hat.

And while it’s impossible to predict everything, you can put contingencies in place to ensure you’re prepared. For instance, your forecast should consist of multiple scenarios.

These scenarios will depict possible performance outcomes, which will prep you for good and hard times. One way to do this is to create forecasts based on past performance, alongside what’s happening currently.

Be Ready for (Almost) Whatever Comes Your Way

It’s not easy being a property manager. Fluctuations in occupancy rates and revenue can occur at any time.

But this is why it’s essential to collect data so you can pick up on trends and mistakes you can possibly avoid (or take advantage of) in the future.

If you need expert assistance with developing forecasts for your PM business, then get in touch with our financial experts today!

Strategic Planning & Advising for Small Businesses in Undeserved Communities

by

 

You decided to start a business in an underserved community. You’re playing you’re part in delivering the services or goods local residents need.

But what’s your long-term game plan for keeping your doors open?

Without proper strategic planning, you could find yourself struggling with finances, vision, and organizational alignment. This can turn into issues that could potentially disrupt your flow of business and shut you down.

So to prevent this, we strongly encourage you to consider professional strategic planning with experts.

Here’s a closer look at what this involves.

What is Strategic Planning?

Strategic planning involves documenting and establishing the direction of your small business. It covers all the aspects of your business, such as the vision, goals, mission, and values.

Its purpose is to provide your business with the organization it needs to operate optimally. With a well-written strategy, you can ensure your business stays focused on short-term and long-term goals, so you have a higher chance of meeting them.

What Are the Benefits of Strategic Planning?

Alright, so you know why having a strategic plan is essential. But how exactly does it help your small business succeed?

Here’s an overview of why you should seriously consider having one:

  • Provide clarity, direction, and focus, so everyone’s on the same page
  • Have a clear plan for everyone’s role and duties to achieve goals
  • Ensure your business stays aligned with its initial mission and displays this in all company messaging
  • Operate your business proactively (no reactively) so you’re always ahead
  • Boost the odds of your business lasting for many years

With the assistance of strategic advisors, you can get expert tips on how to turn your business into a success story you can be proud of.

Next, let’s review what’s involved in strategic planning.

3 Elements of Strategic Planning

When you decide to consult with a strategic planner and advisor, you’ll go through three critical steps:

  1. Defining your strategic goal. At the start of your meeting, you will cover what you want to do with your business. This includes going over how you’ll stand out among competitors, earn a profit, and various other factors to ensure success.
  2. Documenting your current status. At this stage, you’ll go over the present capabilities of your business. This includes the strengths and weaknesses, so you’ll know what needs adjustment and improvement.
  3. Creating a plan to reach your goals. Now that the advisor knows what you’re trying to achieve and your company’s current state, the planning begins. This will cover how you can overcome your weaknesses and improve your business.

In the end, you’ll have a complete (and documented) understanding of what needs to happen next to work towards success.

7 Key Components of a Strategic Plan

You’re ready to get the ball rolling for your strategic planning. But what should you include?

Here’s a breakdown of the elements you’ll find in strategic plans:

  1. Vision Statement: A description of how you envision your business, and it’ll help your staff understand what your company is all about.
  2. Core Values: A description of your company’s beliefs and behaviors (i.e., leadership, integrity, being human, shaping a better future, etc.).
  3. Long-term Goals: Determines how you’ll achieve your vision (within three to five years).
  4. Action Plans: Outlines the steps your business will take to achieve each of its goals.
  5. Mission Statement: Talks of what your business does, for whom, and how.
  6. SWOT Analysis: Stands for Strengths, Weaknesses, Opportunities, and Threats. It shows your position in your market, its competitors, and happenings.
  7. Annual Objectives: Shows your goals for the year and details how each will be achieved. These are broken down into short-term goals.

Working Together with a Strategic Planning Advisor

As a small business owner, you want your business to succeed. But there’s only one way to ensure this — to plan accordingly.

With the assistance of a strategic advisor, you can ensure you’re making the right moves for your business — both now and the future.

If you’re ready to discuss your small business’s goals and next steps, then reach out to us today!

 

How to Create a Cannabis Business Plan

by

 

You’re inspired to build your cannabis business from the ground up. You obtained your certificate to sell cannabis goods, and you may even have a few ideas of locations to set up shop.

But before you begin talking to a realtor or loan officer, you need to get your business strategy in order.

Let’s take a look at what it takes to create a successful cannabis business plan.

What to Do Before You Write Your Cannabis Business Plan

One of the trickiest parts of starting a cannabis business is finding the right real estate. For one, there are zoning restrictions across the nation that can prevent you from opening your shop doors.

So it’s imperative to look for realtors that specialize in commercial properties for cannabis operations. This way, you’ll know you’re purchasing a property that’s zoned for your type of business.

Now, you’ll have to decide whether you want to buy the property outright, rent it from a landlord, or lease the property at inflated rates and large deposit requests.

The latter is if you have not-so-great credit and want to get your foot in the door faster.

Just be sure to choose the location wisely. Don’t jump on the first opportunity that pops up. Check out the crime rates in the area — the last thing you need is to have your store broken into and looted.

Try to find several jurisdictions that allow cannabis sales, then narrow down your results based on safety, pricing, and ease of access for you (and your customers).

Find Out the Application Requirements

You’ll have to apply for a license to sell cannabis. The requirements vary based on the state and county you’ll operate in.

Your best bet is to visit the state regulator’s website to find out what the regulations are.

There may be certain fees, certifications, and other demands you’ll have to meet before you can jumpstart your business.

Start Writing Your Cannabis Business Plan

Alright, so you have a good idea of where you want to set up your location and what it takes to get approved for a license to operate.

Now, it’s time to put together your business plan.

Let’s take a look at what you’ll need to include.

Tweak it So it’s Specific to the Cannabis Industry

There are unique aspects you’ll need to cover in your business plan that isn’t typically discussed in traditional business plans.

For example, you’ll need to go over how the cannabis will be:

  • Cultivated
  • Manufactured
  • Transported
  • Sold

More specifically, what are the functions you tend to cover?

You’ll learn that a retail cannabis retailer and a transporter are two different industries. So you don’t want to get caught up in tax issues when it comes time to define your cannabis business and the taxes you’ll have to pay.

Discuss What Makes Your Cannabis Business Unique

The cannabis industry is booming with competitors eager to cash in. This means you’re going to have to find ways to stand out.

Are you going to set up your business in an area with no other dispensaries? Or maybe you’ll offer your product in edibles that no one else is doing.

You need to determine how both your brand and product will be unique.

Write Your Mission and Vision

What’s your reason for starting a cannabis business? And what is it you’re hoping to accomplish?

Your mission and vision statement will help guide your business plan and operations, so make sure it’s concise and convincing to the reader (loan officers, stakeholders, etc.).

Create a Market Snapshot

It’s good to know how your business will fare financially once it’s open. And while it’s impossible to predict your income exactly, you can get a good idea of what to expect.

With a market snapshot, you can discuss your path to success, analyze competitors, and compare your business to theirs.

If others are doing well, then odds are your business will have a chance to generate revenue.

Develop a Marketing Plan

How do you plan to get the word out about your business? Make sure you have an online and offline marketing strategy. For example, posting on social media, buying social ads, and building an email campaign are forms of digital marketing.

Business Operations Strategy

When you bring people on board to help run your cannabis business, it’s good to have a manual with standard operating procedures. Your overall strategy should cover things like:

  • How to manage inventory
  • How to perform critical tasks
  • Preventing fraud and theft
  • Who’s needed for your team
  • Level of cannabis experience required
  • Compliance with state, local, and fed laws
  • Securing insurance
  • Community benefits (creating jobs, unionizing, etc.)
  • Financial data, such as ROI, growth, etc.
  • Startup costs
  • And a separate business plan for investors

Don’t Go It Alone — Get Help from Cannabis Accounting Experts

There’s a lot of planning that goes into setting up your cannabis business. If you’re like most, you’re not familiar with the cannabis industry’s financial, tax, and regulatory aspects.

With the assistance of cannabis accounting experts, you can ensure you’re setting your business up for financial success.

Get in touch with us today to learn how we can help start your cannabis business.