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.