3 Common Mistakes Cultivation Businesses Make

January 10, 2017

The new year is upon us, and as many of us use this time to reflect, I took some time to do the same. While we’ve seen many cultivation businesses survive and thrive, we have seen too many businesses come and go, while others teeter in the balance.

Often, reflection can help us see where we went wrong. Thinking about all the cultivators who have shared with us their lessons learned, I would like to share some common mistakes we’ve heard cultivators make in launching or running their businesses:

1. Not assessing the market potential. Before investing tens or hundreds of thousands of dollars or more launching a legal cultivation business, determining the size of the market you can serve is essential. Some factors to consider: If it’s a medical program, how many qualifying conditions are there? (The more conditions, the larger the market potential.) How difficult is it for patients and doctors to register? (The more difficult and the longer patients and doctors have to wait, the longer it will take for the market to grow.) How many cultivators and dispensaries will be licensed? If the number of growers is disproportionate to the number of dispensaries, supply may seriously outweigh demand, as in Washington where there are 350 retailers and 1,022 producer/processors, per 502data.com, creating a very challenging market for cultivators.

2. Not having enough capital to possibly “wait out” a new market, as regulations are often delayed. As an extreme example, but a true cautionary tale, Hawaii’s medical marijuana market became legal in 2000, but it took 16 years before the state licensed its first cultivators and dispensaries. A less extreme example is North Dakota, which voted to legalize medical marijuana in November 2016. Cannabis business hopefuls and patients did not see the new law take effect Dec. 8, as the law specified, because officials said they needed an undetermined amount of additional time to navigate what they said were confusing provisions in the law.

3. Not tracking data, nor working to reduce labor and increase profit margins. The cannabis market is getting increasingly competitive. Maximizing efficiencies to reduce labor and costs, and increasing profit margins will mean the success or failure of many businesses, as will tracking data so you know which variables are weighing down or helping your operation.

The good news is that we will be bringing you even more content as we increase our frequency from 6 issues to 12 monthly issues this year. We also will be holding our first cultivation conference, Cannabis 2017, in March in Oakland, Calif. I will see many of you there.

As always, I welcome feedback on our editorial content and issues you are facing in your business and/or grow that we can help with through our content. And I’d like to thank you for being a valued reader and/or advertiser, supporting us through our launch and being instrumental in our rapid growth.

Happy New Year!