How to Protect Your Cannabis Business Against a Recession

making your cannabis business recession proof

The United States is currently dealing with uncertain financial times. Inflation is at its highest in decades, interest rates have been rapidly rising, supply chain issues stemming from the COVID-19 pandemic are still impacting many industries, and the war in Ukraine is having a financial ripple effect throughout the world. With all these factors at play, it should come as no surprise that many leading economists have predicted a recession will hit the US economy by the end of 2022 or early 2023.

While we don’t know for certain whether a recession is on the horizon, it’s important to have a plan in place in the event that one does occur. There are a variety of steps you can take to help your business stay profitable during a recession. With a little proactive planning, you can significantly increase your chances of successfully navigating the challenging financial climate that may potentially lie ahead.

Is the Cannabis Industry Recession-Proof?

tips for making your cannabis business recession proofThe cannabis industry is still relatively young and wasn’t around during the last major recession in 2008, so there isn’t any historical data to help us predict exactly how an upcoming recession may impact the industry. Some experts seem to feel that the industry is relatively recession-proof, while others fear that it may be hit hard.

Experts that argue the cannabis industry is relatively recession-proof look to the alcohol industry as a guide for how cannabis will perform. Alcohol sales held relatively consistent during the 2008 recession and over the long term, sales increased. This is likely due to the fact that many individuals view alcohol as something that provides relaxation and stress relief, making it an expense worth keeping in their budget when money is tight. Cannabis is a similar mechanism for relaxation and stress relief, so many experts believe it will fare similarly to alcohol if a recession hits.

Other experts fear a recession will have a greater impact on the cannabis industry, citing a variety of factors to support their belief:

  • Prices are rising consistently
  • Cannabis operations are expensive to run
  • The industry is over-regulated to the point where it can be stifling to businesses
  • Business deductions are challenging due to IRS laws governing the cannabis industry
  • Lack of effective federal cannabis reform and widespread legalization weakens the industry as a whole

However, the experts who think the cannabis industry may be hit hard by recession also indicate that the impact may vary by state. States with emerging cannabis markets such as New York, New Jersey, Massachusetts, Illinois and Florida may fare better due to higher wholesale prices and less competition in their market. On the other hand, states with more mature cannabis markets such as Colorado, Washington, Oregon and California may be more severely impacted since businesses in these regions already deal with issues associated with declining wholesale prices, overproduction of many products, and a saturated market that creates fierce competition for customers.

6 Steps to Make Your Cannabis Business Recession-Proof

The following tips provide a good starting point to help protect your cannabis business in the event that a recession hits in the next few months. Keep in mind that the specific steps you’ll need to take will depend on the unique factors impacting the industry in your area.

Streamline Your Business

A positive cash flow is critical to the success of any cannabis business. Because cannabis is still a relatively new and emerging industry, many businesses have been able to spend freely to capitalize on expansion opportunities. While this free spending may help your business grow during a strong economy, it can create cash flow issues during a recession.

The best way to avoid this problem is to streamline your business. Look closely at all your expenses. Prioritize those which are critical to the growth and success of your business. Cut out expenses which may be deemed less necessary. Do the same with every aspect of your operations. Are there areas you can eliminate and still maintain your profitability? If so, you may want to cut out aspects of your business which aren’t turning a profit and focus all of your resources on those areas which generate the most revenue.

Re-Evaluate Your Vendor Contracts

While it may be possible to weather vendor contracts with unfavorable terms during a strong economy, these contracts can become financially crippling during a recession. Now is the time to examine all of your vendor contracts to identify any that have unfavorable terms for your business.

If it’s possible to terminate these agreements, you should put in your termination notice now and shop for a better contract with a different vendor. If you’re unable to get out of a bad contract, reach out to the vendor and see if you can renegotiate some of the terms which may place a financial strain on your business if a recession hits.

Review Your Inventory Management

Reigning in your inventory costs can provide significant savings and help you remain profitable during a recession – as long as you’re not sacrificing the quality of your product mix in the process. Conduct a thorough review of your inventory management to:

  • Identify items which you’re ordering in too large a quantity
  • Determine products which you may be able to source at a better price
  • Re-evaluate your inventory par levels to make sure you can stay on top of ordering and shop for the best deals

Revisit Your Product Mix

evaluate your cannabis product mix to make your dispensary recession proofDuring a recession, it’s crucial that you offer the right products for your customer base. For example, a cannabis business in an affluent area may be able to maintain a higher sales volume of premium cannabis products during a recession. These customers will still have money to spend on cannabis and value quality over cost. In these situations, offering premium clean green cannabis products can differentiate you from your competitors and gain a larger share of this quality-oriented customer base.

However, cannabis businesses with a lower socio-economic demographic may find that focusing on lower and mid-tier products will appeal more to a price-conscious customer base that has been hit hard by the recession and has less money to spend on cannabis.

You should also identify which products don’t perform well and phase these out of your product mix. Cutting back your offerings and focusing only on the products which perform well can help you stay lean and profitable during a recession.

Maintain the Loyalty of Your Existing Customer Base

Maintaining a loyal customer base is critical during a recession. These customers provide an easy opportunity to increase sales without heavily investing in efforts focused on bringing in new business. During tough economic times, customers are more likely to shop around to find the business offering them the best deal. Therefore, you need to make your existing customers know how much you value them.

There are several ways to accomplish this:

  • Rewards programs – Offering a rewards program is a great way to cultivate repeat business. If customers know their loyalty will be rewarded with a free or discounted item after a certain number of visits, they are more likely to keep coming back.
  • Specials – Everyone loves a deal. Consider offering daily, weekly or monthly specials for some of your most popular products, giving your customer base an incentive to keep purchasing these items from your store.
  • Customer service – Providing excellent customer service is one of the easiest ways to differentiate your business from your competitors and show your customers that you truly care about them. Identify the needs of your customer base, and go above and beyond to meet these needs. Keep your customers happy and they will keep coming back to you.

Invest in Marketing

Many businesses will look for opportunities to reduce their costs during a recession. While this is sound thinking in general, it’s important to be critical of the areas where you reduce your budget. Often, marketing budgets are one of the first places businesses will make cuts during a recession. However, this is one of the biggest mistakes you can make.

A recession is the time where your business needs effective marketing the most. Customers are looking to make changes in their buying decisions in order to better optimize their limited funds. Make sure your business is top of mind at a time when customer loyalty tends to wane. Stepping up your marketing efforts during a recession will help potential customers become aware of your offerings and let them know what differentiates you from your competitors. This can help you attract new customers at a time when your competitors are losing them.

American Cannabis Company Can Help Your Business Navigate a Recession

Navigating a recession is challenging for any cannabis business, and it can be helpful to have the guidance of an experienced cannabis consultant who can identify the most important steps necessary to make your business recession-proof. American Cannabis Company has extensive experience providing robust cannabis consulting services nationwide. We understand the ways in which state regulations impact your business, and we can help you devise a plan that will allow you to remain successful during an economic downturn.

As the nation’s leading cannabis consultants, American Cannabis Company has the proven track record you need to realize the full potential of your business. Our data-driven approach to industry success enables us to conduct a comprehensive evaluation of your operations and identify the specific actions that will be most impactful in moving your business forward. Our team of cannabis consultants will provide detailed recommendations on the steps you need to take to ensure your business is prepared for the upcoming recession.

Contact us to schedule a free consultation.

6 Benefits of Working with a Cannabis Consulting Company

cannabis consulting company

Why You Need a Cannabis Business Consultant

The cannabis industry continues to grow rapidly, with new states legalizing recreational and medical marijuana each year. While there are more opportunities to open a cannabis business than ever before, there are many legal hurdles to navigate, and competition is fierce within every sector of the industry. While it is possible to run a successful operation by going it alone, it is often beneficial to work with an experienced cannabis consulting company who can guide you through many of the difficult business decisions that lie ahead.

Whether you’re starting a new cannabis operation or a grizzled veteran who has been in the industry for years, there are numerous pitfalls that can potentially derail your business. Working with a cannabis consulting company can help you avoid these pitfalls while helping you make your operations more efficient. When you choose the right consulting professionals, you can set your business up for success for years to come.

Discover 6 important benefits you’ll experience when you work with a cannabis consulting company.

1.    Remain Compliant with the Latest Cannabis Laws in Your State

remain compliant with state cannabis laws
6 Benefits of Working with a Cannabis Consulting Company

Cannabis laws are constantly evolving, making it difficult to remain compliant. There are laws governing every aspect of the industry. Whether you’re applying for a cannabis license, setting up a retail store, opening a commercial grow facility, marketing your business, or packaging and storing cannabis products, there are regulations in place that must be adhered to. Failure to remain compliant with the latest laws and policies can result in costly fines and other consequences which may be devastating to your business.

An experienced cannabis consultant can help you navigate these changing laws. Your consultant will stay on top of the latest federal, state and local laws so that you can focus your energy on other aspects of running your business. When new regulations are being proposed, you’ll know ahead of time. This knowledge allows you to be proactive and prepare well in advance of the new laws going into effect rather than being reactive and having to scramble at the last minute to ensure you remain compliant.

2.    Strengthen Your Candidacy for Licensure

There is often a tremendous amount of competition for a limited number of cannabis licenses when states launch medical and recreational programs. There are strict requirements that must be followed at every stage of the application process, and you must document just about every aspect of your proposed business. You may be asked to submit information regarding:

  • Business plans
  • Standard operating procedures
  • Sources of funding
  • A physical location for your business

To make the process more challenging, the licensure requirements vary from state to state. An experienced cannabis consulting company will know the specific licensing requirements associated with your application and be able to guide you through the entire process. This will significantly increase your likelihood of having your application approved.

3.    Set Your New Business Up for Success

Setting up a new business is always a complicated process, but it is particularly challenging in the cannabis industry. There are many aspects of the process that must be evaluated, and the complex regulations governing the industry must be adhered to at all times. An experienced cannabis consultant can help you grapple with important issues such as:

  • Establishing your brand messaging
  • Choosing the location for your new business
  • Determining the right size for your retail store or grow facility
  • Designing the layout of your store and choosing an aesthetic that aligns with your brand
  • Choosing the right suite of cannabis technology to manage your operations and provide all documentation required by state regulations
  • Making sure you have proper insurance coverage
  • Establishing a business model that is easily scalable as you grow
  • Navigating the complex tax laws that apply to cannabis businesses
  • Hiring the right members for your executive team
  • Choosing the proper channels to market your new business

The consequences for making the wrong decisions on many of these matters can be devastating for your business. A cannabis consultant will take the time to understand your business goals in order to guide you through the decision-making process. This will help set your new business up for sustained success.

4.    Speed Up Your Learning Curve

cannabis consultants provide industry education
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The tremendous growth potential associated with the cannabis industry has attracted a lot of bright and talented business professionals from other industries who are looking to shift gears in their career. While many of these individuals have experienced a great deal of success in their previous ventures, they often find that starting a cannabis business is a completely different beast. There is a tremendous amount to learn about the industry.

There are many technical aspects associated with the products offered by a cannabis business. In order to provide the highest quality products and have the ability to educate your customers on their options, you will need to navigate a steep learning curve. A cannabis consultant has a deep knowledge of all aspects of the industry and can help you get up to speed much quicker than is possible if you have to figure everything out on your own.

5.    Expand Your Network and Leverage Important Cannabis Industry Connections

Whether you’re starting a new cannabis business or trying to expand an existing company into different areas of the industry, you’ll need the assistance of others to achieve your goals. Your cannabis consultant will have wide range of industry connections that you can leverage based on your specific needs.

For example, if you run a grow operation that has developed a new high-end strain, will you know which dispensaries have the customer base looking for the quality you provide? If you place this strain in dispensaries with more budget-conscious consumers, it may not be the right fit. Your cannabis consultant can connect you with the right retail partners for your new strain.

If you run a retail store, you will need to establish relationships with a variety of wholesale partners. How will you know which wholesalers to do business with? Your cannabis consultant to can put you in touch with the right providers to deliver the products you need while helping you get the best possible deal.

6.    Identify Emerging Opportunities to Pursue

The cannabis industry is constantly evolving. State regulations are always changing, new technologies are being implemented, new products are being developed, and consumer trends change over time. It can be both challenging and time-consuming to stay on top of these developments as they arise.

Your cannabis consulting company will have their finger on the pulse of the industry. They are always monitoring new products, technology and trends. They also stay current on the latest laws and regulations. This knowledge is invaluable as you try to evaluate new potential opportunities that will help your business grow.

American Cannabis Company Can Set Your Business Up for Success

American Cannabis Company provides comprehensive cannabis consulting services. Whether you are a new business applying for a cannabis license and setting up your operations or an existing business seeking to expand, we can position you for success.

ACC has extensive experience working in the cannabis industry – from retail stores to commercial grow operations. We know the specific laws governing the cannabis industry in every state, and we can make specific recommendations that will align with your business goals.

Contact us to schedule a free consultation. American Cannabis Company serves clients nationwide.

Arizona Cannabis Legalization: What You Need to Know

Arizona highway sign with cannabis leaf - Arizona cannabis legalization

Arizona passed Proposition 207, the Smart and Safe Act, during the November 2020 election to legalize the recreational use of cannabis alongside with the medical cannabis program established in 2010. On January 22, 2021, the Arizona Department of Health Services (ADHS) began approving applications for which dispensaries have already opened for business. The speed for which this process was completed makes Arizona the fastest state to successfully launch their cannabis program.

While the program is already underway, there are many rules and regulations which must be followed before you can open a dispensary. The following information will provide an overview of Proposition 207, including what you need to know if you are planning on entering and operating in Arizona’s new recreational cannabis industry.

Purchasing Cannabis

According to the new law, adults who are at least 21 years old can legally purchase cannabis products from a nonprofit state licensed dispensary. A wide range of products will be available for purchase, including flower, extracts, edibles, salves, topicals and capsules.

Proposition 207 allows individuals to:

  • Purchase up to 1 ounce (28 grams) of cannabis with no more than 5 grams in the form of concentrates
  • Cultivate up to six (6) cannabis plants at their primary residence

All recreational cannabis purchases are subject to a 16% sales tax. While delivery services are available for medical cannabis patients, these services will not be offered for recreational cannabis customers at this time.

As part of the state’s medical cannabis program, patients can purchase up to 2.5 ounces (70 grams) in a 14-day period. There is a state-provided tracking system used by all dispensaries to ensure these limits are adhered to. Medical cannabis purchases are subject to a 6.6% state tax and each city is entitled to levy an additional tax of 2-3% if they desire.

Cannabis Licensure in Arizona

The ADHS is responsible for issuing licenses to businesses interested in opening a new dispensary. The following rules have been established to govern the licensure process:

  • Application submissions for a cannabis establishment license (recreational dispensary license) started being processed on January 19, 2020
  • No more than two (2) recreational dispensary licenses will be issued in counties without medical cannabis dispensaries
  • If a county already has a medical dispensary, only one recreational dispensary license will be issued
  • Medical dispensaries that are issued a recreational license will be able to operate both aspects of their business from the same location

Upon receiving a license from the ADHS, a business will be permitted to operate:

  • A single retail location that sells, cultivates and manufactures cannabis products
  • A single off-site cultivation facility which can be used to cultivate and manufacture cannabis products, but not sell them to the public
  • A single off-site location that manufactures, packages and stores cannabis products, but does not sell them to consumers

Social Equity Ownership Program

The ADHS is allowed to issue 26 licenses to applicants who qualify under the Social Equity Ownership Program. This program is being created to promote the ownership of cannabis businesses by people who have been disproportionately impacted by the enforcement of prior cannabis laws. Applications for these special licenses will start being accepted within six (6) months of finalizing the rules of the Social Equity Ownership Program. Currently, there is no timeline for establishing the rules associated with this program.

Cannabis Facility Agent Licenses

In order to work for a cannabis business or testing facility, individuals must obtain a Facility Agent License. Only one facility agent license is required per person and will permit those individuals to work at multiple cannabis businesses or testing facilities.

In order to obtain a Facility Agent License, you must:

  • Be 21 or older
  • Have not been convicted of an excluded felony offense

American Cannabis Company can Help Establish your New Business

Setting up a new cannabis business can be more complicated than you would expect. As there are many legal hurdles to navigate, it is important to have the help of an experienced cannabis consultant who can successfully guide you through the process and ensure your new business is set up for long term success and position itself as a leader in Arizona’s fledgling recreational cannabis industry.

At American Cannabis Company, we have been helping entrepreneurs just like you navigate the waters of establishing new cannabis businesses in each market across the country. Our unique License Right Approach™ is specifically designed to help you obtain a cannabis license and build a foundation for a successful business.

As part of our exclusive approach, you will receive:

  • The proper guidance necessary to ensure you adhere to all Arizona regulations
  • A detailed explanation of the opportunities available that align with your specific business goals
  • Cohesive and comprehensive business planning
  • Our exclusive Green Profits Operations Roadmap™ to help you realize the full potential of your business
  • Our Aligned Success Guarantee™

When you work with ACC, you can count on receiving a flexible approach that puts your unique needs and goals at the forefront. We will help you build your business from the ground up and establish a framework that can help you grow in the burgeoning Arizona cannabis landscape.

Schedule a Consultation

Please contact us today to schedule a consultation. We provide cannabis consulting services nationwide.