The cannabis business is tough. Across the nation in states with more open licensing schemes, supply is rising and prices are coming in fast. Competition is ever increasing, consumers are demanding higher quality products, and profit margins are being eviscerated.

Many operations are struggling with sales velocity, compliance costs are rising, and with new tax, labor, environmental and regulatory requirements, many operating in the farming space, are failing, fast.

This piece will summarize an oral presentation I give designed to help farmers achieve financial success despite the challenges listed above. This 9-point plan, if taken seriously and executed well, can help you not only survive but thrive in what promises to be an increasingly crowded space.

Understand the Operating Environment

Cannabis cultivation entails significant risk but offers significant opportunity as well. As has been argued for years, bulk flower prices are heading in one direction – down. In all likelihood, this trend will continue and prices will eventually find equilibrium – presumably at much lower levels. Without high volume and very low production costs, playing the bulk sales game will ultimately collapse most farms.

The alternative, acquiring shelf space and selling packaged products at the retail level still evades most farms. Large vertically integrated companies grow, package, and sell flower through their own storefronts. Other well-heeled operations pay slotting fees to acquire shelf space or employ regional sales reps and brand ambassadors to tell their story, create retail relationships, and move packaged products with higher margins.

In addition, thousands of small operators are seeking the same prize, either through their own label or a white labeling agreement with a copacker. At the end of the day, competition for valuable shelf space is significant and will only increase in time. To succeed in this endeavor a cultivator must understand retail and consumer needs, and meet those needs better than others – either through quality, specialization or price point.

What can you do to help retailers improve margins? Can you deliver a product that is so smoking hot and in such high demand that retail foot traffic and sales improve in the stores carrying your merchandise? If you can, prices will firm significantly and your cultivation operation will flourish. Taken one step further, imagine a scenario where across the nation everyone is demanding your stuff… a truly viral situation where folks are talking about and singing about your flower or extract. Prices for that label will melt upward, to levels only dreamed about previously. Will that label be yours?

Conduct a Feasibility Study

Given your skill set, expenses, and product focus, can you function in a paradigm of rising costs, falling prices, and ever-increasing competition? Given the marketplace we actually have, can you pay the bills with bulk sales or by growing flash frozen? Can you maintain the size of your current operation, or could you reduce your cultivation footprint in an effort to control costs and improve quality?

Cultivators of all sizes are faced with the same questions. As we have seen from our neighbors to the north, even large corporations are scaling back their cultivation footprint and right-sizing their operations to focus more on quality and less on volume.

How long can you hold out? Can your operation sustain losses for a few years, hoping for better days ahead with national and global markets, or does getting out now make more financial sense?

Being realistic about business is critical for cultivators. While the current realities in Cali cannabis are sobering to say the very least, maintaining unrealistic expectations does not serve anyone well … it can also break the bank.

Some believe that this year will clear the deck in Cali, meaning that so many operators are going to shut down that supply will slack off and prices will firm. I personally believe that new developments currently underway will more than offset farm closures and also believe that distressed asset sales will only bring new entrants to market. Some of the largest MSO’s have a modest footprint in the Golden State and I assume they are simply waiting for a better entry point. Only time will tell.

Professionalize and Formalize Your Operation

I wrote a column on this point a few months ago and the feedback was overwhelmingly positive. Regardless of size or resources, we can all improve our businesses by professionalizing and formalizing our operations. Here in Humboldt, there are plenty of free resources available to small business owners – business planning, budgeting, marketing, and operational assistance are available, for free. Regardless of formal education or experience, we can all create a mission and vision statement, identify our target market, and craft our product offering appropriately.

Perhaps your cannabis play is in the area of health and wellness, perhaps it’s medicinal, or recreational. The marketplace needs to know where your heart is. Maybe you grow because you believe in cannabis as a tool for harm reduction. Maybe it’s to help people manage health issues or simply to improve people’s overall sense of well-being.

Whatever the case may be for you, the market needs to connect with your offering and understand how your products are uniquely positioned to help them. Maybe it’s the terpene content of a strain you have bred – perhaps it helps combat nausea or inflammation better than other strains on the market. Maybe it’s the taste, smell, or cannabinoid content that differentiates. Whatever the case may be, showing how your product is different and useful will help you rise above the competition and carve out a lasting niche in the business we love.

Focus on the Profit Function

The profit function is one of the most fundamental concepts in business. Revenue minus costs = profit. Clearly understanding your farm’s sources of income and understanding your company’s costs in exquisite detail is a must.

Where will you be selling flower or biomass? To who and for what price? How much does it cost you to grow a pound? Let’s not forget that many farms operated without a formal budget for years. Few farms were aggregating expenses or using accounting software – the money was flowing freely and every dollar invested in a farm had a huge return for years.

As things have tightened up, understanding where every penny comes from and where every penny goes is a must. Working with a competent bookkeeper or CPA, tracking expenses with accounting software like QuickBooks, and forecasting the timing and amount of revenues is critical for your operation.

Have you secured a forward or contractual arrangement for your flower ahead of time, or are you growing flower and hoping it sells? Contractual arrangements can help provide security to your operation and help immensely with budgeting and forecasting.

By having a realistic and accurate understanding of revenue and costs, you can make a more informed decision around whether or not continuing in business makes sense. The last thing you want is to bite off more than you can chew…spending money to produce a product you can’t sell. That leads to wealth erosion, enormous stress, and bankruptcy. Do the hard work. Understand your business’s finances in excruciating detail and you will be more informed and able to operate from a place of knowledge and strength.

Understand Developing Resources & Stay Connected and Informed

Our industry is developing rapidly. Getting plugged into industry data and developing resources can empower you, improve cultivation outcomes, and drive profitability for your business. Online chat rooms, industry events, informational sources, and developing sales platforms are coming online with greater frequency. Meeting others throughout the supply chain, sharing technology and resources, and upping one’s business and cultivation skills has never been easier.

Social media platforms like Linkedin and others are ripe with opportunities for collaboration, knowledge sharing, and mutually beneficial business relationships. Resources like the Elevated Botanist publish high-quality cultivation pieces that can help you up your skills in the dirt and boost production.

The days of hiding in the hills are over. Companies that are well informed, well connected, and adept at forming business relationships will have far greater success and staying power than those who isolate or go it alone. Becoming a resource for others, participating in collaborative projects, and asking for help when needed are skills we can all learn and benefit from.

Our industry is developing rapidly. New discoveries about plant care, business management, and effective marketing are hitting the street regularly. Make sure you are in the know and that you seek information regularly – it can make a world of difference.

Work Smarter (and Maybe Harder Too)

Systematizing your operation in an effort to produce predictably amazing and consistent results is a must. Documentation and systems creation are hugely important in creating a well-functioning company. Killing it one run and bellyflopping the next happens in cultivation regularly. Creating a winning process and executing it precisely and consistently is a must – especially in an environment of declining margins.

Putting in the time necessary to be successful is also increasingly important. Unfortunately, farming is not an industry well known for work-life balance. Cultivating cannabis successfully, especially at some scale is a real grind. It takes commitment, energy, passion, consistency, and physical sacrifice.

Cutting corners, working 4–6-hour days, and relying on others to do work for you is not going to cut it in the current paradigm. Sweating it out, working sacrificially, and honoring those who help you along the way are critical.

Be Thankful and Honor the Plant

Working with the plant is a blessing, remember that always and behave according. Allowing pests and pathogens to overwhelm your garden, growing spindly sick-looking plants, failing to shape, bottom, and core your ladies, and simply neglecting them out of laziness are all recipes for disaster. Growing lush, stumpy plants with heavy, beautiful flowers is the best way to succeed in cultivation these days. That doesn’t happen by itself.

Touching the plant regularly, giving her what she wants when she wants it, and honoring the cultivation process and your natural surroundings will bring better energy to your farm and help improve results.

Care For Yourself Physically and Mentally

Farming cannabis is not for the faint at heart. Physical and mental strength are important for longevity and success in this business. Drug and alcohol use, being out of shape, and failing to sleep well will not serve you well as a cultivator or cannabis business owner. Caring for your body and your mind will help you operate at a higher level and will help you perform at your best, month after month, year after year.

Exercising, eating well, getting enough sleep, and caring for yourself emotionally and spiritually will carry over and improve your performance in the garden. Stress, burnout, emotional instability, and substance abuse will inhibit your efforts and will show up in terms of lackluster production and product quality.

Farming ganja is a marathon, not a sprint. Producing larger volumes of high-quality cannabis does not happen by itself. It takes commitment, love, passion, strength, and physical/mental endurance. Remember that and live well.

Manage Business and Personal Finances Prudently

Regardless of company size, margins for California cannabis operators are slim. Solidifying company financials through cost control, budgeting, forecasting, and documentation is critical. Understanding the financial health of your company is a must and working with competent advisors and strategic partners who can help improve financial performance is highly recommended.

Undergoing a personal financial planning process is recommended for cultivators as well. While personal and company financials are often highly intertwined for smaller operators, knowing where you stand financially can help inform your business decisions. For those in a stronger place financially, investing in infrastructure and continuing to fight the fight may make more sense.

For those struggling on a personal level, closing up shop and entering another profession with benefits and a retirement package is likely the prudent choice.

Farming ganja was highly profitable for years. Many people in the Emerald Triangle stacked millions of dollars over the past decades, but that is more challenging these days. Managing your company prudently, upping quality and production, and creating winning business relationships will separate the winners from the losers. Authenticity, storytelling, connecting with consumers and retail partners, and product differentiation are necessary to survive and thrive in highly competitive markets. Take steps each day to improve your performance, create new relationships, and learn new skills. While getting out there and exposing yourself to new ideas and potential rejection can be scary for some, it’s necessary in today’s business climate. Go get yours!

I am rooting for us all,

Much love,

Jesse

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Jesse Duncan is a lifelong Humboldt County resident, a father of six, a retired financial advisor, and a full-time commercial cannabis grower. He is also the creator of NorCal Financial and Cannabis Consulting, a no-cost platform that helps small farmers improve their cultivation, business, and financial skills. Please check out his blog at, his Instagram at jesse_duncann, and connect with him on Linkedin.