5 steps every cannabis business needs to take to ensure that not only it survives but it thrives. With everything changing so quickly due to COVID-19 many businesses are getting hit hard. Times are rough right now, but there are always things you can take action on to improve your cannabis business. We are all stressed right now, but you can use this crisis to improve your business and to come out stronger.
Our goal is to make this post as actionable as possible to give us all the best chance of staying in business and saving jobs.
Let’s get started.
1. Cash Flow Keeps You in Cannabis Business
Businesses don’t fail because they don’t make a profit. They fail because they run out of cash. Cannabis products are already challenging for cashflows, to begin with. During these trying times, it is going to become even more make or break. The best way to stay on top of your cash flow is to improve your sales and cash flow projections.
You need to diligently project out your cash inflows and outflows for the next 3-6 months in order to identify times when you may need to find some solutions to stay cash flow positive and avoid going out of cannabis business. In these times of uncertainty and with things changing daily, you need to update your cash flow projections every week as sales projections change.
There is no point to make cash flow projections if they aren’t accurate. When you make your projections, professionalism and presentation matter.
This is because you can leverage sales projections to get better payment terms with your suppliers.
If you can show them your sales projections for your marijuana business, you approach them as a partner. They want you to stay in business just as much as you do. Your projections have to be accurate and believable by your partners otherwise there is no point. Don’t try to hack it together yourself or with an untrained employee. Get help from someone with experience.
ACTION: Create at least a three-month Crisis Cash Flow Projections taking into account any anticipated changes in your business.
Review and update every week to give you the best chance to keep your business alive!.
2. Leverage New Credit Cards and Financing Options to Boost Your Cash Flow
There are new credit cards and payment methods that have been launched in the last few years that you can leverage to alleviate any cash flow issues.
Next, sign up for Plastiq which allows you to pay almost any bill with your credit card, for only a 2.5% fee.
The Plastiq combo can be really powerful and save your cannabis business in tight times. ???
In times like this, it can be easy to panic. But you are smart and capable, and you can use this as an opportunity to make improvements to your business.
ACTION: Sign up for Plastiq to give yourself a needed cash flow boost.
3. Get Clarity on Your Financials
The economy is about to take a hit in major and uncertain ways. You will need to know your numbers in order to survive. If you are following our recommendations you will already have your cash flow reports up to date. Now it’s time to go even deeper to prepare your business to survive and then thrive!
This is the foundation for everything and needs to be done. At a minimum, you must get your bookkeeping in order. Prepare your Profit and Loss statements and Balance Sheet.
This will open you up to options that may be necessary to survive and give you the clarity you need to make important decisions. Also, many lenders and your vendors will feel much more confident in your cannabis business if you have these documents.
In order to be eligible for loans and acquisition, your finances need to be done completely and correctly.
With uncertain times ahead you don’t want to be caught in a situation where you need a loan badly but can’t get it because your books are incomplete or incorrect.
Given the regulatory nature of the cannabis marketplace, it is crucial that your bookkeeper specifically understands the cannabis industry.
We said it before, but the best way to ensure you are on top of what you need is working on getting your cash flow reports up to date, consult with a Cannabis business experienced bookkeeper or accountant.
If you don’t have one, send us a message and our team will find you an accounting partner for free. You can find our contact information on this page.
Once you have clarity on your financials, you can dive into your numbers to find opportunities to increase profits which may be critical for your survival.
If you are unsure, consult with an accounting professional.
4. Ruthless Expense Reduction
Once you have clear optics on your finances, you can move into attack mode. Bloated businesses will not survive. So, you need to examine and cut down all unnecessary expenses.
What can be cut? What can be renegotiated? Start with your biggest expenses because those will have the biggest impact on your bottom line. Ruthlessly review your last few months of bank and credit card statements, noting every expense that isn’t 100% necessary. Then, cut it. If you don’t want to review these things yourself, then get the help of a diligent person who can do it for you.
ACTION: Review your last months’ P/L, bank statements and credit card charges and cut anything that is not completely necessary for your cannabis business.
5. Efficient Inventory Management
Holding efficient inventory will allow you to minimize your invested capital so you can save your cash flow. The goal is to hold the least amount of inventory necessary while still avoiding going out of stock. So how do you hold efficient inventory and stay in stock?
- Get in front of your supply chain management. This means having a good reorder tracker and sales projections in place to project your future needs.
- Closely monitor how much inventory you currently have, the velocity that your inventory is moving, days left in stock, how long reorders take, etc.
That will provide you the insight you need to make orders when you need to stay in stock yet not have cash tied up with excess inventory.
ACTION: Create a reorder tracker and sync with your sales projections. Update and review weekly.
So there you have it. 5 steps to take action on NOW to give your cannabis business the best chance of surviving during any crisis.
What do you think? Anything else you can do? Please share with anyone you think this may be able to help.
We are all in this together. To save our businesses and save jobs.