How to survive the increasingly competitive cannabis industry
The cannabis industry is rapidly evolving
The U.S. cannabis industry is in a time of rapid transition—perceptions are changing, legalization is progressing, the market is growing, and regulations are constantly evolving.
Despite the U.S. market still being in its infancy, future legal changes (coupled by the rapidly growing number of entrants) will eventually thrust the industry into adulthood—and cannabis companies must be prepared for how these nationwide developments impact their business.
This impact is inevitable. Marijuana industry experts estimate our medical and recreational marijuana market is currently valued at $8.3 billion, and predict it will surge to $25 billion by 2025. In four years’ time, the U.S. cannabis industry is expected to deliver as many as 340,000 full-time jobs and make a nearly $80 billion economic impact. In fact, colleges now offer comprehensive cannabis certificate programs to prepare for the expansion of legalization and job opportunities.
Exciting, right? Well, the unfortunate truth is that it’s still not an easy road for many cannabis companies. North American public cannabis companies raised $394.1 million in January 2019 alone, but that number curtailed dramatically during the same time period in 2020. Much of the sector is now in a liquidity crunch, desperate to find additional capital, all the while new tax and regulatory changes add even more pressure.
How can cannabis companies survive in 2020 and beyond?
According to a recent MarketWatch report, big players like MedMen Enterprises Inc. have half a year’s worth of cash remaining, while Harvest Health & Recreation Inc. has roughly nine months of liquidity available. Access to capital is currently the greatest challenge for operators in the cannabis industry and regulations in both the U.S. and Canada have hindered the sector’s growth following a booming start to 2019. The good news is not all companies are struggling. According to Ello Capital’s analysis, Massachusetts-based Curaleaf has more than three years of cash remaining and Chicago-based Cresco Labs Inc. has more than two years available. So what’s their secret? How are some cannabis companies managing to survive?
Of course, a lot of factors come into play. It is safe to say that the normal economic rules that apply to mainstream businesses also apply to the cannabis industry. Even the best-designed businesses are no match for poor management, lack of technology, and the inability to be proactive instead of reactive. With the ongoing push of legalization and decriminalization driving market growth amidst the COVID-19 pandemic—and industry executives still predicting high growth in years to come—cannabis companies can and will succeed if they optimize operations with flexible technology. Matt Hawkins, chief executive of Entourage Effect Capital, says companies must “make every effort to be more efficient” in order to keep up. He emphasizes companies should explore innovation while “preserving margins.”
Okay, I know what you’re thinking; exploring innovation while preserving margins seems like an oxymoron, but many cannabis companies have an ace up their sleeves for surviving the turbulent industry. Now, there isn’t one silver bullet for success, but these cannabis executives are creating and strictly following a detailed digital operations strategy. Digital is key here, meaning breaking away from the old way of managing operations, like:
- Relying on repetitive manual tasks
- Keeping track of processes on paper forms
- Updating and sharing giant, complicated spreadsheets
- Tracking to-dos with emails
So, what does a digital operations strategy look like for a cannabis company? A proper digital operations plan means managing workflows and standard operating procedures (SOPs) with one piece of technology across the entire business, from cultivation, production, quality and compliance control, facilities management, sales, distribution, inventory, etc.
How can cannabis companies use technology to optimize their operations?
Technology remains the best lever for growth in transforming the way cannabis companies maximize their operations. The right software can facilitate efficiency and effective regulatory oversight. But simply rolling out new technology won’t work alone; businesses must start by optimizing workflows and processes. Optimizing your workflows is all about finding more efficient ways to manage time and resources. Because running a cannabis business is expensive— and even worse if you’re a multi-state operator struggling to scale—businesses need a low-code cannabis workflow software capable of growth and providing real-time data across multiple locations.
A successful digital operation means having access to critical data to help you gain control and visibility across the entire organization. Real-time access to accurate data allows executives to make informed decisions on how to direct the business —and with a click of a button, your low-code cannabis workflow software should provide immediate insights into:
- Cultivation and extraction
- Production capability, forecasting, and harvest predictions
- Quality and compliance control
- Facilities management
- Sales analytics and cash flow
- Order fulfillment and Distribution
- Raw material supply and inventory management
- A/P and A/R invoice and file management
- Third-party testing
- Employee training and accountability tracking
- Human resource and personnel file management
- Revenue forecasting
- And more
Imagine knowing which strains are performing better than others, what products need to be cut and why, what a detailed remediation history looks like, which teams are performing most efficiently and why, or even which areas of a grow facility are producing the highest quality of plants. Jon Marshall, former chief operating officer of The Clinic, a successful multi-state recreational and medical cannabis company, points out how important technology was for his business.
“Information is power, and the operational insights we’ve derived from real-time, granular-level analytics and reports have been invaluable to our organization. We can make decisions at a moment’s notice.”
Technology gives operators the power to acquire this information and then act on it in order to bolster the already thin margins that are difficult to overcome in this industry. The fruits of a digital operations strategy include increased productivity and profitability, a lower cost of operation, and economic growth — all highly desirable outcomes to any business, but especially to today’s cannabis industry.
Is process automation the future of cannabis?
Absolutely. Many industries have implemented new technology to update their processes so they don’t fall behind and cannabis is following suit. The result of using technology to automate processes and procedures is businesses become cost-efficient, timely and, most importantly, remain highly competitive. The right cannabis workflow software not only gives executives real-time visibility, but it also automates processes with step-by-step guidance through tasks to ensure processes are completed with the utmost care and quality. Plus, by automating these processes, problems that are typically caused by human error are mitigated.
The larger your business grows, the harder it is to keep up with inventory, sales, and staff. Automating manual tasks helps move work step by step, ensuring nothing gets overlooked or delayed. Low-code cannabis apps give executives more peace of mind, allowing them to set up custom thresholds, triggers, alerts, notifications, and approvals to keep work on track, on time, and well-documented. That’s why a digital operations strategy is so important. The right technology can unlock real-time data so you can monitor every process, automate prevention or corrective actions, and access a comprehensive audit trail within seconds.
How should cannabis companies evaluate technology partners?
Half the battle of implementing an effective digital operations strategy is evaluating different software solutions. This is especially difficult in a growing industry like cannabis, as many new vendors and partners attempt to break into the field.
Of course, having a successful track record in the industry with notable customer success stories is a great start, but keep in mind that just because a provider offered services since the early days of legalization, it does not mean they are the best available option. Reliability and security are paramount and often overlooked in the cannabis industry. If you’re evaluating a technology partner, it is critical to perform a thorough security analysis and overview while paying attention to key metrics around uptime, defects, and any relevant certifications. This may all seem obvious, but it is incredibly easy to get lost in the noise of all the new entrants flooding the market.
In an industry that is constantly changing and highly regulated, businesses shouldn’t roll the dice on unproven technology or they may risk potential compliance issues or downtime, resulting in lost revenue or a tarnished reputation. Choosing the right technology partner always starts at the top. Leaders must champion digital transformation in order to facilitate high adoption across the company. You’ll want a system capable of seamless integration with your POS and wholesale ordering software, but also compliments your state-mandated tools like Metrc and MJ Freeway.
Cannabis companies should also look for technology that offers native mobile and web-based capabilities. It’s imperative that teams have the ability to work anywhere, on any device, even when they’re offline. Low-code cannabis apps provide a unique advantage, offering additional workflow features like:
- Creating and scanning barcodes
- Taking pictures, recording audio notes, and adding geo-location tags
- Capturing signatures
- Real-time reports with customizable charts, graphs, and dashboards
How can cannabis companies improve quality, increase productivity, and drive efficiencies?
The short answer is technology, but having a technology partner with experience in and knowledge about your industry is key. At TrackVia, we consider ourselves lucky to work with successful businesses across the cannabis industry for over 5 years. Being headquartered in Denver, Colorado, we’ve gotten to see the industry evolve around us and across the U.S. first-hand.
After Colorado legalized marijuana recreationally in 2012, large indoor grows and retail shops were popping up all over and moving to the industrialization state. A few years later, the stigmas that existed around cannabis waned as larger companies exuded staying power and the industry took on a more professional air. Today, we are entering the age of modernization in the industry and helping businesses build their digital operations strategy from the ground up.
As money continues to pour into the industry from more traditional funding sources (private equity, venture capital, etc.) companies with the right infrastructure in place will succeed long-term. We like to use our partners at The Clinic as a great example of sustainability. They wanted to eliminate manual work and improve workflow processes, efficiencies, and productivity. After seeing the value of their first low-code cannabis application, they quickly expanded, and TrackVia now supports nearly 95% of their daily operations. They’ve saved 50 hours of labor every day due to productivity and efficiency gains, which translates to over $300,000 in cost savings annually.
Gone are the days where anyone with a grow shop could flourish in the wild west of weed. Today’s companies will continue to exude staying power and attract the funding required, by modernizing operations with software that makes them more efficient producers and sellers. From strong POS solutions in retail shops to reliable tracking software behind the scenes, having software and technology in place will allow your company to weather hard times in a volatile industry, and make it more attractive for acquisition, funding, expanding, or whatever goal you are hoping to achieve.
Are you interested in seeing how fast you can build and implement a low-code cannabis app? Check out our product sheet to learn more. If you’re ready to see a low-code cannabis app in action, request a demo. l promise it will surprise you.