“Open Your Eyes” by new 1lluminati via Flickr.com.
One of the interesting things I notice about the cannabis industry is that there seems to be two distinct categories of business owners: the really dedicated pot culture crowd and the new breed of entrepreneurs looking to make money in this highly competitive, market-driven industry. And these groups appear to be completely out of sync.
It’s not to say that “traditional” marijuana cultivation techniques are incompatible with the new, legal business. But there are unquestionably some operators that have been running into problems because they’ve followed an outdated business model that relied upon 80% profit margins, no taxes, no business license, no lease and no insurance.
Recent visits to two large controlled-environment agriculture trade shows — Cultivate in Columbus, Ohio, and Farwest in Portland, Oregon — have convinced me that stoner magazines are leading growers on a path toward bankruptcy in a high-cost business with rapidly advancing competition.
I believe there is room for indoor production, outdoor cultivation, greenhouses, artisan manufacturers and large-scale commercial operators in this emerging industry. However, a facility that is not carefully managed from seed to sale is not likely to survive in an era of taxes, regulations and fierce competition. The good news is that some cultivators are learning fast. They’re going to the big agriculture shows and seeking advice from professionals with real credentials and experience.
As I’ve said before (and still believe), the “master grower” with 10 years of experience at growing weed in his basement is about as relevant to a modern day, high-tech, legal cannabis production facility as a horse and buggy would be to big city transportation needs. (Read more about common mistakes in commercial marijuana production on Page XX.)
Also, let me relate to you a conversation I had with a gentleman who had founded one of the larger cannabis business organizations. At the time, Marijuana Venture was barely a couple months old, and we met to discuss our visions and possible partnership opportunities. One of the first things he said was that his organization was dedicated to keeping marijuana cultivation out of the hands of big business. He believed that in order for marijuana to be successful, it should always be grown by small, family-style farms and artisan producers.
After the meeting, my editor and I talked about how we felt his utopian vision of a mom-and-pop cannabis industry was not just a dream, but completely unrealistic.
In a capitalist country like the USA, if people are allowed to produce cannabis for maximum profitability like any other crop, the likelihood of poorly run, prohibition-era grow models surviving is next to nil.
After all, this is America. Capitalism — yes, even in the new marijuana industry! — rewards great business plans and buries the unprepared and underfunded. Small businesses can succeed, but you have to know how to “sharpen your pencil” when you need to.
One final note: I’ve received a lot of calls and emails lately from people looking to buy grow licenses. Most of these people would be called “tire kickers” in the auto business. A word of advice: Just as in the real estate industry, get “pre-approved” if you want to be taken seriously as a buyer. Have a reputable lawyer audit your financials, and don’t make any inquiries until you can prove you have real money behind you. There are licenses that can be purchased (I know of at least two), but the owners are gun-shy because of all the people who talk a big line, but fade away when the discussion turns to proving they have the capital to execute a transaction.
Greg James
Publisher