Five tips to help build a solid business foundation and avoid industry pitfalls
As a budding company, you must be careful about how you proceed with your business. It isn’t possible to avert every hurdle, but some problems are avoidable.
Since the marijuana industry is a newer field, some insurers, investors or other stakeholders may be hesitant about trusting you, so it is best to ensure your company is standing on a solid foundation.
And while you’ve probably heard about cannabis insurance, which plays a leading role in protecting you and your company, the precautions don’t stop there.
Here are five essential risk management considerations to protect your cannabis business.
- Reliable Cannabis Insurance
The first step to securing your business is getting insurance, but insurance for cannabis isn’t the same as other corporate insurance.
In the U.S. cannabis industry, the markets are relatively smaller and isolated. It leaves room for many misunderstandings, mishaps and costly cash payouts. So, before you can avail benefits from any insurance, you need to see where you stand according to the law.
Once you’re in the clear, it’s important to decide what aspects of the business to insure. Here are a few examples of the policies available for purchase:
- D&O Coverage: Directors & Officers insurance protects the personal assets of senior company officials in case any legal claims are made against them. Whether the claim is genuine or false, the company’s finances can be protected until the claims are proven true.
- Product Liability: Any product that’s ingested by a customer should have a liability policy drawn up. That way, if a customer makes a claim due to an allergic reaction, injury or other harm, your insurance can help cover the costs of damages.
- Cyber Insurance: With the risk of cyber attacks is increasing day by day, cyber insurance can protect a business. There isn’t much fine detail in such policies, but common issues like data breaches and ransomware are covered.
- General Liability: If you’re unsure of what policies you’ll need, you should start with insurance for general liabilities. This basic policy covers accidental harm of multiple natures and protects you in case of unprecedented issues. Coverage varies from company to company.
- Bumper Crop Preparation
The bumper harvest dilemma can be the trickiest problem to solve. If prices drop or supply surges, cultivators can be faced with deciding to sell everything at a low price and go into a deficit, or hold onto it, waiting for a better offer with the risk of it losing potency.
This isn’t a problem you’ll regularly face, but to overcome any surplus issues before they arise, you’ll need to invest in resources and keep your options open.
That can mean spending a pretty penny on appropriate storage units, which preserve potency and have a high capacity.
Additionally, you need to find more customers you can supply to. Rather than depending on the smokers as your primary supply destination, find other businesses which manufacture cannabis products and require a study production chain.
Having insurance for cannabis also gives you crop coverage, which can support you during challenging market conditions.
- Optimum Work Environments
Your cannabis company can be of any nature, but one thing you’ll definitely need is a safe setup and adequate equipment. Not only is it essential for storing your products, but also for the safety of your employees.
There aren’t many workplace regulations for cannabis companies. However, you should think about common problems.
As for necessary equipment, you can think of all machinery, tools or software you’d need to carry out tasks legally and safely. Many states also have requirements on cash handling and safes and procedures should be in place to ensure the safe transfer of money and camera coverage requirements.
Finally, you’ll need an experienced and reliable workforce. But be cautious during the hiring process. Keep your company out of risk by ensuring workers are 21 and without a prior criminal record.
- Dealing With Unexpected Threats
Your cannabis business is vulnerable from many angles, some of which you may not have even considered.
For example, new startups are more vulnerable to cyber-attacks because they don’t have the funds to invest in high-level cyber security. By facing a data breach or stolen information, your customers may lose trust in you and stunt your company’s growth, so cybersecurity protection should be considered.
Also, your business partners and employees are major stakeholders. Like any business, you’re bound to encounter people who aren’t trustworthy or may blindside you. Stolen cannabis or cash cases aren’t as rare as you think. So when you’re choosing who to work with, pick wisely.
- Keeping Your Eyes and Ears Open
The cannabis industry is ever-changing and the playing field isn’t consistent.
Your state laws determine how well your business will perform, especially if it imposes too many regulations or limitations. You also need to be cautious of laws you don’t completely understand or other grey areas.
Be sure to consult experts about any confusion you face and stay updated with the latest news on cannabis laws. In the meantime, make smart choices. Keep a record of your production, sales, and profits to avoid suspicions or mishaps.
It’s always better to be safe than sorry. Many entrepreneurs are inspired to join the market with bright ideas, but poor strategies hinder their success.
Create a sturdy risk management policy for your own company. It will benefit you in the long run.