Helping Entrepreneurs Develop Their Cannabis Operational Strategies
- Oct 26, 2022
In this episode of CannaCast, Eric Altstadter, Partner and leader of EisnerAmper’s Cannabis and Hemp Group, speaks with Juliana Whitney, founder and CEO of Cann Strategy. Cann Strategy helps cannabis business investors and operators win licenses, launch operations, expand to multiple states and develop competitive strategies. Juliana is also the co-founder of Leafsheets.com, a site that contains information entrepreneurs need to move forward in the cannabis sector.
Eric Altstadter:Thanks for tuning into this episode of CannaCast. I'm your host, Eric Altstadter, EisnerAmper's National Cannabis and Hemp Practice leader. I am joined today by Juliana Whitney. Juliana is the founder and CEO of Cann Strategy, the company that helps cannabis business investors and operators win licenses, startup operations expand to multiple states and develop competitive strategies, and she's also the co-founder of leafsheets.com, a site that contains information entrepreneurs need to move forward in this industry. Juliana, thanks for joining me here today.
Juliana Whitney:Thank you so much for having me, Eric.
Juliana, when did you first get started in this industry?
JW:2015, in Las Vegas at the first dispensary that ever was legally in existence in Las Vegas. I started as a bud tender, front desk.
EA:Wow. How did Cann Strategy come about? Tell me a little bit about the work Cann Strategy does.
JW:Cann Strategy came about after about six to 12 months in the industry, and I thought I figured it out, how to do the operations and the application, and I asked an executive of a company in Nevada if I could get their dispensary open because they had cultivation production, no dispensary. The executives met, they said yes, got them open. I've been doing consulting ever since then, which is what Cann Strategy does, and that's working with companies that want to get a license in a new state. We help them to successfully achieve those, to acquire those, either through purchasing them or through actually winning them in the application process.
We help companies to start up. So if we help them get a license, we'll then launch their operations with them. If they come to us already licensed, we'll help them launch. And then we do a lot of business development, operational efficiency kind of things. Sometimes we even help people to get out of the industry by helping them find someone to acquire their company.
EA:You recently started a new business leafsheets.com. Tell us a little bit about leafsheets.com.
JW:Leafsheets came out of my understanding of the business strategy and consulting piece that I've learned through Cann Strategy. I've seen how many entrepreneurs can't afford the fancy law firms, plus the consulting firms, plus all the fees that are associated with the business. I thought, can we build a model that's more accessible and approachable for the scrappy entrepreneurs of the world who have the brains, the talent, can figure things out, but they just don't have the industry specific resources or know how? So we built Leafsheets based on that, which is why on there you'll see a lot of answers about regulations. You'll see a lot of do it yourself guides to teach people how to customize the documents that we sell, and we sell the standard operating procedures, plans, logs, all the things that you need for the application process, and then also for actually operating and for passing operational audits.
EA:How important is a strong foundation to a business in this industry?
JW:It's everything to a business in this industry. If a company sets up their operation and they don't have everything in line to maintain compliance and to have smooth operational processes, they will definitely have trip ups. They will definitely get fined, or at least when they get audited by the state, it'll be complete chaos and create these operational hiccups.
If you can get a solid foundation in place, then everything is much more smooth sailing moving forward and much easier for you, even in terms of scaling in the long term. Because if you are in one state, you scaled to another state, if you can apply and not have to say, "Oh, well we did have this deficiency," or, "We did have this suspension of our license or this huge fee." The next state doesn't want to see that. So if you set up your very first one correctly, do that correctly, then you're good as you grow moving forward.
EA:How important is it to run a cannabis business the same way you would run any other business?
JW:It's similar. It's important to run it the same in terms of really great financial record keeping, tracking the finances generally, having good hiring practices and recruiting practices and leadership in place, your marketing. These are all things that are critical for cannabis business and, admittedly, not a lot of cannabis businesses do all of those all that well. The industry is definitely still developing and mastering even what I would consider some of the most basic best practices of business success generally.
EA:You're from Las Vegas, so it's a little different out here in the East Coast. We're in New York. New Jersey recently started selling adult use recreational cannabis. New York has approved it, but a bit behind as far as setting the rules. What do you see as the issue New York has with moving forward?
JW:They're trying to be very careful and very mindful. I was just at a meeting with one of the Office of Cannabis Management chief representatives and he was speaking about how the way that they've developed their program, there's a lot of social equity woven into it, in a way that other states haven't done before. I think they want to do it well, which no other state really has done before. It takes a lot of thought. They're trying to be careful in that. Careful in creating capital for underrepresented groups to actually get into the industry and create successful businesses. Creating opportunities, figuring out how to structure their regulations well.
So I think they're just being very careful, very cautious. They don't want to mess it up, which is fair, given that they are... the world watches New York, and it could be hugely embarrassing if they totally flopped. I think they're just trying to be careful.
EA:New York and New Jersey have a strange relationship because it's a bridge and tunnel away and it's so easy to get access from... or residents in New York to get access to New Jersey, or vice versa, so easily.
EA:So far I think 19 states have legalized adult use. What states do you expect to join the group of legalization?
JW:There's a bunch on the ballot coming up. Oklahoma is one. I look forward to Ohio joining. Ohio's a huge state. I think it'll be a great market. And then there's some others that are... I'm totally spacing on, but I know one that a lot of people look forward to. We get emails from people about Texas constantly through Leafsheets. It's constant. It's emails. It's on our TikTok. Everyone's like Texas, Texas, Texas. So the day Texas goes rec will be a big, huge, incredible day.
EA:Now you work with a lot of people on licensing applications. How different is the licensing application process in each state?
JW:They have their similarities and then some key differences. Key similarities, if you look at states with a limited number of licenses, are, there's the need for capital, there's the need for probably 25 different operational plans. There's your background information on your owners, their taxes paid, the background checks, all the things.
So you have that in place. Then things that differ will be like the requirements for the amount of money that you need. The requirements for insurance or for your location. Do you need a location? Do you need a lease in place already? Do you need just the landlord to say that they would lease the property to you? That's a big important piece, because it's financially really impactful to the feasibility of doing the application process in different states.
Then you'll see states like Oklahoma, California, I think New Mexico, with many more licenses. Those are a little different because they're a lot more lax. Oklahoma's original process was pretty easy, which is why we saw way too many licenses issued.
EA:How important is branding to this industry? What things should somebody avoid while trying to brand themselves?
JW:Branding's everything. It's everything in this industry just as it is in any other. It's a key component to being able to compete right now, given that cannabis as an industry is pretty new still, there's this great opportunity to be really good at branding and marketing. The companies that can figure that out and understand how worth it it is to invest in that upfront are going to crush it. It's so key. And getting the consumers and having them stick with you.
The things to look out for, this may be a little overly critical. My big thing is always try to not make your branding colors just a regular green, black, white, brown. Try not to use the word cannabis, or leaf, or relief. There's all these words, if you look at cannabis companies, that are used constantly.
I also say to avoid making the feature of your logo a cannabis leaf, because if you look at the logos, there's so many versions, so many takes on a cannabis leaf, that companies have used in this space. But to expect a consumer, for their brain to know like, oh, this company, its leaf looks like this, and this... It doesn't make sense. So being more creative and understanding. McDonald's for instance, isn't just called Burger Hut. Pizza Hut has its thing. Everyone else has their own name. You got to be different. You have to differentiate. You can't just follow, oh, that seems to be going okay for those guys, I'll just do something really similar.
EA:Where do you see growth in the industry? Is it flower, or is it other types of products, such as beverages or edibles?
JW:I believe that beverages are going to do really well. If you look at the trends at the moment, it doesn't totally look that way. Flower still is queen of the jungle. Then drinks are pretty small. They're a pretty small amount of the market. But anyone I speak to loves the concept of them, especially because they're so social and there's so little... there can be a little amount of THC, there can be a lot of THC, it's more discreet. It's just they're, I think, a pleasant way to consume the product.
EA:It'd be interesting when you have people like Anheuser-Busch or Pepsi involved in the industry. That's a whole different element in the industry.
JW:Yes. But it'll be fascinating to see what people come up with. It'll also be fascinating to see what the customers want. If you take a drink they're used to and just put THC in it, do they really want that? Or do they like the fact that can is... you know, the little canned beverages, that they're a drink of their own? It's this own herbal cocktail creation with THC and it's its own category. So I'm excited to see where the consumer behavior lies on that.
EA:Yeah. That should be interesting, because if I go to a 7-Eleven in New York, or go to a 7-Eleven in Las Vegas where you are, and I buy a Diet Pepsi, there's a comfort that it's the same product. Now that comfort doesn't exist in this industry.
JW:Exactly. Even in terms of, you could buy the same product in different states and it's just come out differently. So even that consistency just within one brand, it still isn't there in many cases. We're still getting there.
EA:Michigan has seen some companies begin to lay off employees and consolidate companies. What advice would you give to someone who is looking to make themselves an attractive acquisition target?
JW:Well, have everything in place. We do compliance audits with Cann Strategy, which is essentially just making a report, going through saying fix these things. Or, if there's nothing to be fixed, at least having a full report for any potential buyer to be able to easily look at and know that the company they're looking at buying has everything in order.
Make sure your financials are really solid, that you are as efficient of an operation as possible, and be ready for when a buyer comes to you to present them with everything that they need. Make it a smooth process. A lot of times people will come to me saying they're ready to sell their business, and then I have a buyer, and then it takes three weeks, four weeks just to get their profit and loss statement. It's just things weren't ready. So it starts off messy from the start. Anything to make it a clean, smooth process, given that deal making is already a lot of a process. Anything to make that simpler, I would suggest doing that.
EA:That's why you need good accountants, like EisnerAmper, to help.
EA:Recently, President Biden declared he would pardon all federal prisoners who are currently locked up for simple marijuana possession. How important is that for the industry?
JW:That's critical, I think, in business ethics standpoint, having the people who came before this industry and who were targeted and who were punished for exactly what we're doing now, and often for much less than what we're doing now, giving them the freedom to, in some cases it'll be them actually being still behind bars and getting out, but in other cases it's they're no longer behind bars, but they can't get jobs and they're having this struggle simply because of some cannabis crime.
So freeing these people of that is a burden worth lifting. It's something we've all wanted in the industry for sure. Now we want to see it on a state level too. The Last Prisoner Project is about keep going until the last prisoner is good to go. The burden has been lifted and I think it's important to remember that we have to keep going on the state level for that to actually happen.
EA:Now, the price of opening a dispensary, I know that varies depending on where the location is. Obviously a city location is going to be more expensive than a rural location, or an urban location more expensive than a rural. What's the general price to open a dispensary these days?
JW:I usually say around 2.5 million if you want something that's pretty good. Depends then on, vastly on the state that you're in. Like on your rent. The rent that you have or how much construction costs are, depending where you are.
Then also the building that you find, is it basically ready to go, or are you doing a new build? These are the things that really change that pricing. But usually if someone has a facility that's, let's say, like 2,500 to 3,500 square feet, and they're doing a build, but on a building that already exists, then I usually say two to 2.5 million.
EA:What's the number one piece of advice you would give a new operator in this industry?
JW:Keep your excitement, but understand how challenging everything's about to be. Because I think if someone can be excited when they're starting out, but also know, oh, I'm going to have all these regulations, all this compliance. This isn't just like the cool, loosey goosey, chilling industry. It's a very serious industry. We're highly regulated. There are a lot of rules we're under, constantly being watched, things are always changing.
So to keep that in mind also, but still maintain the excitement. That would be my suggestion for people coming in so they're not taken by surprise, so they're not taken out and so they're not tempted to break the rules to make it all easier for them.
EA:Now Juliana, last question. You're in Las Vegas. Today you're not, but you happen to live in Las Vegas, and I know you're a big sports fan. What's your favorite? The Las Vegas Raiders or the Las Vegas Golden Knights?
JW:The Golden Knights, because the Golden Knights were born out of Las Vegas. They're the team we have that started there. The Raiders are transplants. They're cool, but they're transplants.
EA:Well, thank you Juliana. And thanks for listening to CannaCast, as part of the EisnerAmper podcast series. Visit eisneramper.com/cannabis for more information and podcasts. Also, please visit cannastrategy.com and leafsheets.com for more information about Juliana and her companies. Join us for our next podcast, where we'll discuss other budding issues.
Transcribed by Rev.com
Our CannaCast podcast addresses the burning issues impacting the cannabis sector. EisnerAmper professionals cover the tax, regulatory, financial, logistic and other key strains of the industry. We’ll also talk about budding developments with market leaders from the highest levels.
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Eric Altstadter CPA is an Audit Partner and Chair of the firm's Cannabis and Hemp practice with over 30 years of experience working with public companies and privately held businesses
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