Cash flow is the lifeblood of any business, and any business owner should always be on the lookout for ways to strengthen that flow. This is especially true in the cannabis industry. Due to the massive amounts of regulation required, the cannabis industry has fewer advantages than standard retail.
Like all crops, the cannabis wholesale market is very volatile. It takes roughly five months to produce a cannabis harvest that’s ready to sell, so any disruption in expected production has a ripple effect throughout the entire industry. Grow operations can get shut down for compliance violations. The city could refuse to renew their permits. They could lose a crop to mites, mold, mildew, or any number of other plant hazards. And every time something like that happens, the price for a wholesale pound of bud skyrockets. Conversely, if the grow ops flood the market with too much product, then the price risks fall below the production cost. That means every grow op is selling at a loss indefinitely. The larger companies will likely survive while the smaller places go under. With the smaller growers no longer producing, the supply drops, and the price rises again. Understanding and preparing for this cycle is relevant to every corner of the industry. Grow ops and dispensaries are the most vulnerable, followed by concentrate and edible companies. They each need a steady flow of fresh cannabis to survive, so it is imperative to have multiple lifelines and backup plans. Some places have set price, weight, and strain deals instead of a la carte market price. This protects both the growers and the dispensaries from wild price fluctuations. Forethought will help you to keep your cash flow strong, and more importantly, uninterrupted.
The other most important thing to remember is that not only do you have cash flow coming in, but you also have cash flow heading out. It doesn’t matter how successful your sales numbers are if you’re simultaneously spending money faster than you can make it. You must continuously be aware of your expenses. You must continually reevaluate your necessities and your priorities. Preparation and vigilance are required to keep the ship afloat on your firm and stable cash flow.