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The Balance Between Passion and Profit

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Cannabis entrepreneurs are a passionate bunch. Growers deeply love the plant and can talk endlessly about strains, nutrients, irrigation, lighting and yield. While unwavering devotion is great, entrepreneurs preparing to set up a grow operation often think about how to grow the plant but don’t think through all of the best business practices involved.
Before starting Ideal Harvest, I was Director of Business Development for a business solutions company. While there, I helped develop the first true vertical grow system for the cannabis industry. The grow system dramatically increases product output per square foot as compared to horizontal or vertically stacked horizontal systems.
An unforeseen consequence for growers who bought the new vertical grow equipment was that they got so much more cannabis yield, that they didn’t have enough vegetation space or processing space to handle it all. As growers struggled to keep up with the increased output, I realized that I couldn’t just sell them the equipment. I also needed to help them plan the whole grow operation, from floor plan to workflow processes, in order to ensure that my clients could optimize the use of the modernized equipment.
Today, as Ideal Harvest completes its 3rd year, I have seen almost every type of grow operation in use today and have helped numerous facilities improve their systems from seed to sale. I encourage every eager canna-businessperson to think all the way through their business plan. In other industries, you write a business plan and investors know what to expect. The cannabis industry is so new, that most investors don’t know what to expect so most of the typical questions in the business plan don’t get asked and many owners never truly think through their business model past what looks good in a pitch deck. This means that most owners are not likely working through the historic ebb and flows of the marketplace that are tracked in other industries.
Some questions grow operations should think about are:
– How can I be agile in a fluctuating marketplace?
– In an industry with surprisingly small profit margins due to high taxes and regulation costs, what happens when the price of cannabis drops or the market becomes flooded with competitors?
– How will my business weather the ups and downs?
The answer? It’s all in how you build your business, not only what you’re going to grow, manufacture, or sell. You need to ensure everything runs as efficiently as possible, do everything to increase profit and lower the cost of production.
One opportunity to increase efficiency, for example, is by managing labor costs. It is a well-known fact that high employee turnover rates come at a hefty price. Many grow operations have minimum wage labor that work under demanding conditions. Few facilities think about company culture, employee engagement or work conditions. As a result, employee turnover is high, and money is wasted.
Another aspect of the business that should be examined is workflow efficiency. I’ll never forget seeing a truly wasteful layout for a grow operation. One side of the grow facility had all of the dirt and nutrients for the plants. All the way on the other side of the building were the grow rooms. So on a daily basis, workers were transporting the dirt from one side of the facility to the other, back and forth, to harvest, service and prepare new clones.
Instead, a facility should be designed in the most efficient way possible, with a central hub that all your grow areas feed off of. It’s about using your space more efficiently and automating your business to allow you to take advantage of economies of scale. That starts with good design, planning and strategy before you’ve even grown your first plant, not assuming you can throw up some antiquated grow equipment, hope for the best, and start picking out the color of your Tesla.
Maximizing profit is a delicate balance where growers need to analyze the current market value of what they are about to grow with consumer demand. Too often growers produce a marijuana strain that only a tiny fraction of their customers want to buy simply because they like it. You can’t run your grow operation like a garden club; trading on rare heirloom tomato seeds. You need to run it like a business.
Growers should know the profit margins for each strain that they want to produce and all of the individual operational costs that go into the overall cost to grow: lighting, nutrients and consumables, labor, security and all the other building costs associated with running your operations. Then, look at how you can reduce the cost to grow each plant by making constant incremental adjustments. For instance, if you can use nutrients that cost ten cents per plant, rather than two dollars per plant, do it. It doesn’t matter that it is the fertilizer du jour. You can save thousands of dollars per harvest by using the cheaper plant nutrition.
I’m passionate about the cannabis business and feel exhilarated to be able to help build this new, dynamic industry. My mission is to help entrepreneurs in the cannabis community improve their business practices, become more successful and achieve their goals. Just like the plants, there is room for all of us to grow together.

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