Cannabis Knowledge & Insights

Difference Between Buying a Cannabis License & Buying a Cannabis Business

In this video and article, we discuss the differences between buying a cannabis business license and buying a cannabis business. Watch the video below and continue reading to learn more.

At GreenGrowth CPAs we help a lot of M&A deals close by auditing financials to make sure that both sides of the deal closed with confidence but one disconnect that we’re seeing throughout the deal process is that buyers and sellers have very different opinions about the value of a license versus the value of that cash flow positive business now in this video we’re to explore the difference between the license and the value of that business now if you have any questions about buying or selling cannabis businesses or their licenses then please reach out to green gross CPAs via our website at green bro CPAs com or give us a call at eight hundred 676

so today’s topic is the big difference between buying a cannabis license and buying a cannabis business and all the little nuances along the way including what you’re actually buying the money you need in the time and effort to take this across the finish line and this presentation is brought to you by green growth CPAs now there are a ton of articles out there detailing the cannabis licensing process you see the high valuations of these cannabis companies that are public and the astronomical cost but actually getting into the industry and as an entrepreneur new to this space you may read these blog posts or see these videos about how licensing is probably one of the most expensive costs of doing business and yes it is very very expensive and some people even think that having a cannabis business license is like a golden ticket to the industry but in most cases this couldn’t be further from the truth now we feel plenty of phone calls from clients and prospective clients who are very very uninformed about the value of their license and sometimes even about the value of their business they think just because it’s a cannabis business and it has a product that’s cannabis based it must be worth millions of dollars but the key issue is that most people don’t know the difference between owning a license and owning an actual business or a cannabis business that has positive operating cash flow in the difference between these two assets couldn’t be larger now we’ve also seen an ongoing trend of entrepreneurs shelling out a ton of money to get started in the space only to bleed out on that cash and then ultimately close the doors of their business or sell it for ten percent of what they actually put in to it so in this video we’re going to give you some considerations you should think of before you spend a big amount of money on a cannabis license or on a cannabis business and explain what the difference is between buying that license or buying an actual business so consider this video a healthy dose of reality and by the end you may want to buy a laundromat business instead of diving headfirst into cannabis but before we get started I need to let you know that the information contained in this presentation is meant for guidance purposes only and that is professional legal or tax advice and further it does not provide any personalized legal tax investment or any business advice in general so in this video we’re gonna cover a few things first I’m going to address right off the bat the Green Rush myth and then we’ll talk about is your market ready for new entrants then from there we’ll talk about considerations in the understanding of the difference between buying a license and buying a business then we’ll talk about some tips on M&A in the cannabis industry then we’ll talk about budgeting for your investment and then I’ll give you some tips for the absolute beginner with no money or very very little cash so first the green rush myth now the media loves to write headlines about this so called Green Rush and the Green Rush refers to the spread of legal medical and recreational cannabis across the u.s. maybe even other countries alluding to the Gold Rush of the 1800s and the money-making potential of this industry now the problem with that narrative is that it creates FOMO or fear of missing out which pushes you to make wrong or hasty choices and in reality the Green Rush is mostly hype now it’s a storyline pushed by the media that’s become ingrained in this cannabis lore only to be proven wrong nearly at every turn now from our experience don’t let these news stories or crazy high valuations of public cannabis companies trick you into thinking that cannabis is going to make you rich because most of the time it won’t and once you look at the real numbers and the added amount of complexity from working in a highly regulated industry just like alcohol or just like the airline industry you’ll actually see that making it and cannabis is not as simple as digging for gold now my last thought on this Green Rush is you rush because the resource that you want is finite such as gold right you will not be alive by the time that it actually replenishes but with cannabis there’s an infinite amount of product in a growing user base every day new markets are opening new people are opening their minds so using cannabis either for medical purposes or recreational purposes and yes getting in early may seem better and sometimes it actually is but look at alcohol companies for example there are new ones coming up every year for example white claw no one was talking about this product two years ago and now it’s a cultural phenomena and alcohols been legal for 90 years after prohibition was lifted and even look at premium brands like Casa amigos tequila Casa Meagles is a tequila company that was co-founded in 2013 so 80 years after prohibition was lifted by George Clooney and his partners and it was purchased in June 2017 for seven hundred million dollars plus up to 300 million dollars based on the brand’s performance so that’s a lot of money a billion dollar valuation and transaction in just four years of operation and again that’s 80 years after prohibition or 90 years after prohibition has actually gone away so just understand you need to do it right or you will fail don’t be in a rush be smart be thoughtful and make the right choice for yourself even if that’s not going into cannabis so now that you understand that the Green Rush is a myth the first question you need to ask yourself is is your market ready for new entrants now before investing in a license or in a cannabis business you need to understand is your market ready or not and if it’s brand new there’s never been medical there’s never been recreational yes there is room for new entrants that’s very very obvious but the difference is between when you go from medical to recreational so what you need to do is consider the maturity of the medical cannabis market that you’re getting into and that will weigh heavily into whether or not you even want to try to compete for a license or actually buy an operating business now for example the oldest medical market in the country is California and despite the fact that the market has been around for twenty years there are still plenty of quirks that can actually make doing business incredibly difficult in the state of California for instance a long existing medical cannabis market usually means there’s an equally thriving black market that exists and sometimes it’s even more powerful than that regulated medical cannabis market so this means that local cannabis businesses both legal and illegal have been building relationships with their customers and cementing their place in the market for years this also means that enforcement of closing illegal shops is usually less successful and they’re gonna be thriving those black market shops are gonna be growing and staying around and again if you haven’t heard this in any of the other videos as a black market operator being shut down is in the business plan they know that they will be shut down at some point they’ll just move and reopen somewhere else so what you need to understand from this point that I’m making is that the longer a medical cannabis market has been around the smaller the incremental bump will be in sales when your state actually allows recreational cannabis again the case in point when California opened up the market for recreational cannabis there was no flood of new customers flocking to these license shops you know taxes really kept them away or not knowing what those shops were or where they were you know that was some of the big barriers that they didn’t address in the regulations or they address him in the wrong way that again pushed customers away or didn’t attract those customers there was a relatively small new group of consumers just an incremental bump in demand in the black market is still thriving nearly three years after they legalized recreational cannabis and even look at Colorado the black market is still crushing it five or six years later so when you have these older markets that have been medical for a while and then they turn over and they allow recreational cannabis don’t expect a hundred percent or four hundred percent jump we’re talking 15 twenty five maybe even thirty percent incremental bump and you have to actually find your place in the market and make sure that that black market is not pushing you out of your own business so the bottom line here is that the younger the medical cannabis market the better the business opportunity and if it’s a brand new medical market even better the neck thing I want to talk about is buying a cannabis license or a cannabis business so if you believe the market is ready for your investment or for your next steps then your next step is to decide whether you will pay for a cannabis license or actually buy an existing business now I want to preface this with one thing there is no right answer to this question do you buy a license or do you buy a business it’s gonna depend on many many factors including your risk tolerance your experience your growth and exit plans and much much more now a license in most cases is just a checkbox a green light by the powers that be authorizing you to actually open up your business a license says essentially that you can go ahead with the next steps of starting a cannabis business but it doesn’t ensure that you’ll actually win customers over and make a profit it’s just a piece of paper that says you can do this in the process of getting a license is incredibly costly and there’s no guarantee that you’ll actually get it but once you do the clock starts ticking for you to actually build a valuable business understand that getting a license it takes a lot of time it takes a lot of money when you go for a license typically you need to have a space that they say this is where I’m gonna operate my business and if that licensing process takes six eight twelve months you need to usually pay rent on that space for six eight twelve months with no revenue and you may need to make certain upgrades to that space before you even get your license so just be thoughtful about that going for licensing is incredibly expensive but sometimes it makes sense so let’s talk about that okay there are two good reasons to buy or apply for a cannabis license the first case is having it as an asset now cannabis licenses are very valuable when they’re scarce or hard to get in cities with high tourist populations or a very dense local population for instance in Pasadena there are only six retail licenses available and there are a ton of tourists around there meaning your sales potential is high there’s also a lot of local people around there and as you look around and you see there have been many many lawsuits where the people that were applying for those licenses are now suing the regulatory body or the city because they don’t see the process as fair so it’s very very highly competitive now in the city of Commerce there are limited licenses but not much foot traffic there’s not much walking area compared to Pasadena Pasadena is very walk friendly and given that this city is an industrial center there’s probably not that high of income in that area because it’s not a desirable place to live right when there’s a high demand to live somewhere the higher income people come to that area now this is just a generalization but understand competition for the license increases that value of the asset now the second reason why you’d want to buy or apply for a canvas license is as a tax strategy now having a certain license opens your business up to new tax deductions potentially or actually taking advantage of backing other indirect costs into cogs because cogs is the only deduction now you’ve probably heard that taxes are egregiously high in the cannabis space for cannabis businesses but when you can invest thirty thousand into a license to save a hundred thousand dollars every year in taxes it makes sense to buy that license so for example if you’re a cannabis retailer two straight dispensary and you want to get into manufacturing then getting a license to take advantage of tax laws may be smarter than buying an entire business especially if you have the space in your current facility what’s the point of buying an entire new location taking on more leases taking on more people if you can just buy that license to unlock that tax advantage now to build on this when looking for licenses to purchase especially the retail licenses make sure that the market makes sense building out what we said earlier about the Younger medical markets there’s other factors that you need to think about for it to make sense and make sure that you’re not just getting overzealous about simply having a cannabis license or having a cannabis dispensary make sure that the license will unlock some type of financial benefit for your current business things like opening up new tax laws cutting down on supply chain costs having direct access to your customers to push your own brands easier things like that now also it needs to make financial sense for cannabis cultivators manufacturers and distributors you can be more flexible because you can actually drive to go get your clients your clients can’t even come directly to you they can only go directly to the retailers so you need to make sure that you look at the financials behind operating the business and find the cheapest cost of doing business now for retailers not all sites are created equal so make sure you do your homework again on the market size the foot traffic the retailer load the actual book of business and the relative competition there’s so much that goes into this not all licenses are created equal you really have to do due diligence on the financials model it out and look at the actual ROI of the business because maybe buying a retail license in a certain area it sounds really fun and sexy to own a cannabis business but your money may be better put elsewhere again into a laundromat or into a coin carwash something that actually pumps out cash without you having to be there so just don’t forget about the financial aspect don’t let that green rush myth cloud your judgment so that’s licenses now on the other hand businesses we need to talk about the difference between buying a license which is just a piece of paper and businesses and a business is a set of processes people and property that create value and if you’re looking to buy a business obviously the most valuable ones are those that are already profitable so look for cannabis companies that have strong SOPs or standard operating procedures they have amazing staff and repeatable success built in you don’t want something that’s a fluke where they one time got a contract to go sell at Coachella they made a million dollars and now they think their business is worth a ton of money okay this goes for retail businesses as well as all other cannabis verticals SOPs staff and repeatable success is incredibly important and if you don’t look beyond profits and beyond the financials you risk taking on tons of liability with a company that doesn’t have the right compliance measures or documentation procedures in place to make sure that when you actually take that business over you can repeat that success and make that same money now having a license and an entity form and some product and a few customers doesn’t mean that the business is valuable or worth investing in it’s not really hard to make it look like a business you know these things are not a difficult to get that license that entity formation some product and customers it can all just be a house of cards make sure that there’s a structure of that business that can continue to build and create value now there’s a lot of due diligence that you need to do because you’re gonna be shelling out hundreds of thousands of dollars and maybe even millions of dollars when you buy these businesses so don’t rush into this make sure that you are actually peeling back all the layers of the onion all the layers of that business and you know put that business owner in the hot seat to make sure that they’re backing up that asking price with information that says yes it’s actually worth that much in one last point on buying a business and even this licensing stuff here as well is that you must have self awareness as to whether or not you can actually operate a business and I should have brought this up at the beginning because some people just want to get into business because it sounds cool it’s the wave right now but you need to have self-awareness to understand are you an operator because there’s a significant difference between being an owner and being an operator and from that being a successful operator just because you own a business doesn’t mean that you’ll actually be able to run it well operators have a multidisciplinary skill set that allows them to actually handle the many facets of running a business from HR to finance to supply chain and everything else that comes along with running a business especially a cannabis business in a highly regulated industry it’s very very cutthroat it’s highly desirable there are a lot of people keeping a watchful eye on you so make sure that you understand are you an operator or not now this is where the power of having a team is very very important if you know that you’re not an operator then you have pretty much two main options first find an operator within your network to bring onto your team now consider giving this person equity in the business and making sure that they have experience in running a business that is similar to the one that you are purchasing for example a general manager at a big-box retailer will be a solid candidate for being a GM at your dispensary but maybe you go and you buy a manufacturing business you want to find a head lead manufacturer who can operate the menu during floor that will actually be a good candidate maybe they worked in aerospace or maybe they worked in other kind of high-throughput manufacturing and accuracy manufacturing to make sure that this is gonna be the right person for the job or you find someone who has worked on commercial farms to help with your cultivation business now your second option is that when you buy the business you can offer what we call stay on bonuses to key employees such as those general managers those manufacturing managers had growers and even the support staff now you can keep them on for a certain period of time and have them earn out that bonus or wage or just keep them on permanently there’s many ways to structure these stay on bonuses typically there’s some money up front and they can earn an even larger bonus if they stay on for a longer amount of time now use your time wisely with them so that you can document all of their processes if it’s not done already right if you’re gonna buy a business that doesn’t have SOPs written down then make sure you take a price break on that business so that you can spend that time and spend that money on stay on bonuses to document those processes and you want to also spend time with these people to see what true value they offer within the business to see if you want to keep them around for the long term now if you don’t know who to keep on and who to let go of then consider running what we call functional interviews and we made a video about that just Google cannabis functional interviews and you’ll see a video come up where we talk about what to ask and how to go through the process but essentially you break apart every function in person and process in the business see where the value is created and then you keep some people you cut others you streamline some processes and this will help to optimize the performance of the business in a people’s perspective and a financial perspective and yes it can be intense and it can be one of those difficult situations you have to go through it’s two to three months of you know having to make those tough decisions but the financial implications can be huge for your business so that’s what you need to know about the difference between buying a license and buying a business and how some licenses or businesses are not worth much at all anyways so just be thoughtful when you choose between buying that license and buying that business and if you even want to get into this industry at all so now we understand that I want to go over some tips for M&A which is murders and acquisitions in the cannabis industry so again if you’re still considering investing into the cannabis industry then we strongly recommend making your decisions as rationally as possible again Green Rush myth out the door don’t let that cloud your judgment you need to do your research you need to think about your cast expenditure and how much is gonna be required for that and then calculate how much you stand to actually earn on this cash make this above all a financial decision and not an emotional one business is yes there’s emotion in it but this is a financial machine make sure that the business you’re buying can actually produce the financial results you’re getting into this business for because you don’t want to run into what we call hobby laws where you constantly lose every year bang-bang-bang four five six years of losses you may get audited and they say well show us the opportunity for profit or the drive for profit here if you’re just totally screwing up every year you may be shut down by the IRS now before you buy a cannabis business or a license you need to do a very thorough analysis of the financials if there are financials in place or doing pro forma financials and then look at the opportunity that you’re buying into again don’t let the Green Rush narrative cloud your judgment you’re making a financial decision here so ask yourself what will this investment yield if I put 1.25 million dollars into this will I make a 10 percent or 15 percent IRR whatever it’s gonna be you need to really look at these because when you look at your return on investment and you can actually compare multiple businesses maybe it’s a cannabis business a typical ordinary business and then maybe some other startup idea that you have write a financial decision with normalized numbers that you can just say all right well this is the financial implications this is the skillset and the people I need to bring into each of these businesses can I wrangle all these things together and actually make something from it and in most instances businesses are a more valuable investment opportunity than licenses especially if their breakeven or just below breakeven or especially if they’re profitable and had that aggressive tax strategy and have a stable set of clients because understand this it’s going to take a lot more cash a ton of cash a lot more skill and a lot more time to go from a license to a positive cash flow business than from a business that it may be underperforming to becoming a cashflow positive business heavy lifting is an understatement here there is a lot of heavy lifting in the cannabis industry so don’t think again that this is just like you know selling cannabis out of your house or out of your college dorm there is a lot of red tape here you’re gonna need a lot of money for lawyers and cpa’s potentially lobbyists a lot of things going on here in a lot of heavy lifting it’s a build on this I want to touch briefly on valuation so when buying a business in sellers please pay attention to this because I don’t want you to get laughed out of the room or laughed out of the conversation when you say something crazy you need to make sure that the valuation of the business that you’re buying is reasonable okay and what you’re selling at is reasonable many operators think that their business is worth five times their existing revenue and in other industries that’s a fair multiple in most cases but without a proper tax mitigation strategy you’re going to be way overpaying for that business at that valuation especially if you’re buying at five times the top line there’s no way that it’s worth that kind of money also with more licenses coming online every month valuations are dropping drastically so unless it’s a critical market or a unique market make sure that you’re actually paying a proper valuation a proper multiple don’t get deluded into thinking that because it’s cannabis it’s worth millions be thoughtful again financial analysis this is a financial choice not an emotional choice and the Green Rush causes some owners to overvalue their business at a multi-million dollar price tag some pie-in-the-sky because they want to make their Mille and they want to cash out and they want to do this and they want to do that they want to tell all their friends they made millions in cannabis but if there is not any bite to that bark then the business is not worth that much and to build on this I can’t go too deep in this M&A slide we made two hours of M&A content there’s two videos and the links are on the screen here watch those it’s about the full due diligence process and then business combination especially if you are an operating business and you need to integrate another business into yours what are the considerations and processes to making sure that those businesses come together to create synergy and create exponential value by working with each other now that you understand about all these different things the licensing and versus the business the M&A tips the green rush myth I want to talk about healthy dose of reality of budgeting for your investment into the industry I’m going to talk about a few different levels of investment in cash here and I also hit on people that have absolutely no cash or very very little cash and yes very little is an opinion but when you start to see what I’m going to talk about in the slide you’ll understand what is very little cash so first if you have less than $100,000 in liquid cash you’re going to have an extremely hard time getting directly into a licensed cannabis business as a sole owner yes there may be some opportunities out there where you can buy an existing business maybe in the Oklahoma area or maybe some of those businesses that are just dying and they have no way and there’s no other buyers and you’re taking a huge risk on not knowing what you’re buying you may be able to get in but likely not those are few and far between the only market again that you can reasonably get in with that size of cash a hundred thousand or less is probably Oklahoma and at this time the state has much lower cost for licensing it’s like 2,500 to 5,000 dollars for the licensing and the cost of doing business in Oklahoma is also lower significantly lower compared to a California or New York or an Illinois but however you need to be an Oklahoma resident for two years to get approved so if you don’t live in Oklahoma or you don’t have a business partner that’s been living in Oklahoma for two years you can’t work there and again if you’re not that Oklahoma resident you may want to find partners to pool funds together and buy into part of a business or create an ancillary business that helps cannabis businesses succeed right don’t think about having to do this all on your own find a team pull your money together and start something great and exam apples of ancillary businesses could be getting into the waste removal business as a manufacturer you have all this spent cannabis it can’t just be thrown into a normal garbage truck it has to be taken care of by a waste removal business or you could get into setting up security cameras for dispensaries or cultivation sites or any other cannabis business or start an electrical or construction firm that specializes in cannabis cultivation operations there are many many ideas in how to actually get into the industry because again remember this industry is going nowhere but up there is no ticking time bomb where you have to get in by 2022 into an operational retail business or you’ve lost your opportunity again don’t forget about the alcohol comparison that I gave you earlier it’s been 80 90 years since prohibition has gone away and there’s still unicorn startups that make billions of dollars now if your budget is around two hundred to five hundred thousand dollars you’re in the range of being able to take over and turn around a struggling cannabis business there are a lot of businesses in this price point here and what you need to recognize and understand is that just because someone owns a cannabis business now doesn’t mean that they’re good at running it okay so this means there’s opportunity for you there are great opportunities out there to take a business and run it into profitability maybe they’re losing money every month because they can’t get good bulk buying discounts or they just don’t know how to market or whatever reason that they’re not being successful you may have that little skill or that big skill that says this is actually how you turn this business around in this specific market and early cannabis operators they were excited and they were diluted by that Green Rush narrative and they jumped into the industry and they really have no idea how to run a business at all they couldn’t even run an ice cream cone stand and especially they cannot run a cannabis business up to profitability and their inexperience is now your opportunity to get into the market and at this level of investment the 200 to 500 thousand dollar range we don’t recommend starting from zero and going through that entire licensing process in paying rent that entire time paying professional service fees on time and paying all these other build-out costs and all these other things because if you do get approved you’re going to need a significant amount of cash we build out that business facility stock it with product or stock it with machinery and then have enough operating capital for six to eight months to actually run it and that’s a big if if you actually get the license but getting a license does give you a little bit of leverage if you’re raising capital and you have access to that capital so make sure that that license that you’re actually going to get is specific to your skill set because you’re a master manufacturer or you’re a master grower a master cultivator or it’s actually scarce enough to warrant an investment and one other thing maybe you actually do go for this you know from zero to actually building out the business with this initial investment here of two hundred to five hundred K but think about it this way maybe you raise or get committed capital of one point five million dollars and you take the money in what we call tranches or little bits and bytes and you take only $250,000 for the licensing and the rest of that money is contingent on actually getting the license so if you do take out a debt note you don’t pull all the money and have to pay back all of that debt you actually have money sitting in like a reserve that you can actually pull on it’s it’s there it’s not really being you know used by anybody else so just be thoughtful 200 to 500 K gives you options to buy these struggling cannabis businesses now if your budget it’s five hundred thousand to a million and a half and even larger then you have significantly more options so consider buying existing businesses that are cashflow positive maybe pay that premium and then use that cash flow to finance the rest of your enterprise right if it’s kicking off a hundred thousand dollars in profit a month then yes boom we’ve got some money to invest and leverage into other verticals or other businesses because if you’re gonna be buying at this level you probably want to buy multiple businesses over an 18 24 48 month period maybe even over the next ten years but you need to find an asset that is pushing out cash so you can actually have the Headroom to go and look for other businesses and yes it may need a bit of turnaround you can optimize a little bit more but that cash flow can float the rest of your business opportunities and it’s no secret cannabis is incredibly cash intensive so the more you in your war chest the higher the likelihood that you will be successful so again as you saw we discussed here that sub 100k at 200 to 500 and that 500 at 1.5 million dollars the more money you have the bigger the war chest the longer you can last in battle so don’t try to do this on a shoestring budget but with that said I want to go over some tips for the absolute beginner with no money or someone that has $25,000 or $50,000 because I just want to be very frank it’s not a lot of money in the cannabis industry and many times we get the question how do I get started in the industry here how do I get ahead of this licensing process my state is coming online in two months or six months or something along the lines of just getting started and there at a very very early stage so if you’re not plugged into the cannabis industry already I want to give you three or four tips on how to actually position yourself to be successful down the line tip number one is to look for cities that are favorable for cannabis businesses or to cannabis businesses because not every city will be licensing for them and if they are licensing for them they may not be very open to these businesses one thing I want to add here is look at which cities are claiming that cannabis businesses are essential businesses during this coronavirus pandemic that we’re going through you saw some businesses like in Berkeley are being closed down or San Francisco is saying medical can but recreational cannot Boston shut down cannabis businesses they’re not really thinking about the cannabis industry at the level they think about even alcohol so be thoughtful about that that’s just one data point but in tandem with that you need to consider which vertical you want to be in so aside from finding out you know which cities are favorable maybe you want to start a nursery then go into other verticals such as a full cultivation or retailer distribution or manufacturing maybe even getting into testing but at any rate think about what skill set you have because that will tell you what you can actually get into and be good at and think about the skill set of your team members and how you can bring the most value to the market you know don’t just say you want to have a retail just to have a retail if you’re an introvert and you put your whole team is introverted and you guys don’t like talking to people and you’re not good at managing a front-of-house staff you’re probably not going to be good at retail but maybe you’re good at distribution because then you can just go drop things off get the signature and get out of there at any rate think about the location and the vertical you want to be in tip number two is to begin to budget accordingly and as you saw from the last slide cannabis is expensive and $50,000 is nothing in this industry so starting a retail location from opening and doing the licensing process all the way through at first six months of operation that can take anywhere from $750,000 to 1.5 million maybe even more depending on the market and cultivation it depends on the size and the scale but that can be from 500k to 5 million even twenty five million dollars if you want to go really really big but it all depends on the scale of the operation and nurseries maybe three hundred thousand dollars minimum there are a lot of capital investments and typically higher than normal rents if you don’t buy the property and if you’re buying the property you’re gonna have to have a lot more money than this so you know again there are many many factors but it will take a lot of cash to open you know one of those cannabis businesses and other verticals is distribution maybe they’re gonna be a bit cheaper because you just need to have the location and then you buy the product and you have some vehicles maybe you don’t need to be in the sexiest or closest of areas you know to be in downtown LA you don’t have to be in downtown Hollywood you can be out in the desert or you can be in a remote location and the same with manufacturing but don’t forget with manufacturing equipment costs are very very high especially if you want to hit a high throughput and actually hit some economies of scale and actually make a profit tip number three is to start to build a team around you you’re gonna need people in your daily operations to help you run this business but aside from that you’re gonna need lawyers to help with your applications or your M&A transactions you’re gonna need CPAs for financial projections or for building that tax strategy and filing your taxes again operations partners who can actually help you run the business and specialty people for becoming your manufacturing manager or your head grower and you know that’s just if you choose to be in those verticals but you’re gonna need a general manager for your retail location there’s many many people you’re gonna need to make this business come together it’s not a one-person show cannabis is a team sport things you can do to build up your team is to join your local cannabis community and see where the needs are yes you could just visit a lot of locations but you know get experienced by actually volunteering time in other businesses or you can go to meetups or you can reach out to other cannabis business owners and see what you can learn from them see if you can you know take them out to a lunch or get coffee with them just build these relationships and see how you can add value see what the opportunity in your market is in tip number four is gonna be finding real estate or finding your actual specific location because once you find out that estimated location or the city you want to be in in the funds and the team the true first step is to get property by either buying it or leasing it and then get licensed if you want to go through the licensing process and when it opens you’re gonna need to actually work with a local lawyer who fully understands the regulations and can help with your application in that specific district or city where you’re at yes maybe you want to be in the LA area but the application for Pasadena is significantly different than the one for the city of Commerce and from there once you find that real estate the real race really starts of building a meaningful valuable business and I talked about the licensing process here but if you’re gonna do an M&A transaction in tip number four in finding that real estate this is the time where you start searching for businesses in that city or in that area you want to be in and it will be a long journey because most of these cannabis businesses are not prepped for M&A and if you look only for just even a month you’re gonna realize that they have shoddy record-keeping no SOPs or very weak SOPs not detailed there and you’ll need to do some deep due diligence to see if they’re really actually is a business or just some papers and money flying around now I hope this video was helpful and brought some value and helped you understand the difference between buying a business and buying a license and you actually got that healthy dose of reality that this is not a green rush you know going for some kind of finite resource so if you need help with evaluation due diligence or an audit for your cannabis business when you’re to buy or one you’re going to sell or maybe you are struggling and you need to go into receivership please reach out to us via our website at green growth CPAs com or give us a call at eight hundred 676 for M&A transactions for buyers that have found a business and say hey I really want to buy this but I don’t know is it really worth this much money we’ve helped people get licenses we’ve helped them value those licenses you’ve also done audits for investors so if you think a cannabis business is taking on your money and they’re not giving you a report back every quarter we can help you audit that business to make sure they’re using their cash properly and they’re doing what they said they would do when they took on your capital as an investment so again if you have any questions or need help with any of these aspects anything cash in canvas please reach out to us at green growth CPAs com or give us a call at eight hundred 676

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