When most operators decide to open a dispensary, they are under the false impression that it will be a breeze because selling cannabis is easy; it sells itself. Right…? The industry is booming and continues to grow as each state legalizes cannabis, and we get closer and closer to cannabis reform on a national level. Economists describe a flourishing industry worth upwards of $43 billion a year by 2025.
While cannabis dispensaries, in general, have experienced an increase in revenues since the onset of the pandemic, some are still falling short and have opportunities to increase profits by analyzing their customer and point of sale (POS) data. Operators need to recognize not all products sell the same and not all budtenders are as effective at promoting or cross-selling products. A few changes to your operating strategy could grow your bottom line and optimize your business performance.
This article reviews some popular POS analytics systems and explains how to properly leverage the data in your cannabis dispensary to improve your finances. Some operators may be unsure how to identify opportunities for practical applications from data reports in their POS system. While there are many different types of analyses you can run with various POS systems, we will focus on the top three reports used by some of the most successful dispensaries across the US.
Purpose of analyzing POS data
What are the main reasons cannabis dispensaries should analyze their POS data?
Reason 1: Measure how their business is performing
By analyzing the POS data, operators can recognize the increase and decrease of sales based on specific factors. It’s better to know than to assume or guess.
You can explore how separate product groups and brands are performing. This is extremely helpful as operators can determine trends for multi-location shops and clearly understand which product lines are most popular for each customer base.
Data reporting can also pinpoint root causes and bottlenecks to help you make better decisions going forward.
Reason 2: Improve the fiscal health of your cannabis business
By analyzing the data and identifying some common trends, you can now decide which changes to make to your strategy. When putting your data into action, you can measure how changes to your strategy affect your overall production and bottom line.
For example, you can run a sales report by the hour, commonly referred to as a daypart sales report. In a recent example, we helped an operator identify an opportunity to adjust labor deployment during the first three hours of operation when the customer count was down by 50% and wait times were significantly less than average. They cut labor costs by having one employee open in the mornings versus two.
Although this may seem obvious for some operators, you can take your business from good to GREAT by removing the guesswork and scaling costs through the use of key data analytics tools.
What are cannabis data analytics tools?
Data analytics tools allow you to plug in your POS data and run specific analyses. The most common industry POS software solutions include Greenbits and Flowhub, to name a few. Common data analytics tools include Growius, Phocas, and Tableau.
There are many different features to consider when purchasing data analytics software for your dispensary. Those include: ad hoc reporting capabilities, industry benchmarking, visual analytics, and of course, cost.
While pricing and features can vary, it is also essential to consider which have direct API connections with the software stack you are already using or planning to use. This helps automate data collection and reporting which can save a ton of time in the long run.
We recommend checking your current POS provider’s built-in software capabilities before looking outside your existing stack. You can often customize the dashboard templates to help keep a pulse check on the shop’s daily, weekly, and monthly performance.
Can you use Microsoft Excel in place of a data analytics system?
While Microsoft Excel can handle lots of data, it doesn’t manipulate or process “BIG” data well.
It’s best used for simple analysis reports such as daily sales mix or daypart sales, but to do more multivariable breakdowns of data, you will need something with deeper capabilities. More integrated software is also generally automated and requires less manual input by the operator.
Shopping for Cannabis Data Solutions
While it can become overwhelming to research and compare software options on the market, the positive impact of finding new ways of measuring your business performance can make it all worth it.
Because the software gives you detailed insights on sales, inventory, staff, wait times, etc., operators can better manage their daily operations and plan accordingly instead of operating so blindly.
We demonstrate how we work with Growius to build customized dashboards for our clients for this case study. .
Growius Dispensary Reporting Example
This example shows a series of three reports we created for a cannabis dispensary client who recently enrolled in our Outsourced CFO service.
The inventory aging, budtender sales, and product bundling frequency reports provide some of the most revealing details about the financial health of your dispensary.
This example discusses our client’s opportunities and how our strategies can change business behaviors to cut costs and increase revenue.
Analysis 1: Inventory Aging Report
What is an inventory aging report?
Inventory aging reporting provides a record of the inventory on hand and the amount of time it’s been sitting in stock. Many operators utilize this reporting to identify less popular merchandise among consumers and which product brands sell slower. The report even breaks down the extra costs associated with the storage and maintenance of aged inventory.
Since most products sold in retail locations are organic matter and have a relatively shorter shelf life, it is critical to the business’s success to maintain fresh quality products.
How to use it?
In this report, operators can identify products, product lines, or even brands moving slower than average throughout your business sales cycle.
To release aged inventory, operators may decide to offer a targeted promotion. And communicate with the internal purchasing team to share customer concerns and change future inventory buying behavior.
By making more analytical purchases, operators can reduce inventory costs overall by eliminating brands and product lines that bring less revenue.
Analysis 2: Budtender Sales Report
What is a budtender sales report?
The budtender sales report provides a flexible view of the operation depending on what the operator is tracking. With this report, operators can track the average transaction size, the average number of transactions per working hour, repeat customer interaction, average profitability, and so much more.
How can you use the budtender sales report to increase revenue for your dispensary?
Track average transaction size and profitability
Operators can record average transaction size or average profitability (by employee) with employee sales tracking.
We recommend observing Budtenders with the highest metrics to view their sales practices and interactions with clients. Operators can learn which employees excel at upselling and bundling products. Their techniques can be used to improve sales scripts for training new and existing employees.
Track number of transactions
With transaction reporting, operators can record average wait times or even service time by employee. This data allows the operator to view the length of time it takes for budtenders to complete each transaction. And measure which budtenders are the slowest, leading to increased wait times.
Operators can identify training gaps with the POS system, lack of product knowledge, or comfort level with customer interactions.
Another creative idea is that you can even measure repeat customer interaction. This can often be more difficult to track but can be helpful for operators to know which budtenders their customers are interacting with and if customer future return rates vary based on who they last interacted with.
Analysis 3: Product Bundling Frequency
What is product bundling frequency reporting?
With product bundling frequency reporting, operators can learn which products sell well together.
For example, you may find that 12% of people who purchase flower also purchase rolling papers, and of those, 50% buy a lighter. (Yes, this is an obvious example, but the principle is there.)
What can retail operators do with this information?
Operators can train employees to offer rolling papers and a lighter with every flower purchase as part of their sales scripting strategy.
Another simple solution is to automate this cross-sell with a pop-up on the POS system suggesting more items for the budtender to offer the customer before they complete their check-out.
Remember, offers and bundles are a numbers game. There will nearly always be a certain percentage of people that will say yes to an offer, you just need to ask.
If you would like help implementing a financial performance dashboard for your cannabis dispensary, we can help. For more information on how POS data analytics tools can help your cannabis dispensary, reach out to our accounting experts at GreenGrowth. We are here to help your cannabis venture through any level of the accounting and tax filing process. We employ several financial programs that can assist the company with its fiscal responsibilities including, tax planning and compliance, outsourced CFO support, audit preparation, tax controversy support, and much more.
For recommendations and assistance with tax planning and accounting services, schedule a free consultation or contact us at 1-800-674-9050.