Congress Holds First Cannabis Policy Reform Hearing of 2020 This Week
by Morgan Fox, NCIA’s Director of Media Relations
This week, Congress will hit the ground running by holding the first cannabis policy reform hearing of 2020 only weeks into the new session. The hearing, entitled “Cannabis Policies for the New Decade,” will be held by the House Energy Subcommittee on Health on Wednesday.
This hearing is expected to explore the barriers to cannabis research, the health impacts of current federal cannabis policies and the implications of reform, as well as several pieces of cannabis-related legislation including the Marijuana Opportunity, Expungement, and Reinvestment (MORE) Act, the Marijuana Freedom and Opportunity Act, the Medical Cannabis Research Act of 2019, the Medical Marijuana Research Act of 2019, the Legitimate Use of Medicinal Marijuana Act, and the Veterans Medical Marijuana Safe Harbor Act.
This hearing is an excellent sign that Congress is willing to continue the groundbreaking progress it made last year.
Unfortunately, all the witnesses for the hearing are representatives of government agencies that have not been overly receptive to ending cannabis prohibition, namely the Drug Enforcement Administration, the Food and Drug Administration, and the National Institute on Drug Abuse. But while we do not expect these witnesses to be cheerleaders for meaningful cannabis policy reform, there will no doubt be many tough questions asked by lawmakers who understand the importance of changing our nation’s outdated and harmful federal laws.
The hearing also presents an opportunity to help inform members of the subcommittee and others in Congress about the facts on this issue, as well as to show them that the cannabis industry is united in its common goal of removing cannabis from the schedule of controlled substances in a way that helps address the harms caused by prohibition, and let them know we are committed to working with them to address any concerns. A coalition of cannabis industry groups will be submitting a joint letter to the subcommittee, which will be available later this week, outlining these areas of agreement. NCIA will also be submitting written testimony for the congressional record.
You can watch the hearing here and we will be following up afterward with more information as well as responses, so stay tuned!
Committee Blog: How NCIA’s Banking & Financial Services Committee Can Help You In 2020
As we begin the new year, the NCIA Banking and Financial Service Committee is joining the trend of starting something new for 2020. We are launching a blog series, the very words that you’re reading now, to help the cannabis industry when it comes to banking and payments. Here, you’ll find new content every month. Our goal is to give you actionable information based on current markets so that your business can grow and thrive throughout the year.
In Missouri, the state has issued 192 retail licenses, and 80 licenses for cultivation. To serve the industry, there are numerous banks and credit unions who are actively working with cannabis businesses to offer transparent banking options.
Utah will be issuing 14 retail licenses and 8 cultivation licenses, with businesses expected to start operating in March of this year. There is a financial institution in the state that is ready to bank the cannabis industry, helping your business with compliant financial services.
Finally, the committee has built relationships with additional financial institutions in California, giving even more options for cannabis businesses that need banking solutions. Whether your business is based in Missouri, Utah, California, or any other state with a legal cannabis market, NCIA’s Banking & Financial Services Committee can help provide information that may help you obtain banking services. Please get in touch with usif you need help, and we can make connections that could help.
Considering the changes to legislation in states across the country, as well as the impressive growth of the cannabis industry in recent years, we’d like to take this opportunity to welcome both newcomers and old-timers in this industry. Our community is vibrant and collaborative, with a focus on helping each other grow.
Unfortunately, there are always operators who try to work around the rules instead of following them. As a result, it’s important that we remind all our members about the dangers of breaking the laws or rules regarding cannabis banking and payments. We want to make sure that everyone knows the dangers that can be associated with the few transaction methods that are available to the industry.
Debit and credit card payments for cannabis are not allowed by the branded card networks. What does this mean? VISA and MasterCard do not want anyone paying, or receiving payment, for cannabis on their rails. While not technically illegal, circumventing their rules can lead to some dire consequences, including getting blacklisted and unable to get a merchant account in the future, even when cannabis becomes federally legal.
Instead of trying to work outside the system, focus on compliance and sustainability. How can you ensure that your business thrives for years to come? Build a solution that is legal now and will continue to operate legally as the federal laws expand. Work with banking and payment partners who understand your business and help it grow. Ensure that you only build partnerships with reliable, trustworthy institutions that improve your brand’s viability and performance.
As always, remember that NCIA’s Banking & Finance Committee is here to help you. Our goals are to educate and support operators in this industry across the country. If you’re worried that your banking or financial services solutions might not be fully trustworthy or compliant, don’t stay silent. Make full use of this committee by utilizing all our resources and connections to help your business thrive. Because when your business does well, the association continues to grow and improve, too.
In his role as Hypur’s Chief Revenue Officer, Tyler leverages his extensive experience in building brands, managing key relationships and strategic partnerships. Tyler has been at the forefront of Hypur’s expansion efforts for over five years and touches Financial Institutions, Government Officials, Regulatory Bodies and the State Legal Cannabis industry.
As a result, he possesses an intricate knowledge of the Banking and Regulatory climate, key industry influencers, industry dynamics, and market history. He has also become a key contact for media outlets, analytics companies, industry consultants and investment firms searching for reliable, accurate sources of industry information.
Tyler’s contacts and relationships in the US State Legal cannabis industry are unparalleled.
As a result of his influential value, he was selected to be Chairman of the National Cannabis Industry Association Banking and Financial Services Committee. He is also a member of the Forbes Business Development Council, frequently publishing articles about the banking and payment environment in the cannabis industry. Tyler founded and managed a large beverage company prior to joining the Hypur team and was a professional athlete in the New York Mets Organization.
Ten Years Of NCIA Featuring Aaron Smith
The National Cannabis Industry Association, which currently represents nearly 2,000 member businesses, turns 10 years old in 2020!
NCIA was founded in 2010 at a time after the release of the Ogden Memo by Justice Department directing prosecutors not to prioritize the use of federal resources to prosecute patients with serious illnesses or their caregivers who are complying with state laws on medical marijuana, laying the groundwork for a new national industry.
It’s been a long, wild ride representing the next great American industry. Hear from our Executive Director Aaron Smith about what it’s been like to advocate for the responsible cannabis industry and grow the association for over a decade!
2019 was an incredible year of growth for the cannabis industry; mergers and acquisitions, multi-state expansion, new state licensing, and an explosion of new jobs created. Operationally, more businesses began adopting best practices from the retail and hospitality industries and implemented technology systems to connect all facets of business for stronger insights. There have been focused efforts on hiring, engagement, and training to improve employee retention. Plus, the momentum for widespread acceptance of cannabis legalization is truly unstoppable.
These favorable advancements haven’t come without a variety of challenges, including continued banking access stalls, compliance hurdles, and environmental tragedies. While most legal markets in the nation are struggling to keep up with the demand for qualified talent, select California enterprises laid off an average of 30% of their workforce due to numerous obstacles. Most notably, the vaping crisis shed light on the need forconsistent regulation and testing. Additionally, lack of access to capital has significantly slowed down business growth nationwide.
According to a survey Wurk sent to leading enterprise U.S. cannabis businesses, the largest human resource challenge in 2019 was managing rapid growth and scaling the workforce to meet demand. Managers felt pressure to ensure hiring plans were strategic, yet could meet the constant change of the industry, and many learned that employee turnover was directly related to a lack of training and effective performance management practices.
2019 tested the resiliency, patience, and commitment of many in the industry. As 2020 begins, consider this: this is a passionate community that has the experience, determination and gumption to persevere no matter the roadblocks. As pioneers in cannabis HR, leaders are responsible for providing the right support and resources to the people of the industry, so momentum continues.
In 2020, recognize these 9 trends in cannabis Human Capital Management:
Employee Training & Performance Management
While more than half of the US has some form of cannabis legislation in place, the industry still lacks a standardized education and training program for employees in each vertical. Compliance and risk management programs have been developed by vendors like Cannabis Trainers, and states such as Massachusetts are mandating that operators take part in these sessions. A portion of marijuana businesses have created internal training programs and will invite producers in-house to offer product education to budtenders.
Although there’s been progress in this category, the industry is still a long way away from providing consistent, reliable education to employees. In the coming year, HR leaders will have self-developed or outsourced courses on compliance, at a minimum. More and more operations will expand their employee development to include product and plant specifics, responsible selling best practices, and even positive psychology coaching.
Reducing employee turnover will remain a focus for cannabis HR leaders in 2020. Operators will take a fresh look at how performance management is handled and whether it aligns with company culture. One approach to replace the annual review will be “continuous performance management,” where frequent one-on-ones are scheduled to improve communication, address issues fast, and ensure employees are engaged in the organization. HRIS platforms can support these conversations with people data so managers can combine the human interaction with trending evidence in order to spot at-risk employees before they jump ship.
Employee Experience
People are a business’s largest asset, which means not only can they be the most substantial expense, they are also the biggest revenue generator. The Employee Experience (what people encounter, observe or feel over the course of their employee journey) will begin to be a part of cannabis HR strategy into the new year. By gathering insights about this unique workforce through surveys, interviews, and conversational documentation, cannabis businesses will start to define an Employee Experience that parallels the company’s mission, vision, and values.
Forbes recently included “tending” people as an HR trend to be aware of in 2020. The idea is to cultivate employees and support their growth, rather than manage them. This intentional relationship-building practice evokes a sense of community and wellbeing. Harvard Business Review notes that tending goes a long way in mitigating the “workers as machines” phenomenon. If crucial talent feels they are just a cog in the Multi-State Operator machine or an unseen hourly inventory manager, the likelihood of them voluntarily departing the business will rise.
Standardization vs Customization
Recognition must be given to leadership in 2019 for leaning on other industries for processes to effectively manage a mostly hourly workforce. While cannabis businesses are still in start-up mode, there are labor tasks and procedures that mirror those in the fast food, hospitality, and agricultural segments that can help shape standards. There’s no need to reinvent the wheel, but it’s obvious that the intricacies involved with the seed-to-sale process require customization.
In 2020, HR will balance enforcing best practices and the need for agile, tailored decision-making. When it comes to talent acquisition, for example, a hiring manager may draft a job description that includes vital soft skills, like reliability, communication skills, organization, adaptability, and leadership. In new cannabis markets, following a cookie-cutter model won’t generate the talent pool needed to build a business.
Being innovative with tried and true methods will allow leadership to solve bottlenecks today, not in the future.
Data-Driven Decision Making
According to Deloitte’s 2018 Human Capital Trends report, 85% of companies see people analytics as a high priority, but only 42% believe they are either ‘very ready’ or ‘ready’ to meet expectations. Over the years, cannabis executives have taken action to implement a technology foundation that supports compliance, streamlines processes, and reduces cost. Yet, there is still a lot of runway left to cover.
The focus will shift from technology as a ‘nice to have’ to technology as a major transformational driver in the years to come. Organizations will recognize the benefit of all-in-one solutions that enable better business decisions based on data. Human Resources will remain on budget by comparing actual spend per department, location, and cost center to predicted payroll spend. Managers will rely on people analytics to identify what elements impact turnover and employee engagement. Even in the most fast-paced, ever-changing industry, HR professionals will have the ability to predict future trends for talent, finance, and workforce planning.
Managing Rapid Growth
Massive expansion has created immense pressure for all positions in the cannabis vertical, notably for HR professionals. With most companies growing through M&A activity, not organically, the structure of business is evolving faster than most can realistically manage. This surge will only continue in 2020, demanding the expertise of the HR department to effectively discern new opportunities and build the workforce of the future.
According to the PwC CEO survey, 77% of CEOs believe the biggest threat to their business is the lack of availability of key skills. With CEOs so concerned about talent, cannabis HR managers will shift focus to increasing productivity of their existing workforce as opposed to hiring additional staff. Data will help inform HR professionals on who the top performers are and what conditions are supporting their success.
Outsourced HR Solutions
Employee relationship management should be made a priority for every business, but in-house cannabis human resources may not be an option for all. Small businesses may wait until they reach 40 or even 75 employees before bringing on a full-time HR manager. Constantly evolving labor laws and the risks involved with cannabis payroll will drive some business owners to outsource HR services to cannabis-specific partners.
From employment taxes to employee benefits to the Fair Labor Standards Act (FLSA), there are many aspects of workforce management that owners may not have the resources or experience to maintain. In an industry already strapped for financial support, one mistake in adhering to the work and pay rules for a specific municipality can amount to a hefty fine. The risk involved with managing cannabis people is high and this liability will drive licensees to depend on cannabis-friendly HR and Payroll partners.
Diversity and Inclusion
Key states had strict requirements surrounding diversity initiatives in the cannabis application process in 2019 and this focus will only grow in the decade to come. HR departments will develop stronger D&I plans with innovative ways to recruit, to communicate the importance of unique perspectives and to support peers across the organization.
Sadly, the industry saw a decline in the number of women execs at the end of the decade. Vangst found that of the 38.5% of employees that self-identified as females in the industry, only 17.6% of these women held a “Director” or “Executive” role. This compares to 82.4% for self-identified males.
As momentum gains, the industry will continue to attract like-minded, experienced professionals from mainstream, big box corporations. This past year, KushCo Holdings appointed former Nestle and Cetera Financial Group HR Executive, Rhiana Barr, as their Chief People Officer and Harborside brought on a female HR leader from big pharma. This trend will progress as the industry continues to prove legitimacy through international acceptance and financial opportunity.
Corporate Social Responsibility
Giving back to the community has been a challenging push for cannabis businesses as many non-profit organizations and volunteer programs are still hesitant to partner with plant-touching operations. Thankfully, this trend is taking a turn in a positive direction. Take for example, Cresco Labs, who launched the SEED initiative in 2019 to “ensure that all members of our society have the skills, knowledge and opportunity to work in and own businesses in this industry.” Companies all over the nation are contributing to those most affected by the War on Drugs by donating to non-profits like Last Prisoner Project or collaborating on expungement events.
Human Resources will attract a wider talent pool and increase employee satisfaction in 2020 by providing thoughtful opportunities for employees to be involved in CSR efforts.
Wellness and Benefits Offerings
For years, marijuana businesses have had to worry about basic employee resources, like ensuring they have access to banking and can receive a direct deposit. Although this will remain a hurdle for many, more doors have begun to open for managers to offer benefits, and even 401(k). Insurance and 401(k) brokers that are transparently serving the industry are becoming more and more prevalent into the new year. While Section 280E hinders employers from offering a 401(k) match, some production-focused entities may be able to deduct contributions to their employee benefits plans, where dispensary entities may not be able to—even when they’re owned by the same parent company.
Partnering with cannabis-friendly brokers and financial advisors will only benefit HR professionals as these offerings are still difficult to obtain and execute.
They say a year in cannabis is like 7 dog years… The industry has made it this far, not without flaw and frustration, but certainly with grit and determination. Organizations have the strength to power through 2020 with a solid foundation, the right toolset, and the best people around.
Heather is an experienced marketing professional with a demonstrated history of work in cannabis technology and digital strategy. Skilled in customer relationship management, online marketing, immersive experience design and communications, Heather brings a unique combination of creative ideation and project management. As Director of Marketing for Wurk, the first workforce management company designed specifically for the cannabis industry, Heather develops key messaging to inform the market about effective human resource management and to support the advancement of the industry. With previous experience at MJ Freeway, the leading provider of seed-to-sale software solutions for marijuana businesses, Heather brings a unique understanding of cannabis chain of custody and the various challenges operators face in this highly regulated space. Heather earned a bachelor’s degree in communication design and marketing from Metropolitan State University.
Designed specifically for the cannabis industry, Wurk allows employers to protect and streamline their operations, while providing an environment where people are a priority every step of the way. The intuitive, all-in-one solution automates the most complicated and risk-prone processes associated with hiring, scheduling, and paying employees. Learn more at enjoywurk.com.
Committee Blog: Working With Your Local Government as a Cannabis Cultivator
The regulated cannabis industry is inextricably linked to politics, and all politics is local — so when trying to open and operate a cannabis business, you’re almost sure to need to work with local government in some way.
To help our members understand how to start these relationships right, the NCIA State Regulations Committee hosted a webinar on how to approach local government earlier this year. That focused on identifying your relevant local authorities, how to introduce yourself, and how to properly navigate those relationships.
Once you’ve figured out who to talk to and have gotten in touch with them, they’ll often have questions about the cannabis industry, and there is plenty of good information you can proactively share as well. To help NCIA members inform their local governments about the wide range of issues surrounding our industry, we’ll be diving even deeper with a series of blog posts.
We’ll be starting this series where the whole cannabis supply chain begins: cultivation. Future posts will touch on processing, retail, and more. Even though states categorize their licenses differently, with some issuing stand-alone cultivation licenses and others combining cultivation with processing (or sometimes issuing vertically integrated licenses, with retail too), we’ll be focusing in on the various operations individually.
ECONOMIC IMPACT
When elected officials hear about a new business wanting to open in their town or city, their first question is usually, “how many jobs will it bring?” Mayors, city and town councils, departments of economic development, and other government entities are often laser-focused on building up the local economy, so explaining how your business will help them towards that goal is integral to moving your project forward.
Lucky for them, cannabis cultivation is a very labor-intensive endeavor, and you’ll likely be hiring dozens of people to staff your facility. If you’re an experienced operator who knows exactly how many people you need to hire and in what roles, let your local government know! They’ll be interested to see the range of responsibilities and necessary experience, from entry-level trimmers to mid-career managers to botanists with a Ph.D. If you’re still figuring out your exact staffing plan, providing a range of possibilities will help them understand the scale of your project. Be sure to avoid pie-in-the-sky estimates that you’ll never be able to reach — in the long run, it’s always better to under-promise and over-deliver than to make it seem like you were pulling a bait-and-switch. Also do not forget to include all the contract jobs created by constructing or retrofitting your facility.
Beyond the sheer number of hires you’ll be making, it’s important to talk about the compensation and benefits that you’ll be providing to your employees. If you’re starting everyone above the state’s minimum wage — or better yet, starting everyone at a living wage (generally thought to be at least $15/hour) — highlight that! If you’re providing health insurance or other benefits to your hourly employees, let them know! Elected officials like to see companies doing better than the bare minimum, and love to see companies that do even more.
Your physical facility will also have an economic impact on the community that’s worth talking about. If you’re buying your building, you’ll be paying property taxes, and you can let your elected officials know just how much you’ll be contributing to the tax base. Mayors and councilors always love to see unused space being occupied, so if you’re making use of a vacant or neglected building, be sure to let them know. This goes double if you’ll be making improvements to the building that increase its value (and triple if you’re using a local construction company to make those improvements).
Finally, consider whether you will be providing any additional revenue to the local government. While some state cannabis laws do allow for local taxes, these typically apply to retail rather than cultivation. Massachusetts and some other states also make heavy use of “community host agreements,” or CHAs, where a business commits a percentage of its revenues to the local government for a limited period of time. If either of these applies to you, be sure to provide elected officials with the relevant parts of state law, and the specifics you’re willing to offer. If you plan to financially support any charities, provide details — and if you’d like some guidance on what local charities are doing the most good, just ask, since most officials would be happy to tell you some of their favorites.
PUBLIC SAFETY
Elected officials also care about public safety, but usually follow the lead of their police chief and fire chief, for whom safety is their one and only priority. It’s good to proactively highlight the ways your facility will improve public safety — if you’re installing outdoor security cameras or floodlights, those can protect your neighbors as well as yourself, and there have been multiple cases where cameras on a cannabis business have helped solve an unrelated crime.
It’s important to remember that police and fire chiefs are spread thin and need to know a little about a wide variety of topics. Unless there are already cannabis businesses in their town, they probably haven’t read the state security requirements to open a facility, so providing an overview of the state law can help demonstrate how tightly regulated you will be. Knowing that the state already has rules for waste disposal, product storage, and controlled access areas can alleviate many of their initial concerns.
Once you’ve explained the security features of your building and run through the state requirements for cannabis businesses, you should address any lingering fears or questions that they may have. Two of the most common concerns are the safety of employees while transporting product or cash, and the risk of your building being targeted by burglars looking to steal product.
Regarding employee safety, explain how you will be shipping product to processors or dispensaries. Are you delivering it, are they picking it up, or are you using a third-party transporter? If you are transporting product yourself, explain both the state requirements and your own operating procedures, from GPS tracking to using two employees for each delivery.
You should also go into detail about your banking relationships. Many people outside the industry assume that it’s 100% cash, but if you’re part of the large majority of cannabis businesses with bank accounts, let your local officials know, especially the police chief. They will be much more comfortable if they know your customers will be wiring payments directly to your bank, rather than dropping off duffle bags full of cash at your facility.
Regarding burglary, be sure to re-emphasize your security measures, from cameras and fencing to access control and alarms. Explaining the cannabis life cycle may also be helpful — since plants are not useable products for most of their life, they’re poor targets for theft. This means that cultivation facilities are not prime targets for burglars, but in the rare cases that they are targeted, you can point to examples where cameras have led to burglars’ arrests.
COMMUNITY IMPACT
While economics and public safety are almost always the top two concerns of local governments, they may also be worried about other impacts on the community and how your business will affect residents’ quality of life. Common questions include whether your facility will emit any odor, and if it will increase traffic in the area.
Cannabis is famous for its strong odor, so it’s understandable that people would ask about it. Whether your state requires it or not, it’s advisable to use charcoal scrubbers or other odor mitigation technology to prevent your plants’ odor from escaping the building. Knowing that you’re taking steps to address this concern will help elected officials feel comfortable welcoming you into their community, especially if it’s in a densely populated area.
Traffic concerns may arise, especially if there are recent news stories about mile-long lines at dispensary grand openings. You can address this easily by explaining how cannabis cultivation facilities are not accessible to the public, and the main people coming to your building will be employees and inspectors, not customers.
When built and operated properly, cannabis cultivation facilities should be virtually indistinguishable from any other commercial warehouse. Unless you have very explicit signage (which we do not recommend), most people driving or walking by will not even know that you’re a cannabis business.
GOING FURTHER
Even after you have addressed all of your local government’s concerns, there will probably be even more questions — and that’s okay! This is a great opportunity to keep the dialogue open. Be sure to stay up to date on state laws and regulations so that you can serve as a resource for local officials. Because they’re spread so thin, they will appreciate having someone like you as a go-to when they have questions about cannabis politics or the industry.
If you’re able to offer tours of your facility, that’s a great way to build relationships with your local officials while educating them about your business and the cannabis industry as a whole. They may also appreciate invitations to events hosted by state cannabis regulators, or local industry conferences where they can get broader exposure to the cannabis world.
And of course, it’s important to be a good member of your community. Whether it’s participating in local projects, supporting local organizations, or organizing your own trash clean-ups or other events, staying active and visible will help the community know that they can count on you being a good neighbor.
Be sure to stay tuned for future installments in this series, where we will be addressing other cannabis license types. Our next blog will focus on processors.
The 2019 Cannabis Compensation Survey
NCIA is pleased to join forces with FutureSense to announce the first formally executed survey created for the cannabis and hemp industries. A growing number of companies have been looking for data and best practices for their executives and employees. This survey provides benchmark data to better understand compensation trends and remain competitive for talent in the marketplace.
2020 may be filled with unpredictable and new challenges. Compensation data and best practices are the foundation of any human resources and growth initiative. Pay is an effective supporting tool for any employee-oriented effort. As participation in the survey increases, so will our understanding of what is working and why it is effective.
We encourage you to read through the preliminary results laid out in the report and then consider taking the survey yourself by clicking on the links at the bottom of each page.
A new data release is planned for the first quarter of 2020. It will be followed by quarterly updates for the remainder of the year. We are accepting rolling submissions of the survey and will update and rerelease results on a quarterly basis. Participation is easy and we can help! If you’d like to participate simply go to www.CannaCompensation.com, select the “I Want To Participate” button, and fill in your information. FutureSense will contact you with instructions.
Senate Banking Committee Chairman Gives Cannabis Industry Coal for Christmas
by Michael Correia, NCIA’s Director of Government Relations
NCIA’s Director of Government Relations, Michael Correia
As you may have heard by now, Senate Banking Committee Chairman Mike Crapo (R-ID) issued a very disappointing press releaseabout his opposition to the SAFE Banking Act yesterday. If you recall, the SAFE Banking Act passed the House of Representatives in September with an overwhelming bipartisan majority (321-103) and is waiting for a legislative markup in the more conservative Senate.
In the release, Chairman Crapo said, “I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the State of Idaho. I also do not support the SAFE Banking Act that passed in the House of Representatives. Significant concerns remain that the SAFE Banking Act does not address the high-level potency of marijuana, marketing tactics to children, lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system.” Perhaps the most alarming change Chairman Crapo suggested was a 2% THC potency cap on products in order for a business to have access to the banking system. This provision alone is unworkable and unacceptable.
Chairman Crapo continued by outlining numerous areas that he believes need to be addressed:
Add public health and safety solutions as a requirement for banks to do business with legally-operating state cannabis companies. Options to consider include THC potency; clear and conspicuous disclosures on products; marketing; effects on minors, unborn children and pregnant women; and age restrictions, among other considerations.
Prevent bad actors and cartels from using legacy cash and the financial system to disguise ill-gotten cash or launder money.
Update 2014 FinCEN rulemaking and guidance regarding marijuana-related businesses, and ensure FinCEN has all of the necessary tools it needs to prosecute money launderers and promulgate rulemakings.
Respect state rights in interstate commerce and banking for institutions who operate in multiple states with different state rules.
Eliminate “Operation Choke Point” and preventing future “Operation Choke Point” initiatives. Under fear of retribution, many banks have stopped providing financial services to members of lawful industries for no reason other than political pressure, which takes the guise of regulatory and enforcement scrutiny.
Unfortunately, Chairman Crapo’s views are out of step with the majority of Americans, and every day that he delays a markup on this legislation is another day that puts public safety at risk. While the Chairman may oppose broader cannabis policy reform, he clearly recognizes the problems created by lack of access to financial services. The SAFE Banking Act already addresses many of the chairman’s concerns, particularly public safety, clarity, and transparency. We’re happy to discuss these items with the Senate Banking Committee in a markup. However, efforts to slow this legislation’s momentum will not fix the underlying problems and will continue to put people at risk.
NCIA will continue to work with industry stakeholders, advocates, the financial services industry, and other coalition partners to address Chairman Crapo’s concerns and reach a conclusion that aids public safety, is good policy, and delivers a positive outcome for the burgeoning cannabis industry. That being said, here is how you can help.
Chairman Crapo is requesting public feedback on the SAFE Banking Act and the concerns that he outlined. Interested? You can submit proposals to Banking Committee staff at submissions@banking.senate.gov. Here are a few important tips to remember:
Be polite. While the Chairman’s opinions may not align with your own, remember that he is the sole person deciding whether or not the SAFE Banking Act will continue on in the legislative process.
NCIA, the American Bankers Association, and many other stakeholders have already provided the committee with relevant information on several of the issues identified by the Chairman including legacy cash, interstate commerce and ‘Operation Chokepoint.’
The SAFE Banking Act is a narrow financial services bill that will increase transparency, accountability, and public safety in communities around the country. It does not legalize marijuana.
The SAFE Banking Act is supported by a wide range of national organizations and state officials, including: National Association of Attorneys General (NAAG), United Food and Commercial Workers (UFCW), Credit Union National Association (CUNA), Independent Community Bankers Association (ICBA), American Bankers Association (ABA), Mid-size Bank Coalition of America (MBCA), National Bankers Association (NBA), Electronic Transaction Association (ETA), Law Enforcement Action Partnership (LEAP), The Real Estate Roundtable (RER), National Association of REALTORS, Safe and Responsible Banking Alliance (SARBA), American Land Title Association (ALTA), American Property Casualty Insurance Association (APCIA), The Council of Insurance Agents and Brokers (CIAB), Reinsurance Association of America (RAA), Independent Insurance Agents and Brokers of America (Big “I”), Wholesale Specialty Insurance Association (WSIA), National Association of Mutual Insurance Companies (NAMIC), Rural County Representatives of California (RCRC), Brinks, Inc., International Council of Shopping Centers (ICSC), National Association of Professional Employer Associations (NAPEA), National Cannabis Industry Association (NCIA), Minority Cannabis Business Association (MCBA), National Cannabis Roundtable (NCR) and the Cannabis Trade Federation (CTF). Additionally, the Mayors Coalition to Push for Marijuana Reform, 38 State Attorneys General, 20 Governors, and 18 State Banking Supervisors have endorsed the legislation.
If your business is not yet a member of NCIA, the best way you can help this effort is by joining today so that our team in D.C. can start the year off stronger than ever in our efforts to move sensible banking reform through the Senate and to the president’s desk. Although this news is not what we wanted for Christmas, NCIA has been and will continue to work tirelessly to pass the SAFE Banking Act. We will continue to advocate for a responsible, safe, legal industry in 2020 and beyond. Happy holidays from NCIA’s D.C. team to you and yours!
Webinar Recording: 280E Mitigation – What You Need To Know
Watch this webinar recording in case you missed the live presentation from December 17.
Legal cannabis has been spreading across the United States for over 10 years now. How has the industry been viewed in the eyes of the IRS? The cannabis industry has consistently lost in tax court against the IRS. Can these businesses be profitable on an after-tax basis? Do management companies help with profitability? Jim Marty and Cory Parnell of Bridge West LLC, CPAs and Consultants to the cannabis industry will explore these questions in light of recent tax cases.
Learning Objectives:
1. The session will help attendees understand the implications of recent Tax Court decisions that involve IRS Code Section 280E.
2. Learn how to avoid double taxation with related party management companies.
3. Explore the Eighth Amendment to the U.S. Constitution regarding excessive fines and penalties. Hear the arguments that conflict with 280E.
4. In light of the above, learn how C-Corporations can help protect again personal liability for dispensary income taxes.
Supporting Our Cannabis Champions
by Madeline Grant, NCIA Government Relations Manager
With all the action in the 116th Congress so far, NCIA strives to support as many cannabis champions on Capitol Hill as possible. It is key to keep Members of Congress that support cannabis reform in the halls of Congress, as they will continue to push the momentum forward through legislation, committee activity, and education. Our NCIA-PAC Leadership Circle members make this support possible, as their contributions go straight towards Members of Congress. Below are a few events and fundraisers where we utilized PAC funds to support our issues and Members on the Hill.
NCIA staff attended Congressman Ed Perlmutter’s fundraiser in celebration of the passage of the Secure and Fair Enforcement (SAFE) Banking Act on the House side. Rep. Perlmutter is the lead sponsor of the SAFE Banking Act and because of his leadership and hard work over the years, we are seeing more success this congress than ever before!
As we are approaching the Holiday season, Members of Congress are getting festive. NCIA hosted Congressman McNerny’s Holiday Party. Our D.C. staff is making use of our new office, as we’ve hosted a handful of holiday parties this year full of conversations, hot chocolate, and cookies for all.
Another festive holiday party hosted at our D.C. office with Congressman Earl Blumenauer. The Congressman gave everyone a mini fruit cake, a famous annual tradition in the Blumenauer office. With all the momentum this congress, Congressman Blumenauer has been one of our biggest champions in cannabis reform.
Mike and I attended Rep. Porter’s lunch fundraiser this year. It is always a pleasure discussing policy issues with the congresswoman. As a freshman Member of Congress, Rep. Porter has been fighting for the cannabis industry since day 1. We had the pleasure of meeting the Congresswoman when she entered into California’s 45th district race and continue to support her with NCIA’s PAC funds.
Our Director of Government Relations, Michael Correia, attended Rep. Lee’s birthday this past July. He was able to spend some time with Speaker Pelosi and Rep. Lee while discussing cannabis reform. As you know, the momentum in the 116th congress has been momentous so it’s important to thank the Members of Congress that helped make it happen.
How do we support our champions?
NCIA’s Political Action Committee (PAC) supports our champions on Capitol Hill. With NCIA-PAC funds we are able to contribute PAC dollars to the Members of Congress above and many more. These funds go to their campaigns to help them get reelected and stay to fight for us on Capitol Hill. If you are interested in learning more or getting involved with the NCIA-PAC, please send an email to Madeline@TheCannabisIndustry.org. Thank you to our PAC Leadership Circle members that help support cannabis reform on Capitol Hill- without you, we would not be able to support our champions.
Member Blog: Pathogens And Public Health – The Dire Need To Detect Microbes
As a new industry, cannabis has the opportunity to do business the right way. From day one. Many industries have come before ours, making missteps as well as setting best practices. In fact, we have the Harvard Business Review articles to prove it.
That’s why it frustrates me to no end to see industry players short-cut the right path forward. One of those areas is testing. In every consumer product area, testing is vital to ensuring consumer health and safety, but it is even more dire for products that are consumed or inhaled.
The Dire Need to Detect Microbes
Microbial contaminant testing is a critical step in the supply chain for all food and agricultural products, but it becomes ever more important to ensure cannabis products are verified as free of hazardous contaminants as cannabis-derived products become accepted treatments for various medical conditions.
Currently, the regulatory framework for evaluating the safety of cannabis products differs from state to state, with an abundance of clinical cases to back up the reason for testing, and the availability of technology to meet the safety standards to protect immuno-compromised patients and consumers. Conventional methods such as Petri-dish culturing and qPCR methods are not nearly as accurate or sensitive as commercially available, next-generation technology such as DNA microarray testing. Yet, the continued use of these outdated methods opens up the possibility that dangerous and deadly contaminants can enter the supply chain, and get consumed by millions of consumers.
In a recent study released to regulators and labs across the country, it was presented that plate culturing and qPCR testing was unable to detect the presence of a deadly fungal species, Aspergillus, that is presently common in both recreational and medical marijuana. A different technology, the DNA-Microarray tests not only detected Aspergillus, it also identified the exact species of the fungus, a nuance that requires longer testing times and additional testing steps when using petri dishes or qPCR methods.
Technologies such as sequencing and DNA microarrays can test for dozens of different deadly pathogens multiple times simultaneously from the same sample, whereas plate and qPCR methods test for a single or limited number of microbes. What this means is definitive confirmation when using the Microarray technology. This is where the technology is different and better, and also saves on costs, streamlines the entire testing process and reduces any opportunity for operator error.
In addition to being more accurate, DNA microarray testing is also faster. Plate methods require microbials to be cultured before being tested, which takes a minimum of 24 hours and often closer to a week for slower-growing organisms, such as many fungi including Aspergillus. In contrast, DNA Microarray testing yields results in six hours, and reduces harm to lab technicians by not subjecting them to large amounts of live cultures.
The point here is when technology is available that protects consumers and patients to an even greater level, is faster and more economical to process, and better in terms of performance, then why should the cannabis industry walk down the same path other industries have traversed, and one which they have tripped over multiple times? Why not learn from the lessons of these other industries and set a path that ensures greater safety and quality to the product?
History Not Worth Repeating
We’ve seen what happens when industries and governments turn a blind eye to deadly matters. In the pharmaceutical industry, the FDA came under scrutiny after a study found that excess dosages of the Merck drug Vioxx tripled a patient’s risk of cardiac arrest. In front of a Senate Finance Committee, the FDA was asked why danger signals of Vioxx went ignored. Questioning specifically focused on its relationship with the drugmaker, its expedited review process and the timeliness in conducting and stopping clinical trials when potentially adverse information was found that put the public at risk.
And yet, a similarly concerning matter remains ongoing with asbestos makers. The U.S. began regulating asbestos in the 1970s but has yet to ban the mineral, despite it being the number one cause of work-related deaths in the world. In fact, evidence suggests there is no safe level of asbestos exposure.
Similarly, science shows that there are no safe levels of Aspergillus. All it takes is one spore to kill. Sub-par and outdated testing methods not only risk the health of immunocompromised patients, it also puts consumers exposed over a period of time into the line of fire – as well as the credibility of the industry as a whole. Regulators need to demand cannabis is 100 percent contaminant-free by using testing methods that deliver absolutely proven and reliable results.
A number of stakeholders in the industry and beyond have reason to take up the call. In the recent e-vape crisis over 2,000 people have been hospitalized and 50 people have died due to lung infections. The pathogenic strains of the Aspergillus family would exacerbate this crisis further, and so gives the industry reason to ‘tighten’ the regulatory framework even more so not only with trusted testing methods, but ones that definitively protect public health. Even today in certain states that have not mandated testing of Aspergillus, but only mandating testing of Yeast & Mold, those states are allowing their consumers and patients to inhale Aspergillus ultimately fueling a national pandemic in lung infections. Just reference a peer-reviewed scientific paper by Kagan MD et al in the Journal of Allergy Clinical Immunology published in 1983, where the authors concluded that “[t]he use of MJ thus assumes the risks of both fungal exposure and infection, as well as the possible induction of a variety of immune and infectious lung disorders. Given the extraordinary number of individuals estimated to be MJ smokers, the occurrence of these illnesses may well become more commonplace”.
Sometimes the way things have always been done just isn’t good enough anymore. Technology has changed the way we take pictures, listen to music and even hail a ride. Can you do those things the old way? Sure, but they won’t have as much definition or clarity. It won’t be as convenient or cheap. When there is truly a better way, why wouldn’t you change?
And that’s what we ask when it comes to protecting the supply chain, a place where quality and accuracy cannot be compromised. When it comes to which testing method is the best, there is a clear choice – a choice that literally comes down to life and death. In order to safeguard both consumers and the legitimacy of the industry, cannabis stakeholders should demand labs use rigorous testing methods that pinpoint pathogens and protect public health.
Photos by Michael Chansley Photography, www.michaelchansley.com
Mr. Patel leads the strategic vision, financial health and global growth of PathogenDx, a Scottsdale, AZ based company which provides disruptive DNA-based pathogen testing technology and solutions for the cannabis, botanical, food and agricultural industries.
Previously, Mr. Patel spent over 25 years working with large public, small private and entrepreneurial companies in numerous fields from the life sciences, to biotechnology, to government services and the automotive industry. Milan served as COO/CFO of GMSbiotech. He also was CFO of 2020 Company, LLC, a leading premier professional services firm that delivered business and technology solutions to the government, in the areas of health, education and science.
Mr. Patel also worked at Intel Corporation in Sales & Marketing, Finance and Manufacturing. He has extensive experience in corporate finance, mergers and acquisitions, business strategy and planning, infrastructure and organizational development, and controls, compliance and audit and has led several company exits.
Milan earned his BS in Electrical and Electronics Engineering from the University of Detroit Mercy; a MS in Biomedical/Medical Engineering, University of Michigan; and a MBA in Finance and Marketing, University of Detroit Mercy.
Felony Provisions, Harvest Schedules, and ‘Hot Hemp’ – NCIA Responds to USDA Hemp Rules
by Vince Chandler, NCIA’s Social Media Manager
On October 31, 2019, the USDA released its Final Interim Rule governing the domestic production of hemp within the United States. Going into effect immediately upon its issue, the interim rule regulates industrial hemp after the 2018 Farm Bill removed its Schedule I listing under the Controlled Substances Act. While the IFR is in effect, there is a public comment period happening right now, allowing for early input as the federal agency begins to “test drive” the program. Sunsetting after two years, the interim rules will inform permanent oversight and regulatory infrastructure after a full crop cycle has occurred.
National Cannabis Industry Association Director of Public Policy Andrew Kline formed a coalition of more than 100 leading hemp and CBD entrepreneurs, scientists, medical doctors, and FDA lawyers in May to provide comments and testimony to the FDA on their regulations and rulemaking for CBD. The committee produced 60 pages of formal comments to the FDA, as well as providing expert testimony. After the submission of the coalition’s comments, the NCIA Hemp Committee absorbed the effort to voice the cannabis industry’s position on federal regulation of low-THC cannabis.
On Wednesday, NCIA hosted a webinar with our Hemp Committee Chair Cindy Sovine and committee member Alex Buscher to discuss the cannabis industry’s official response to the USDA hemp rules. Concerns about definitions, the feasibility of harvest windows, and DEA oversight of testing laboratories all pose as potential hurdles in the program’s viability, and NCIA is committed to ensuring our members have all the resources they need to submit feedback to the USDA before the deadline.
It is important to note that, while the 2018 Farm Bill descheduled hemp with less than 0.3% THC, the federal agency has left it up to individual states to submit plans for regulations and oversight. Until a state has submitted their regulatory plan, and had it approved, the sale of hemp is not legal in that state. While states draft and submit their plans, NCIA is leading the quest for information on how federal rules will apply.
The administrative procedure for the USDA requires that they consider any comments put forth by the public, but do not have to adopt any of them. All indications are that they are open to influence and input from those, like National Cannabis Industry Association, with institutional knowledge on the matter.
Highlighted in the webinar as an action item deserving immediate attention and commentary is the USDA’s planned rule for “hot hemp.” The agricultural governing agency appears to have taken the position that they lack regulatory jurisdiction over cannabis plants that test above the 0.3% THC threshold, deferring instead to the Drug Enforcement Administration.
NCIA’s Hemp Committee recommends that, instead of handing oversight to the DEA, USDA should adopt particular procedures that will allow for the remediation of those hemp plants. This re-processing should render non-compliant plants compliant, thus allowing for their use rather than requiring the immediate mandatory disposal, per DEA regulations.
Remediation options could include:
Removal of THC through processing
Conversion of THC
Diversion to fiber market
Interstate commerce, harvest scheduling, and DEA testing laboratory registration need to be addressed, along with specifying definitions for ambiguous terminology. These issues can be changed through public comment at the USDA rules level.
Requiring legislative procedure to change is the felony provision rules in the USDA Final Interim Rule. Currently, the Farm Bill’s statutory felony provision reads, “any person convicted of a felony relating to a controlled substance under State or Federal law, before, on, or after the date of enactment on this subtitle shall be ineligible…”
The USDA could have interpreted this provision broadly, blanketing the ban to apply to anyone working in any capacity in the industry. Instead, the USDA has limited this provision in their licensure by stating that it will apply only to “key participants.” While NCIA wishes to see felony provisions removed as barriers of entry from working in the legitimate cannabis industry, our committee recognizes this liberal interpretation of the provision as a best-case scenario, until the Farm Bill is up for renewal and specific language can be amended or abandoned.
Public commentary is open until December 30, 2019, and all NCIA Members are encouraged to submit their thoughts. For suggested language or guidance shaping your comment, we’ve made available our slide show from the webinar with samples of copy and more information on individual recommended steps. If you are interested in shaping NCIA policy recommendations for hemp, CBD, or many other cannabis sectors, inquire about joining our Policy Council.
Member Blog: The Ultimate List of Must-Have Cannabis POS Hardware
by Heidi Orpilla, Digital Content Specialist at Star Micronics
The cannabis industry is booming – and it’s expected to continue doing so. According to Grand View Research, the global legal marijuana market is expected to reach $66.3 billion by the end of 2025, and each year brings new legalization across the world.
Whether you’re in the business of opening a cannabis business yourself or are looking to provide cannabis point of sale (POS) solutions to your customers, it’s important to understand the critical role cannabis POS hardware has and how to determine which products are right for your business.
Must-Have Cannabis POS Hardware
Receipt Printers
Receipt printers are extremely important in the cannabis market. When it comes to cannabis, proof of legal purchase is key – and there’s no better way to provide it than with a receipt printer. In some places, like Canada, it is illegal to possess cannabis deemed illicit, and without proof of purchase, all cannabis is assumed to be illicit. Carrying that illicit cannabis could result in a $5,000 fine or a five-year prison sentence! In the US, laws vary greatly by state and must also be carefully obeyed.
Along with providing proof of purchase, it’s important to note that depending on your region, receipts must also contain other information, like store name and address, product category/name, and the appropriate tax code/identifier.
Label Printers
Next on the list is another kind of printer: the label printer. An important part of seed-to-sale tracking, printed labels have an important role in the entire cannabis production and retail process. Seed-to-sale tracking is a key requirement in cannabis regulatory models, and refers to the process of tracking plants and their byproducts from planting all the way through to the plant’s sale.
Custom Cannabis Labels
As mentioned above, labels are incredibly important for the cannabis industry. It’s critical to ensure your cannabis labels come pre-printed with official, state-required universal symbols. These pre-printed cannabis labels are available in various sizes for all recreational markets.
Scales
Yet another critical piece of cannabis POS hardware is the scale – but not just any scale will do. First, you must ensure the scale you are considering is legal to use in your state and NTEP-certified. Being certified means that the scales are ensured to charge the correct amount for the product being weighed. Another great feature to look for is a scale that is integrated directly into the POS. Why? Reduced risk of human error that is associated with standalone scales that cannot integrate with the POS.
To make the process of adding a scale to an existing system a simple process, look for scales which are compatible with Windows, iOS, and Android. It’s almost important to seek scales that include a waterproof and dust-proof cover, as well as Bluetooth, USB, and serial interfaces.
Cash Drawers
Chances are you’re aware that the cannabis industry is currently predominately powered by cash. While marijuana is legal in many parts of the country, it remains illegal under federal law, which means dispensaries’ access to credit card processing options is slim. Thus, a reliable, high volume cash drawer is key! Be sure to look for a cash drawer made of durable steel that’s available in colors to match the rest of your POS.
Scanners
Scanners are an important part of the entire seed-to-sale process, from back-end warehouse operations to scanning products at the point of purchase. Important features to look for are connectivity options and a design/color that matches the existing POS, if applicable.
Tablet POS Stand
As we discussed above, dispensary aesthetics are extremely important, not only from a branding and customer experience perspective but also to legitimize the business to outsiders and newcomers. A great place to tie in style is at the POS, and an easy way to do that is by incorporating a sleek, space-saving POS stand into your arrangement. Choosing a stand that features clean cable management is an added bonus.
Self-Service Kiosks
Dispensaries are sometimes limited to how many people they can allow inside at one time because budtenders need to be able to pay special attention to customers, and make sure they are recommending the right products. Some dispensaries are using kiosks to allow waiting customers to pick out what they want on screen, take the slip to the budtender, and simply just collect and pay for their items.
Value-Added Marketing Services
Just like other businesses, cannabis dispensaries need to advertise, but what sets them apart is that they must adhere to strict advertising laws. For example, in multiple states including California and Colorado, over 70% of cannabis advertisement audiences must be over the age of 21.
An easy way to ensure marketing efforts are being communicated only to the intended audience is by printing those promotions on your receipts. By leveraging receipt marketing tools – some of which can be provided by certain receipt printer manufacturers as a value-added service – dispensaries can create custom promotions from templates which increase customer engagement and retention and can be used to promote sales, new products, loyalty programs, and more.
The POS as a Dispensary’s Backbone
In the cannabis industry, accuracy, a professional aesthetic, and responsible marketing are of utmost importance. When properly implemented, the POS can become a dispensary’s backbone to success. By choosing the correct printers, scales, labels, cash drawers, and value-added marketing services, cannabis industry professionals can focus more on growing and selling and spend less time worrying.
Heidi writes for and manages the blog and social media at Star Micronics, a point of sale manufacturer that specializes in POS printing – and more – for the cannabis industry and beyond. Star Micronics offers a full portfolio of cannabis point of sale hardware including receipt printers, cash drawers, NTEP-certified Class II scales, label printers, mobile printers, tablet POS stands, and more. A true one-stop shop, Star provides all the hardware solutions a dispensary could need, from front of house dispensary sales to labeling and weighing product during curation. Additionally, Star has integrations with approximately 85% of all cannabis POS software on the market today.
Webinar Recording: NCIA’s Official Response To USDA’s Hemp Rules
Watch this recording if you missed the live webinar on December 10 about NCIA’s official response to the USDA’s hemp rules.
On October 31, 2019, the USDA released its Final Interim Rule governing the domestic production of hemp within the United States. The USDA is currently accepting public comments to its hemp rules through December 30, 2019. There are many rules that need to be changed or clarified to make the program viable, including sampling, required DEA registration for labs, a fifteen-day harvest window, and a definition of “commingling” among other potential issues. Please join Cindy Sovine and Alex Buscher to discuss the NCIA’s public comments and steps you can take to help shape the final USDA hemp rules.
Closing out 2019, jobs in the cannabis industry have been at the forefront of a national conversation. With more states coming on board with medical and adult-use legislation, the industry is continuing to grow. Industry leaders are looking to attract and retain talent from within and outside of the industry by using competitive compensation strategies.
Several companies launched salary surveys in 2019, including us – FutureSense, LLC. We started on this journey to offer our compensation consulting clients accurate survey data. Surveys happen to be one of our areas of expertise. We partnered with the National Cannabis Industry Association (NCIA) to launch the first-ever comprehensive, compliant, and actionable compensation survey to be released in January 2020.
As we dove deeper into the industry, we found that there were several other surveys in action. We also learned that our survey holds a few essential components that other surveys were missing.
These components include:
Compliance – Creating a compliant survey is not easy. Other surveys provide no acknowledgment of DOJ and DOL regulations around reporting pay data. Most other data sets do not indicate as to how many incumbents represent each data point, nor how heavily weighted any one company was in the data. Our survey follows all DOJ and DOL regulations.
Broad & deep data – At first, other surveys represented these values as minimums, averages, or maximums. Further research showed extreme data points that were not in line with normalized data. Based on our 30+ years of survey experience, these are clear signs of thin data. Our data has always been presented in percentiles, showing breadth and depth.
Usable & actionable data – Companies need much more than a handful of “hot jobs” to build out their compensation programs. HRT and compensation professionals need detail and ranges. Our survey provides extensive ranges and detail for professionals and companies to understand the market and put these findings into action.
When reviewing final survey data, we generally expect there to be data for a minimum of 25th, 50th, and 75th percentiles, each calculated using standard statistic formulas. We also expect there to be a normalized difference between each level of no more than one or two standard deviations from the norm. In much of the other industry data, there are only minimums, maximums, and averages reported. Even more concerning is the wide range of pay for some jobs. In certain cases, we have seen data with no ranges (clearly data for only one or two individuals). In other cases, we have calculated rough deviations of six or even ten standard deviations from the norm.
As an example: one of the industry’s premier recruiting firms did a great job outlining the current trends in the industry and providing info on hot jobs and benefits. The narrative is great, but the pay data used to support their findings is limited to less than 30 positions and does not indicate whether it is compliant with all rules. It’s simply not data that businesses should use to set their pay levels. As an independent third-party survey provider, we’re aiming to provide compensation and benchmarking information that can be used to determine pay, without any bias.
Our report currently covers compliant data for more than 85 positions in 11 job families. As participation in our survey continues to grow, we will continue to expand the number of reportable job titles and family benchmarks. Our goal for 2020 is 200+ jobs with compliant and reportable data. We will also begin to present data by demographic breakouts, like location/region, company size, and revenue. The elements will make the data increasingly useful to any compensation/HR professional or executive looking for pricing for key positions and the foundations for the structure of a viable pay program for their company.
We are big believers in collaboration, not competition, and welcome the opportunity to explore designing a single set of data with other industry providers currently creating their own survey. The goal must be to represent the industry at-large. Good data is critical. Our growing industry cannot afford to promote the use of bad data any longer.
The report summary will be released to NCIA members in January of 2020. For more information or to sign up to participate please visit: www.CannaCompensation.com
Dan Walter, FGE, CECP, CEP, is a Managing Consultant at FutureSense, a holistic human capital consulting firm. He has worked in the field of compensation since 1994 and was previously the Founder and CEO of Performensation. His expertise includes equity compensation, incentive pay, executive compensation, and talent management issues. Dan is an industry thought leader for all forms of equity, including stock options, restricted shares and units, stock purchase plans, and performance-based programs. In addition to his focus on plan design, he has been the architect of software solutions and administrative and technological best practices used by many companies. Dan has coauthored several books on compensation and is a popular blogger on the topic. He is also a popular speaker and does dozens of presentations every year. Dan is also on the NCIA’s Human Resource Committee.
Matt Finkelstein, is a Consultant at FutureSense. Matt has worked in the compensation field with FutureSense for six years and has also spent thirteen years as an organic farmer & gardener. Prior to joining FutureSense, he was managing small family farms & developing educational gardens around California, with an emphasis on regenerative practices and design. As a farmer, Cannabis has always been integrated into his own operations and he has also spent a lot of time on cannabis-specific farms. Matt brings his breadth of knowledge from both fields and serves as the primary project coordinator for FutureSense’s cannabis compensation endeavors. Matt is also on the NCIA’s Cultivation Committee.
About FutureSense, LLC FutureSense provides integrated solutions to build and sustain human capacity and optimize organizational performance. FutureSense specializes in people, pay, organization, and strategy, offering unique and comprehensive services to create solutions that make a difference. For more information, visit http://www.futuresense.com.
Picking Up Speed In The 116th Congress – An Overview Of Our Progress
by Madeline Grant, NCIA’s Government Relations Manager
We’ve seen an extraordinary amount of momentum sweep through Capitol Hill so far this Congress. The U.S. House of Representatives passed the Secure and Fair Enforcement (SAFE) Banking Act of 2019 and the Judiciary Committee marked up the Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2019. On top of these significant policy gains and historic achievements, we’ve seen an increase in cannabis-related bills, committee hearings, amendments, and markups.
With strong Democratic leadership on the House side, the question of legalizing cannabis has even been put on the table. Conversations are happening in hearings and markups that will help educate lawmakers. For example, as cannabis remains a Schedule I substance, significant federal research is still unattainable. These are the important conversations we are having with lawmakers. The SAFE Banking Act passed with overwhelmingly bipartisan support, with a vote of 321-103. This bill has been supported by the American Bankers Association, the Governors Association, the National Association of Attorneys General, and the credit unions across the country. The McClintock-Blumenauer-Norton amendment, which would prohibit the Department of Justice from interfering with state cannabis programs, passed the House with a vote of 267-165. This historic vote shows just how far we have come and with continued momentum where we can go.
Now, we need your help. It is more important than ever that Congress hears from their constituents. Your stories and experiences are what resonates the most with Hill offices. Now that the SAFE Banking Act passed the house, we need to turn our attention to the Senate.
Please call your U.S. Senators and urge them to support S.1200, the SAFE Banking Act, which prevents federal banking regulators from punishing banks for working with cannabis-related businesses that are obeying state laws or halting their services, taking action on loans made to those businesses, or limiting depository institution’s access to the Deposit Insurance Fund. As you call your Senators, be sure to explain the frustration you have had with a lack of access to banking. Personal stories resonate with our Congressional offices, so take a few minutes to make these important calls.
To find your Senators, click this link and simply enter your address. The office phone number will pop up next to their photos.
Please join us May 19-21, 2020 for our 10th Annual Cannabis Industry Lobby Days in Washington, D.C. Not only will you meet with congressional offices to discuss priority cannabis legislation, but you’ll get to know other NCIA members from around the country. For more information about Lobby Days, contact Maddy Grant and madeline@thecannabisindustry.org.
Committee Blog: What The Recent Layoffs in the Cannabis Industry Mean
Many in our industry have heard about the recent layoffs announced by cannabis companies, including some of NCIA’s members, in the U.S. NCIA’s Human Resources Committee views the layoffs as an unfortunate but sometimes necessary part of business, and overall remain optimistic about the industry as a whole.
On the face of it, the recent headlines regarding cannabis industry layoffs appear grim. One of California’s best-known cannabis brands announced a reduction of 20% of its labor force. Another grower is reported to have had a similarly sized cut. Listening to the news coverage, one might have the impression that the industry as a whole is going through a massive negative upheaval. This could not be further from the truth.
At the same time, we have seen hiring trends in 2019 that are overwhelmingly positive. According to an article in Forbes earlier this year, the cannabis industry added almost 65,000 jobs in 2018, with a substantially greater amount expected for this year. Clearly, cannabis is a significant growth engine for employment across the U.S. Add in Illinois, Massachusetts, and other states legalizing cannabis for medical or adult-use, and the numbers continue to grow. The state of the cannabis industry is strong!
Since its founding nearly a decade ago, NCIA has dedicated itself to promoting the growth of a responsible and legitimate cannabis industry. During this time, the industry workforce has swelled to over 200,000 people, and new people are joining us daily from coast to coast. NCIA’s HR Committee, which is comprised of human resource practitioners devoted to bringing best practices to the cannabis industry, carefully monitors hiring trends and other people-related developments.
NCIA’s Human Resources Committee regrets any job losses for their impact on the lives of employees and their families. History has shown that layoffs often happen in high growth industries. These reductions in force occur when companies who have over-invested ahead of anticipated growth must adjust their labor counts to rapidly shifting business dynamics. While painful in the short term for employer and employee alike, this represents a chance for other companies to acquire top talent, and for that top talent to secure new and exciting opportunities.
NCIA’s HR Committee is unwavering in its faith that the cannabis industry will continue to grow as an economic force in this country for many decades to come, and that these short-term changes will make the industry better, stronger and more resilient in the long run.
There are many ways you can get involved and help. Attend NCIA’s national trade shows and regional networking events to get your foot in the door of our dynamic industry. Start a business. Educate yourself on the latest issues, and contact your congressperson. Whatever road you choose to take, we look forward to welcoming you as our partner on this amazing journey!
Member Blog: The Economics Of Trespass Grows And The Legal Industry
by Jackee Riccio, Regional Field Director at the CROP Project
California’s cannabis economy has not generated the cash flow that regulators were anticipating. Current legal sales have topped $3 billion, but unregulated cannabis continues to dominate the market. This may not be surprising, as critics argue that the current licensing process — being lengthy, expensive, and with unpredictable outcomes — does not encourage cultivators to join the legal industry. What may be surprising is how much of that unregulated market is dominated by trespass grow operations on California’s public land. Forest Service Law enforcement & Investigations, and other government agencies, estimate that cannabis cultivated on public lands account for nearly 60% of the illicit market in California. And 98% of trespass grows in California are operated by international drug-trafficking organizations that leave a heavy environmental footprint, and a costly clean-up process for taxpayers. DTOs have wide distribution networks on the East Coast and throughout mid-west states. Many of those states do not yet have adult-use cannabis, creating no legal, safe avenue for cannabis users to purchase from.
So, would legalization federally help the trespass grow issue? Yes, and no. It would in the long term, but in the near term, consumers would likely still purchase what was readily available and inexpensive. Furthermore, without increased Forest Service presence on National Forests where the vast majority of trespass grows occur, they’d still have remote, unvisited landscapes to operate in. Trespass grows operating up-stream of a legal grow may still jeopardize the ability of that product to get to the legal market. In the words of Lindsay Robinson, Executive Director of the California Cannabis Industry Association, “Black market marijuana is potentially dangerous because traces of the toxic chemicals used at grow sites are often found in the plants,” she said. “If you have an illicit grow upstream from you, and you’re legal, that could end up tainting your product and prevent it from entering the market,” Robinson said.
There are thousands of trespass grows throughout nearly all of California’s National Forests. While recreation in National Forests has increased over the past decade, budget cuts have reduced Forest Service presence on the forests and the ability to properly patrol them. For example, the Shasta-Trinity National Forest is 2.2 million acres, and yet only 6 Forest Service Law Enforcement officers patrol its entirety. Reclamation of the sites is only one aspect of removing them from our public lands. To avoid playing trespass grow whack-a-mole, it’s critical that there is regular Forest Service presence to deter the activation of new sites, while reclamation teams clean-up the backlog of existing sites. This is one of the primary goals of the Cannabis Removal on Public Lands (CROP) Project, a nonprofit project of the Community Governance Partnership and the California Wilderness Coalition.
Before CROP, there was no bi-partisan effort or political will to remove trespass grows from the landscape. Two years of meetings, listening to communities and scientists, has led to CROP spearheading a state and national effort to secure state and federal resources to reclaim trespass grows on National Forests, increase Forest Service law enforcement and overall presence in National Forests, educate the public on the dangers of ingesting unregulated cannabis, and increasing criminal penalties for bringing neurotoxic pesticides onto public lands.
Jackee Riccio currently serves as the Regional Field Director for the CROP Project. Her fervor for the natural world has fueled her career as a wildlife biologist and archaeologist, backcountry horse packer, and finally as the co-founder and Executive Director of Cannabis for Conservation, a new 501(c)(3) nonprofit. She graduated from Humboldt State University with a B.S. in Wildlife Management and Conservation, and a B.A. in Archaeology. She has worked for the U.S. Fish & Wildlife Service and private organizations conducting wildlife research on endangered species including gray whales, desert tortoises, and Pacific fishers.
CROP is directed by an Advisory Board of interests that includes environmental organizations, state and federal agencies, local officials, tribes, scientists, and the legal cannabis industry. CROP is fighting on behalf of California’s wildlife, users of public lands, and downstream communities long plagued by trespass grows. To learn more about CROP, or how to contribute, please visit www.cropproject.org.
Watch The Webinar: Michigan’s Adult-Use Market – What Comes Next?
In case you missed the December 3 webinar: The Midwest is becoming a major player in the cannabis industry and Michigan is now accepting applications for its adult-use cannabis licenses with the launch date fast approaching. Join our expert panel as we provide insights into the Michigan adult-use market: an update on what has transpired so far, what potential operators need to know about this key market, and how Michigan’s market will compare to others around the country. It’s an exciting time for our industry with the Midwest on the verge of launching adult-use sales. Watch this webinar from NCIA’s State Regulations Committee as they explain what you need to know.
Member Blog: Cannabis Dispensary Inventory Management Done Right – Best Practices
Discover how state-of-the-art technology can help your dispensary thrive.
Many first-time dispensary owners do not come from a retail background. The cannabis industry is full of entrepreneurs running into long-established retail processes for the first time.
Although the cannabis industry is new, many of the processes upon which it relies are not. Sales, marketing, and administration operate on the same foundations no matter what you are selling, from apples to zucchinis.
Inventory management is one of those ever-present aspects of retail. Every business that sells physical goods has to keep track of its stock, perform inventory audits, and synchronize inventory movement across multiple systems in order to operate.
Cannabis dispensary owners have additional demands to meet. They must implement solid strategies for meeting compliance needs, including comprehensive seed-to-sale tracking. Managing all of these demands while running a successful business can be overwhelming.
Automated Processes Improve Inventory Management
Optimization is the key to responding to the many demands of operating a retail store in a highly regulated industry. In the retail environment, there are never enough assets and resources to get every job done – certain processes need to be automated in order to free up time for higher impact work.
Inventory management is one of those critical-but-time-consuming activities that is ideally suited to process development and automation. Since cannabis dispensaries already have to report on every purchase and transaction that takes place in the dispensary environment, the data is already there.
Yet without a tailor-made technological solution, cannabis dispensaries find themselves spending valuable employee-hours manually entering inventory data into their systems. This necessarily takes time away from other, equally important processes.
Enhance Inventory Management in the Dispensary
Dispensary owners who invest in process development and automation quickly find that the retail service industry already offers many solutions to the kinds of problems they face. Streamlined cannabis dispensaries use these technologies to solve a broad range of problems:
Inventory Categorization. A well-organized inventory is key to success in any retail environment. Dispensary owners that know which products sell best can place those products in the spotlight, further enhancing profits by focusing on their most successful lines.
Automated Data Entry. Manual data entry takes time and produces little value. If there is one readymade way to improve retail efficiency across the board, eliminating manual data entry and freeing up employees to focus on more valuable work is the first step to take.
Inventory KPIs. Key performance indicators (KPIs) help business owners identify opportunities to make better purchasing decisions, improve cash flow, and ultimately boost profitability. Dispensary owners that track data like inventory turnover are better-suited to make sound business decisions. More on these below.
Automated Tracking.Tracking inventory movement through the retail environment is another time-consuming process that, although necessary, produces little value. Implementing automated solutions helps to streamline the process and lets dispensary owners put more energy into value-driving initiatives.
Accurate Reordering.Dispensary owners that know when products are running low can reorder in time to prevent costly and embarrassing stockouts. This is key to maintaining a professional image in a regulated industry like cannabis.
Streamlined Stocktake.Stocktaking plays a critical role in financial management. In order to know how much money the dispensary is really making, owners need to calculate how much liquidity is frozen in stock.
Active Inventory Synchronization.Dispensaries that wish to synchronize their stock with a website database or an app like Leafly or Weedmaps needs to have a solid inventory system in place. Developing active inventory synchronization is key to selling products through multiple channels.
Which Key Performance Indicators Should You Track?
There are many different types of key performance indicators that relate to inventory management. Some of them are more important than others, but navigating the world of cannabis retail requires gathering enough data to calculate any of them when needed:
Weeks-on-Hand. This KPI correlates to the efficiency with which the dispensary moves stock. If the figure is too high, it means that inventory is not selling at the same rate that new goods are coming in. This results in lower profitability due to storage fees and liquidity problems.
Inventory Turnover Rate.This is a ratio that shows how many times the dispensary sold and replaced specific goods during a particular time period. This also tells dispensary owners how fast inventory is selling.
Time-to-Receive.This metric shows how efficient dispensaries stock retrieval processes are. It measures the average time it takes for employees to validate incoming stock, add it to the inventory record, and shelve it in the appropriate place.
Shrinkage.In a highly regulated industry like cannabis, shrinkage is dangerous. Dispensary owners need to be vigilant in recording any discrepancies between recorded inventory and actual physical inventory. Employers who catch discrepancies early can account for shrinkage before regulators come into the picture.
Cost of Carrying Inventory. Holding products in stock costs money. This KPI helps dispensary owners calculate how much capital they spend holding and storing inventory on an annual basis. It allows owners to identify dead and slow-moving stock.
Days to Sell Inventory.This KPI measures how long it takes to sell products in stock. When the number is high, it indicates inefficient inventory movement. When it is too low, stockouts become a risk. Every industry has its own average days-to-sell figure, cannabis included.
Maximizing dispensary efficiency requires gathering this data and acting on the insights it offers. This is only possible with specialized dispensary point-of-sale (POS) systems that adhere to the industry’s rigorous compliance standards on a state-by-state basis.
Invest in a Purpose-Built Point-of-Sale Solution
It takes more than drive and ambition to implement efficient inventory management in the dispensary environment. Dispensary owners need to deploy technological solutions that address the unique nature of the regulated cannabis industry.
This means investing in a POS system that auto-populates inventory database fields, consolidating sales data into a compliance-ready format. Dispensaries that collect high-quality sales data are able to manage growth while empowering their employees to continuously improve.
BenCurren is the Founder of Green Bits, the nation’s leading retail management and compliance platform for the legal cannabis industry. Founded in 2014, Green Bits helps legal cannabis retailers run compliant, operationally efficient and growing stores. The platform serves more than 1,000 cannabis retailers across 13 states and processes more than $3 billion in sales annually through its point-of-sale platform. In 2008, Ben co-founded Outright, an accounting program used by businesses for freelancers and consultants, that web-hosting company GoDaddy acquired in 2012. Ben is a frequent commentator in national outlets about tech, trends, business issues, and state and federal policy and regulation in the legal cannabis industry.
Green Bits provides smart management solutions that help cannabis retailers maximize performance and make better business decisions. Our robust retail platform – with automated state-by-state compliance, inventory control, and personalized insights – enables owners, managers, and budtenders to run, protect, and grow their businesses with ease. The company serves more than 1,100 cannabis retailers across 13 states and processes more than $3.5B in cannabis sales annually. Visit Green Bits for industry resources.
NCIA Committees: Quarterly Update And A Look Ahead
NCIA committees are an opportunity for members to get directly involved in specific industry issues and sectors. These volunteer-driven efforts engage members’ expertise and passion to drill down in areas of expertise and passion to effect change, provide professional development opportunities, and develop best practices and guidelines that will shape the future of our industry.
We recently checked in with these various committees to learn more about what they’re up to and what projects they’re working on this term. Get updated on their activities below.
Scientific Advisory Committee (SAC)
SAC is comprised of practicing scientists, physicians, and other scientific field professionals. SAC’s vision is to disseminate educational materials to NCIA members on scientific topics in the cannabis industry and to advise other NCIA committees as they work to develop standards and guidelines, ensuring that any formal recommendations produced are scientifically sound, sustainable, and legitimate.
SAC is currently working on five projects, all of which are in the outline or first draft phase:
1) Blog on the science behind why ‘sativa’ and ‘indica’ are no longer the best way to classify cultivars.
2) White paper on how cannabis may help the opioid crisis with a review of scientific studies that show how cannabis can be an alternative for pain management.
3) Blog calling doctors to action in the cannabis industry and why it is important for doctors to get involved.
4) Blog on the vaping crisis from a physician’s point of view. 5) General audience and technical white papers on the Endocannabinoid System.
Marketing & Advertising Committee (MAC)
The MAC coalesces the talents of 20 of the industry’s top-tier marketing and communications professionals around three focus areas: Education, Advertising Access and 2020 political goals. We use our personal, professional and business skills and networks to help build a responsible, legal cannabis industry. The committee is producing best practices, webinars, workshops and social media campaigns to aggregate and generate support from NCIA members, the public, media, government and business leaders.
In our first quarter, our Education Sub-Committee began creating a Speakers Bureau to provide qualified experts for conference organizers and media who will address topics of interest and concern in the industry.
Our Advertising Access Sub-Committee is completing best practices for advertising, making presentations to media groups and expanding Advertising/Labeling Do’s and Don’ts from five states to all legalized states.
Our 2020 Sub-Committee is driving awareness around policy change through panel presentations, preparing a campaign supporting pro-cannabis candidates and is encouraging professionals from the cannabis industry to run for office.
Cannabis Cultivation Committee (CCC)
We are working on producing our first podcast episode, which will feature top-notch farmers who are doing great work employing sustainable practices in indoor facilities.
There will be more podcast episodes to come on other hot cultivation topics.
State Regulations Committee (SRC)
The State Regulations Committee has been hard at work on a number of exciting pieces of work-product that should be available soon. For example, we hosted a webinar on December 3, 2019, in which the expert members of the Committee break down what operators need to know about Michigan’s adult-use market’s rules before it launches in 2020.
The State Regulations Committee has work-product in the pipeline on a number of topics of great importance to members. That includes a recurring guidance series on social consumption in markets across the nation, posts analyzing challenges in local/municipal regulation, a focus on the crucial questions of promoting social equity, and much more.
Cannabis Manufacturing Committee (CMC)
The Cannabis Manufacturing Committee is focusing on reviewing existing business practices and state regulations of concentrates, topicals, vaporizers and, edibles ensuring the manufacturing sector is helping shape its destiny. In this approach, we have published our first blog using lessons learned from the e-cig sector. We are also engaging with NCIA’s Safe Vaping Task Force.
CMC has created three sub-committees; GMP (Good Manufacturing Practices), Testing (from the operator’s view), and Nomenclature (providing clarity to industry language). GMP has its first draft complete and will be ready for publication in November. Nomenclature has a concrete draft to review for publishing its first part of a multi-piece series.
Packaging & Labeling Committee (PLC)
The PLC has 4 subcommittees: Honesty & Labeling, Sustainability, Security, Next Generation Packaging. Each subcommittee has set a goal of producing 3 or more blogs and 1 webinar. We have a very motivated and strong group this year. Our biggest vision for the year is to use our data, blogs, white papers, webinars, and PLC members’ knowledge to create a document reflecting the industry views on what federal policy should be around packaging and labeling.
The Retail Committee is working on a compilation of SOPs for retail compliance to turn into a white paper and webinar series, combining efforts from various retailers in several states/markets in order to be most useful to the national audience.
Facilities Design Committee (FDC)
As a new committee, we have established a mission statement: To provide access to resources for the NCIA community and regulators that will inform the design and use of GMP-driven, sustainable and operationally efficient facilities to position our industry to compete in the global marketplace.
We have established two sub-committees: Standards and Sustainability. The Standards Sub-Committee is linked through membership to ASTM’s D37 committee on cannabis.
Banking & Financial Services Committee (BFSC)
Our vision is to provide reliable, actionable and current information to NCIA’s members via committee member videos and a monthly newsletter. The committee will also be coordinating “NCIA Panels” at Bank and Credit Union conferences throughout the country to spread awareness to the issue and bring these institutions closer to the industry.
Lastly, the committee will be contributing language to the Policy Council for revision of the current version of the SAFE Act.
We will keep the NCIA updated as the Bank and Credit Union panels are confirmed. The committee will continue to pair any operator with the best banking option based on a myriad of factors, free of charge.
NCIA Members Now Have A New Way To Register For Events… And Beyond!
A New Way To Register
To claim your complimentary tickets, you must follow the steps below.
First, check to see if you already have an account. If you’re not sure, click “Forgot your password?” to find out.
If you need to create a new account, please follow these steps:
Fill-out the required information and click “Create Account”
You are now logged in and can finish completing your profile.
To claim your complimentary tickets, you must affiliate yourself to your company. To do so:
Click “My Company’s Profile” on the left sidebar menu.
Click “My Affiliation” button
Enter company name with current NCIA membership in the “Account Name” field
You can also enter Primary Phone and Website associated with your business to help narrow the search
Click Search
Select the “Add Affiliation” button adjacent to your corresponding member business, and click “OK”
Once affiliated, select the “Upcoming Event” section on the left sidebar menu, and navigate to the corresponding event listing to complete the registration process.
During the checkout process, you will be notified of complimentary registrations available.
Click “Apply” to redeem a single ticket remaining within your allotment. If you have surpassed your allotment, you will need to purchase additional tickets.
Need help? Reach out to your designated “Company Manager” to assist. Not sure who your Company Manager is? It’s typically the person at your company who initially signed up for your NCIA membership.
As with any industry experiencing unparalleled growth, the cannabis industry is going through a few growing pains in these early years of legalization. Cultivators especially are feeling the pinch as long-standing business practices no longer achieve the competitive edge in a crowded playing field.
Commercial operations look much different today than they did even a decade ago. It’s no longer about experienced growers nor about high tech solutions—the best practices for cannabis cultivation in 2020 come down to the math.
As we head into 2020, how do you increase yields, shave down production costs, and use metrics to manage future harvests? Start with the numbers and drill down.
Labor Considerations
Despite the advances in automation, cannabis still requires a human touch. From California to Ohio to Florida, labor is consistently a producer’s most significant business expenditure. As the largest monthly expense, labor is always a top priority when working on the bottom line. No matter how skilled or educated, human labor is still prone to inefficiencies, wasted time and costly mistakes. Keeping employees on task, consistently trained and accountable can go a long way towards reducing sky-high labor costs.
The best practices on labor in cannabis cultivation aren’t just about hiring the most talented person or operating with the leanest workforce, it’s about running a tight ship. Reduce costs through automated team management or digitally track to-do lists to assign the perfect employee to the most appropriate task. By focusing on improving the efficiency and value of each team member, you’ll create a measurable reduction of labor costs.
Analyze Past Performance for Better Forecasting
Unsurprisingly, cultivators can no longer rely on intuition and handsome experience as a means to producea premium product. Detailed analysis of past crop performance is the only way to outperform the competition and predict future profits.
Accurate and detailed crop analysis creates consistency between harvests (which translates into consistent sales). It can also help improve the crop with minute adjustments during the growth cycle. These tiny tweaks are not feasible if your crop management is based on whiteboards and notepads.
We are working with a grow that will harvest 30,000 plants this year. If they were able to increase their average grams per plant by just one (1) gram, they would see additional sales of $385,000, at nearly zero additional dollars to grow that single gram. Crunching the data from past crops will help grow more profitable future harvests.
The Growing Demands of Metrc
The wrath of the regulator is increasingly prevalent within established markets. With 11 states and counting adopting Metrc (Marijuana Enforcement Tracking Reporting Compliance), it’s become a non-negotiator. Metrc is a mandatory requirement placed on all players in the industry to track, trace and stay compliant.
In many regions, Metrc is required by the state. As a cultivator, making Metrc a priority reduces risk and establishes your product in the market. If you can consistently master the rigorous requirements of Metrc, it’s setting the business up for long-term success.
Data is King, So Lean into the Numbers
Again, cultivation experience is only one piece of the equation these days. Data analysis is an increasingly necessary path towards larger harvests and to keep the costs-per-pound in check. Cannabis cultivation management systems (CCMS) facilitate the move off of whiteboards and spreadsheets into an automated, algorithmic analysis.
Without crunching hard numbers, it’s impossible to determine which strains are the most profitable. It’s equally as painful to decide which employees are the most efficient at which tasks. While spreadsheets can capture massive amounts of data, few companies have an experienced data analyst capable of performing the analysis. It’s why a CCMP is no longer a luxury, it’s become a best practice within commercial operations.
Controlling the Costs of Cultivation
The margin matters in the cannabis industry in ways it never has before. Beyond labor, how does the cost-per-pound break out? Spend the time (and the money) for a deep dive into your largest expenditures directly related to the grow. Examine the costs associated with standard utilities, nutrient procurement, pest management and waste management services to identify areas suitable for cost-cutting measures.
Which services are best farmed out to third-party contractors? What automation can be implemented to cut the cost of the process? Would an upfront investment into more efficient lighting or an on-site biomass cleaning facility make long-term sense? All are important questions to consider during this analysis.
The best practices in cannabis cultivation in 2020 are all about drilling down on the numbers. This is where a CCMP comes into play. It’s about saving on labor without cutting capacity. It’s about assessing the statistics of past harvests to develop a better product.
Cultivators need to have a solid grasp on the minute details contained within their cost-per-pound to shave pennies from utilities, pest control or waste management. At the scale of most commercial grows, pennies per pound transform into significant annual increases in profitability.
Brett Strauss is President of FolioGrow, a cannabis cultivation management system developed with the express purpose of using math and algorithms to help improve yields and profits for cannabis and hemp growers. Get a free 30-day trial or follow the company on LinkedIn, Instagram or Facebook.
CYBER MONDAY SALE! Save 20% off all new annual memberships!
The holiday seasons are upon us and youʻve probably been inundated with commercials and advertisements for all sorts special holiday sales…but have you considered getting you and your business a gift of NCIA membership?
This year weʻve got a deal you canʻt pass up if you own or operate a business in the cannabis industry.
Maybe youʻve been putting off the idea of joining because youʻve been busy running your business. Perhaps youʻve been waiting until you got some things in order. Maybe you just havenʻt allocated the money in your budget or maybe your boss just hasnʻt approved it yet.
If youʻve been putting off joining NCIA for these or any other reasons. Donʻt wait any longer.
2019 has been one of the most monumental years for political progress at the federal level cannabis has ever seen.
With the SAFE Banking Act passing through the House of Representatives, several other pieces of cannabis legislation getting hearings in Congress, Illinois passing adult-use legislation and more states signaling theyʻll pass their own legalization in 2020, itʻs never been more critical to support the work we are doing on behalf of your business.
Here are just a few of the benefits of your business joining National Cannabis Industry Association as a member:
National representation from the onlyfull-time government relations team working to pass the SAFE Banking Act and end federal prohibition.
If youʻre ready to join the fight to end federal prohibition and fulfill our mission to promote the growth of a responsible and legitimate cannabis industry, take advantage of this special deal now!
This Cyber Monday special will end tonight at Midnight PT, so donʻt miss out!
Member Blog: Youth Safety is Imperative to the Future Success of the Cannabis Industry
by Joan Irivine, Co-founder and CEO of ResponsiTech
The House Judiciary Committee recently passed the historic Marijuana Opportunity, Reinvestment and Expungement (MORE) Act in a 24-10 vote. After weeks of declining cannabis stock prices and layoffs due in part to counterfeit vaping issues, this vote provided a much needed, bipartisan boost to the industry. However, we need to remember that this is only the beginning of this process and there is still much to be done for our industry to be successful.
For example, this week, the legislators expressed both support and concerns about de-scheduling cannabis, but there was one consistent theme expressed by several of the committee members – youth safety. Representatives Doug Collins (R-GA), Tom McClintock (R-CA), Lou Correa (D-CA), Karen McBeth (R-RI), Debbie Mucarsel-Powell (D-FL), Sheila Jackson Lee (TX-D) and many more expressed valid concerns about youth safety.
As we all know, there have been many challenges for the industry and it seems that we are always reacting to change rather than being proactive about it. However, we now have the opportunity to lead our community when it comes to improving youth safety–especially online youth safety.
Online tools such as parental control filters are already offered by web browsers, Internet Service Providers (ISPs), firewall proxy servers, search engines, and even computer operating systems. Meanwhile, special plug-ins, toolbars and filtering software are widely available. These options are also commonly used to moderate kids’ Internet use in schools, libraries and other public places. However, even conscientious parents equipped with these tools can’t do it alone. Cannabis companies have a responsibility to label their sites that are unambiguously recognizable by parental control systems to reduce access by minors.
One of the issues in making website labeling mandatory is the fact that each state has different regulations. In addition, domestic laws do not apply internationally. As a result, websites operated by foreign companies cannot be required to comply with another country’s, state, or provincial labeling requirements. However, if international cannabis businesses and bloggers adopt a voluntary standard parental filtering label, proactive industry self-regulation can accomplish what governments can’t.
With parents implementing parental filters, and the industry installing standard parental controls, we can work together to reduce children’s access.
Moving forward, what does ResponsiTech recommend for companies in the cannabis industry? To start:
Continue to use self-affirming age gates for initial entry as a secondary safeguard.
And of course, use an age verification service for any purchase; including both online and delivery services.
Let a qualified marketing compliance expert conduct an audit of all of your brand’s Internet and social media profiles.
Like it or not, media, parents, and legislators consider vaping THC and nicotine as the same issue, even though minors obtain THC products from the illegal and counterfeit markets. Licensed e-cigarette retailers use various forms of age gates and verification to prevent youth access. We suggest that the cannabis industry incorporate policies that we established for another industry and Juul has included in its new marketing policies:
Do not feature images or situations intended for a youth audience.
Campaigns depict appropriately aged individuals.
Do not use cartoons, caricatures, or other designs aimed at attracting minors.
Ensure responsible placement of our product designed to limit exposure to an underage demographic.
Support and comply with all federal and state regulations to prevent sales to minors – this includes stringent third-party age verification for online sales.
Use social media responsibly to ensure content is targeted to adults while limiting engagement by youth.
Our industry needs to establish its own standard online youth policies before our legislators do. Let’s take the lead and make it happen.
I have written several recent articles about Online Youth Safety which provide more details:
Joan Irvine, ResponsiTech Co-Founder & CEO, brings over two decades of policy development, government relations, and advocacy for online child protection in ‘high-risk’ industries to the cannabis industry. She successfully spearheaded an international award-winning parental filtering label and worked with First Amendment, Internet Security, and Privacy attorneys and international law enforcement to establish online child protection. Learn more about us on our site, LinkedIn and Facebook.
Member Blog: Cannabis Business Security – Going Above and Beyond
In 2018, Sacramento CBS reported crooks stole $80,000 worth of cash and cannabis products from TotalLeaf Inc. after circumventing the facility’s alarm system and video surveillance technology.
Christopher Cohen, owner of the Sacramento-based cannabis manufacturing and distribution company, told the news outlet his security plan passed muster with state and local authorities, but noted the company upgraded its security after being robbed. The edibles-to-oils manufacturer has added steel doors, additional security cameras, alarm systems, fences and bolted-down safes. The firm also hired a private security company to watch over the property 24 hours a day, seven days a week.
Commercial cannabis businesses, like TotalLeaf, are prime targets for burglary, robbery and internal theft. This is not surprising in a cash-based industry with a flourishing black market. Commercial cannabis business operators must maintain stringent and customized security strategies that go beyond state and local minimums to fully protect their businesses from crime.
In states where cannabis is legal, the first step toward acquiring a commercial cannabis license is meeting state standards. However, a growing number of local communities are expanding on these bare minimums and applying a wide-ranging set of additional security requirements for commercial cannabis businesses. Emerging local regulations incorporate specific design elements, lighting standards, manpower requirements, and heightened camera and alarm standards.
Regulations vary by municipality. Regarding design elements, local entities typically require the use of door-redundant screening areas, internal/secure loading areas, and reinforced product storage rooms. A minimum exterior lighting standard of 1.5-foot candles of LED, white luminance, and prohibitions against up-lighting and light trespass are also common. Some localities even demand one or more armed, or unarmed, security guards on the premises, during business hours and sometimes around the clock.
Gaps remain though local regulations are more stringent, says Matt Carroll, President of Carroll Consulting and Director of Compliance for Seed to Sale Security. Carroll, who develops security plans for cannabis operations, finds, “There is little value in meeting state (and local) standards just to check a box for compliance. Operators seeking to enjoy peace of mind and asset protection will approach security planning from two different perspectives: technical compliance and actual security. Existing regulations do nothing substantive to deter burglary, robbery, or to protect the safety of those working within or visiting a commercial cannabis business.”
But what does going beyond security requirements actually look like? This article investigates how cannabis operations can better harden their security by voluntarily meeting additional requirements for security cameras, access control and alarms.
More Security Camera Coverage
State-level cannabis regulatory bodies typically demand a basic level of surveillance coverage for access points and limited access areas, which are spaces where operations process, store or transfer cannabis goods. Most local authorities expand this requirement to include security camera coverage on all sides of the building, adjacent thoroughfares, and more thoroughly throughout the interior.
States also set a minimum resolution for security cameras. For instance, California requires a minimum resolution of 1280×720 pixels (e.g. 1 megapixel). Herein lies the problem: Any minimum megapixel standard predisposes operators to meet the minimum standard and little else. But, doing so may not achieve the goal of “certain identification” as expressed in the regulations.
Security camera megapixel ratings mean virtually nothing. For certain identification to take place, companies must also factor in the distance of the targeted viewing area from the camera placement, and the camera angle, lens quality and compression rates.
For positive identification in idyllic lighting conditions, security cameras must meet a minimum standard of 60 pixels. For night mode, positive identification demands up to 90 pixels per foot. This is what matters: pixels per foot (PPF) at the target, not the camera resolution. IPVM, an independent research group, has developed a great video to drive these points home.
Regulatory agencies hoping to get footage of value from crimes in cannabis settings would be wise to adopt a PPF standard over an overly simplistic megapixel standard.
Better Access Control
With access control, state regulations typically require walls, doors and commercial-grade locks. They also expect operators to maintain a log of visitors and those accessing video surveillance systems. More stringent access control regulations are few and far between.
Though reasonably priced biometric and electronic key systems are readily available, hand-written logs meet most state and local regulations. However, manual logging is unreliable. Using a manual system, coupled with PPF-ignorant video standards, puts access control on the honor system.
Responsible operators fill the gaps regulations ignore. These business owners reinforce storefronts and roll-ups with K4 or better rated bollards to deter vehicular intrusion. They install solid-core doors at all exterior access points and at internal doors leading to limited access areas. They equip doors with pry-resistant latch covers and automatic closing devices. They reinforce shared walls to prevent tunneling and they fortify product/currency storage rooms.
They also use electronic access controllers that limit staff to areas of relevant roles and to the days and hours when employees work. They reduce opportunities for human complacency to override their access control strategies from initial design, to technology, to supporting and enforcing policies.
Improved Alarm Systems
Short of mandating that operators install an alarm system that is operational after hours, most states establish no standards for monitored intrusion alarms at commercial cannabis businesses. This is another area where applicants can fill in the gaps.
Some jurisdictions mandate a specific Underwriter’s Laboratory (UL) standard for intrusion detection and robbery alarms.
Beyond meeting UL standards, it’s also important to extend the focus of an intrusion alarm system beyond exterior access points. Offenders can come in the form of stowaways concealing themselves inside until closing. They may be employees accessing areas they shouldn’t or third parties who find less expected ways to access the premises, such as tunneling through walls or ceilings and misappropriating ventilation shafts.
A properly designed alarm strategy protects against these situations by establishing various partitions, allowing for “home” and “away” modes, and setting aside areas for management-only access. Even while occupied by workers, certain areas of the premises, such as product or currency storage areas, should remain under alarm monitoring.
Finally, a thorough alarm system abides by UL Standard 681, incorporating contact points at every door; sufficient motion detectors to detect movement in any direction, in any area of any room; glass break sensors; ventilation protection; and panic alarms at vulnerable positions, such as the entrance, loading areas, product/currency storage areas and the management office.
What more can you do?
Responsible cannabis operations also seek to elevate the safety and security of the entire industry.
This includes lobbying at the state level for severe criminal penalties against those engaged in the black-market trade. Public acceptance of cannabis often leads prosecutions to fall flat as jurors shrug about black-market activities. Black-market operators also view the limited penalties as a cost of doing business. But, as long as the government handles black-market cannabis retailing with kid gloves, criminals will target legitimate operators for their stockpiles of Grade-A product.
It also includes lobbying at the local level for more stringent security standards. Offenders who reap the rewards time after time an area will continue to target that area. But if cannabis business owners’ partner with local authorities to tighten up safety and security standards, their businesses become an environment where the juice is not worth the squeeze for offenders, ultimately driving their crimes to regions with less formidable targets.
Finally, it includes teaming with proven security experts who work in the cannabis space; following their best practices, developed based on real-world experiences; and teaching others in the industry to do the same.
Patrick Chown, is the Founder and President of Seed To Sale Security, a national cannabis security company offering security consulting, security plans, and security system installation to customer’s in 30 states. With cannabis-specific technology and a proficiency with regulatory compliance state by state, Seed To Sale Security makes sure your cannabis business stays safe, secure, and compliant.
Member Blog: Hemp and Marijuana Genetics – A Closer Look At The Differences
There are many ways to classify cannabis variants, but the most popular distinction is between hemp and marijuana. Although most of us take these classifications for granted, perhaps you’ve wondered if they are really legit? Put another way: are there real genetic and anatomical differences between marijuana and hemp? And, if so, what are they?
The hemp/marijuana classification is still a major debate within the cannabis community. Although up-to-date research suggests there are genetic differences, critics contend these distinctions have much more to do with legality than botany.
To better understand the complexity of the hemp v. marijuana classification, let’s quickly go through a primer on the cannabis genus. Afterward, we’ll take a closer look at the differences often associated with hemp v. marijuana and why these terms have gained such prominence.
The Basics Of Cannabis Distinctions
The first thing we should clear up is that the word “cannabis” is reserved for the plant genus. This means that both hemp and marijuana technically fall under the cannabis label. For many years, botanists have categorized the cannabis genus into the following three groups:
Cannabis sativa
Cannabis indica
Cannabis ruderalis
Of these three, sativa and indica are probably the most familiar to you. Usually, cannabis connoisseurs draw the sativa v. indica distinction to help differentiate the physiological effects of each strain. Sativa-heavy strains are said to be more energizing while indicas are supposedly more sedating.
It’s important to remember, however, that sativas and indicas were first split up due to their flowering patterns and features. Here are just a few of the key distinctions often ascribed to these two cannabis variants:
Indicas
Short
Fat leaves
Fast-growing
Enjoys mild climate
Sativas
Tall
Thin leaves
Slow-growing
Enjoys a humid climate
Ruderalis is a shrub-like variety of cannabis that evolved in harsh northern environments. Due to its history in regions with little light or warmth, ruderalis strains evolved unique genetics that allows them to flower automatically rather than relying on specific amounts of light.
Cultivators nowadays cross-breed ruderalis strains with indicas, sativas, or hybrids to create what are known as “autoflowering seeds.” These auto varieties are convenient due to their predictable flowering period, but they tend to have fewer cannabinoids than standard sativas or indicas. Most often new cannabis cultivators use auto seeds to gain valuable growing experience.
Hemp v. Marijuana: The Legal Distinction
So, why do we need a hemp v. marijuana distinction on top of all these cannabis varieties? A short answer is that drawing the line between hemp and marijuana helps a lot in the legal department.
You see, hemp is legally defined as a substance containing less than 0.3 percent of the high-inducing compound tetrahydrocannabinol (THC). Marijuana, on the other hand, could have 0.3 percent THC content or above.
Obviously, this makes it a lot easier for legal authorities to categorize what is and what is not legal. As of today, the U.S. legalized hemp at a federal level, but marijuana laws vary by state.
Beyond THC: The Different Uses Of Hemp V. Marijuana
This all doesn’t mean that the hemp v. marijuana distinction was arbitrarily drawn up to help legislators. OK, the 0.3 percent benchmark was pretty arbitrary, however, it’s true that hemp naturally produces less THC than marijuana strains. But there’s more to this story than just THC.
Now that the CBD market has skyrocketed, it’s often hard for us to imagine non-edible uses of hemp. However, for most of human history, hemp has been cultivated strictly for industrial purposes. Indeed, people have used the hemp plant’s fibrous stalks to make clothing and rope for thousands of years. Amazingly, hemp is now showing great potential in a variety of fields including papers, plastics, cosmetics, and even fuel.
Marijuana, on the other hand, has always been associated with recreational and medical use. Growers who cultivated marijuana were always interested in maximizing certain terpene and cannabinoid profiles for their chosen strain.
So, the distinction between industrial hemp and marijuana is still valid and useful as the cannabis industry expands. Growing hemp for industrial purposes is far more interested in quantity rather than quality. Marijuana cultivation, on the other hand, requires a greater degree of care and attention to detail.
Industrial hemp cultivators could often get away with planting their male and female seeds in rather tough environments. Professional marijuana cultivators, on the other hand, need to focus a lot of attention on making their environment hospitable for female seeds.
Of course, there are now many high-CBD hemp cultivators out there using similar marijuana grow methods. With that in mind, it’s still quite useful for cultivators to distinguish between industrial hemp and marijuana to better plan their growth cycle.
Does Hemp Look Different Than Marijuana?
Now we know how hemp and marijuana differ in THC content, growth features, and traditional uses… but do they look different?
To the untrained eye, mature hemp and marijuana might appear to be the same. Indeed, there are many cases of police accidentally arresting truck drivers for “marijuana possession” when they were actually transporting hemp. There are, however, a few key anatomical differences to look out for.
For instance, hemp plants are generally taller than most varieties of marijuana. Remember that many cultivators are interested in hemp’s fibrous stalks, which is why they’ve bred them to grow as tall as possible.
In addition to their height, hemp plants also tend to have thinner fan leaves compared with most strains of marijuana. These hemp leaves also tend to be concentrated at the top of the hemp flower with few leaves further down the stem. Marijuana plants, on the other hand, tend to have more leaves evenly spread throughout their branches.
Looking Into The Genes: Novel Research On Hemp v. Marijuana
After reading the above description, you might understandably conclude that hemp strains might lean more towards the sativa side. After all, sativas are typically associated with tall height and thin leaves.
While this makes logical sense, recent genetic research is changing how we think about the sativa v. indica theory. A team of Canadian researchers recently published a study examining the genetic makeup of over 80 marijuana and about 40 hemp strains. Shockingly, they found that hemp plants have a closer genetic tie to indicas rather than sativas. Most marijuana strains, however, showed a mix of sativa and indica influences.
The scientists concluded that there was enough of a genetic difference between hemp and marijuana strains to warrant the classification. Of course, more research will be necessary to understand these complex hereditary differences.
So, Is The Hemp v. Marijuana Distinction Valid?
While there will likely still be a debate about the hemp v. marijuana distinction, this classification system is popular for good reason. Also, there appears to be a scientific basis for grouping hemp and marijuana into separate genetic categories.
Distinguishing between hemp and marijuana can help consumers make a more informed decision when purchasing hemp flowers, hemp trim, oils, or other products. Plus, with the growing interest in hemp’s industrial uses, it’s important for farmers to separate out strains for industry and those for human consumption.
While it might not be a perfect classification system, “hemp v. marijuana” is still around because it continues to help cultivators and consumers make informed choices.
George Mouratidis is a cannabis writer and freelance contributor to Industrial Hemp Farms, Cannabis Tech, and Highlife Media.
IHF LLC is a Colorado-based, fully licensed & certified hemp farming and wholesale company. IHF wholesales CBD hemp biomass and many different cultivars of clones and seeds. The Company also wholesales CBD distillate, T-Free, Decarboxylated Crude, Isolate and other cannabinoids produced at our extraction facility. One of our primary goals is to make mutually beneficial deals, connections and contacts in the hemp industry.
Member Blog: Are Women In Cannabis Facing Some Headwinds?
So far, the cannabis industry is willing to elevate female executives more than other industries. And it’s been this way since adult-use legalization started to spread among states in 2014. That’s when a huge opportunity opened up for people with some leadership experience and a cool idea. Women who had hit a glass ceiling in more traditional industries saw a chance to make a rewarding career shift. Long-term success isn’t a given for anyone making this move, but it’s easier to get in and get noticed if you have a niche product, a specialized service, or fill a particular wellness need.
I fear the inroads women have made for higher ranks at canna companies are getting needlessly tougher. As our industry continues to mature and expand, larger amounts of funds are needed to get a business off the ground or scale a business, but securing funds could become harder if you’re female.
From the moment I first started helping cannabis companies, I was riveted by its diversity and inclusion. In my years of working with some of the most innovative companies in Silicon Valley, I was used to male-dominated cultures. It didn’t matter what I role I held — I started as an engineer in aerospace and later became involved in operations, marketing and sales, and professional services — a lopsided imbalance was often in play.
But with cannabis, this industry has seen a higher proportion of women rise to great heights. More than one-third of executives at cannabis companies are female. That’s remarkable when you also take into account that females hold only 21 percent of senior-level roles at other types of companies, according to Marijuana Business Daily survey figures. On a more anecdotal level, however, I suspect from what I’m hearing that the gains women have made could waver. With industry maturity, even at this early stage, comes the zealous interest of deeply pocketed investors (most of them men).
Why the Shift?
Female leaders in cannabis have made great strides, but history threatens to repeat itself. For instance, this statistic would make anyone wince: Female founders across all industries acquired only 2.2 percent of venture capital in 2018, according to PitchBook. And those who are able to get the funding they need don’t get as much as men in the same position.
We’re in the midst of rapid growth, and big-name investors are noticing. While I don’t want to generalize, it’s widely known that investors are more likely to be white males. This puts the more equitable playing field created by cannabis at risk.
In some ways, it’s natural that as more money comes in, there would be a shift. That’s the tradition, as more men have traditionally beendominantin business. I don’t buy into this tradition and it’s what attracted me to the industry — the cannabis industry is known for being non-traditional. We’ve been cracking glass ceilings and we’ve been shedding corporate conventions. The result has been fast growth, satisfied customers, and innovative products. I think we can attribute some of that to the diversity at work.
How can we ensure that women get their fair share? There are loads of opportunities here for entrepreneurs and seasoned executives, across genders, to make their mark. What matters less than someone’s gender is the ideas they have, their plan for making their business thrive, and whether they have a solid foundation for truly understanding the company as they make big decisions. When you encounter women entrepreneurs, I encourage everyone to give them a shot, hear out the business plan, and assess the opportunity they’re presenting with an open mind.
There is still time to build upon the momentum women have made. Let’s all, especially men and investors, make a concerted effort to fully support women-led businesses and recognize the need for diverse talents and skillsets. I made a similar call in a blog post for my firm, and I was pleased with the reaction — it really hit a nerve. Women in our industry clearly want to talk about this. The consensus is that when different perspectives are voiced, smart ideas and decisions rise to the top.
As vice president, Maureen Ryan leads the business development functions at Kukuza Associates, a finance and accounting firm dedicated to the needs of cannabis companies. She spearheaded Kukuza’s parent company’s (RoseRyan) 2014 entrance into the cannabis marketplace and developed Kukuza’s finance solution to address the common pain points across cannabis companies. Check out the Kukuza Rapid Diagnostic to find out if you have the right finance pieces in place to scale your business.
NCIA Board of Directors Results Are In
The results of NCIA’s 2020-2022 Board of Directors nominations process are in!
Earlier this year, we announced a new application process for our annual Board of Directors nominations. We are appreciative to have received so many very thoughtful and impressive applications from over 50 NCIA members seeking to fill eight available seats.
Candidates not chosen during the selection process may now seek an independent nomination to go before a vote of the NCIA membership. Independent candidates must get the signatures (electronic) of 3% of the membership in order to qualify for the ballot.
If no qualified independent candidates are received by December 20, the slate of nominees recommended by the Board of Directors shall be declared members of the Board of Directors and shall commence their term in January 2020.
If one or more qualified independent candidates qualify, all candidates will be presented to the membership for an election in late December.
For information on the process or instructions on seeking an independent nomination, contact NCIA’s Hilary Srole at Hilary@TheCannabisIndustry.org by Friday, November 22.
Stay tuned!
Video: NCIA’s 2019 Year In Review & Announcing 2020 Dates
2019 was quite a year! We’d like to take a moment to thank all of our attendees and the sponsors who made our events possible.
Were you one of the 15,000 attendees at our 15 Industry Socials, 15 Cannabis Caucuses, and 3 Conferences & Trade Shows this year across 20 states and 27 cities?
Watch this video recap of 2019 with NCIA’s Director of Events, Brooke Gilbert, and Events Manager, Brian Gilbert.
The rapid growth and ever-evolving nature of the cannabis industry has resulted in wild and hyperinflated business valuations, making it extremely difficult for companies to zero in on a fair valuation as they seek to acquire or be acquired in the up-and-coming field.
What can cannabis companies do to counter overinflated valuations as they pursue an exit or acquisition strategy? The best approach is to better understand what investors are looking for when they evaluate a company for a potential merger and acquisition deal.
Many Ways to Determine Value
Pinpointing the value of a business is not an exact science. Investors rely on a variety of methods and evaluation techniques to help them land on a fair valuation. Let’s break down some of the most common methods.
Discounted Cash Flow: A Discounted Cash Flow (DCF) analysis attempts to determine a company’s value today based on projections of how much money it will generate in the future.
Market Transaction: This method estimates a company’s value by comparing the business to similar companies in the marketplace. This approach works really well with publicly traded companies.
Adjusted Net Asset Method: A company’s value is determined by analyzing the net value of its assets minus any liabilities.
Revenue Multiplier/EBITDA: A company’s value is determined by dividing its revenue multiplier ratio by its earnings before interest, taxes, depreciation, and amortization (EBITDA).
Unique Cannabis Challenges
Because of the unique nature of the cannabis field, each of the above-mentioned valuation methods come with their own challenges when applied in the industry.
Discounted Cash Flow: Because cannabis businesses’ operating costs are so high and their margins are so slim, a DCF analysis will likely produce a more modest valuation than some of the eye-popping ones seen throughout the industry in recent years. But that doesn’t mean it’s unfair or wrong. DCF analyses take into account the current realities of U.S. tax code and the impact it has on costs and earnings.
Market Transaction: A market method should not be used by cannabis companies in pinning down a valuation because cannabis companies that have gone public — most notably in Canada — have not been able to sustain their sky-high IPO values, which raises concerns that they were overvalued. Also, public cannabis companies north of the border have seen their values plummet in recent months because big promises of heady market growth don’t seem to be coming to fruition.
Adjusted Net Asset Method: While this method can be beneficial for certain cannabis businesses with a lot of assets (cultivators, for instance) one potential downside is it assumes the value of the company is simply the value of its assets and does not take into account any potential for future earnings.
Revenue Multiplier/EBITDA: This is currently the most widely used valuation method in the cannabis industry and is likely going to be used in tandem with another valuation method. That’s because EBITDA eliminates the impact of tax restrictions under IRS tax code 280E. It allows investors to look at a company’s hypothetical profitability for when those tax issues are eventually resolved. Most professionals in the cannabis industry agree those tax and legal issues will be eliminated in the next five to eight years. The risk or challenge with this method, then, lies in if that timeline ends up being longer than expected.
Other Valuation Considerations
Evaluating a company’s valuation is a multifaceted approach. Investors often rely on a hybrid approach, using more than one of the standard valuation methods. But they also take into consideration other metrics that have little to do with the bottom line. Some of those include:
Management Team: Who’s on your board? Who are your top executives? Investors take a look at management before any other metric. Because of the industry’s legal haziness, investors want to see legitimate industry expertise on boards and management teams.
Brand Loyalty: Brand loyalty is big in cannabis. If buyers find a strain they really enjoy, they are more likely to try other strains from the same brand when the preferred product is out of stock. Investors will look at how companies measure brand penetration as part of their due diligence.
State of Financials: How quickly are you able to produce them? Is your accounting managed through a cloud-based system? Are your company’s financials messy? Unbalanced? Clear and organized financials are important, as is responding to investor requests in a timely manner. Otherwise, an investor will get the impression that you are disorganized and don’t truly understand your business — which can have a huge impact on any potential valuation.
Be Your Own Advocate
Whether a cannabis business operator is pursuing an acquisition or an exit, it’s important to understand the standard approaches investors take when evaluating such opportunities. Also, don’t be afraid to suggest a particular valuation method or approach to potential investors. Ultimately, nobody knows your business better than you — it’s vital to be your own best advocate.
Advocating for your business and having a better understanding of the valuation process will go a long way toward landing on a fair valuation for your business.
Melissa Diaz is a co-founder and CFO of Arizona-based Rebel Rock, which provides cannabis businesses across North America with specialty accounting solutions, income tax services (U.S. only), CFO and controller services, and business system implementation. She guides companies of all sizes through GAAP compliance, financial modeling, financial reporting and general financial accounting inquiries and functions.
In addition to leading Rebel Rock, Melissa co-founded Rebel HR, which provides cannabis companies with technology-based HR solutions. She is also a partner in High Rock, a likeminded accounting firm focused on cloud technology integration. Melissa has additional experience as a financial statement auditor with a large international accounting firm, providing audit services for domestic and international businesses. Further, Melissa has experience overseeing global revenue and receivables for a Fortune 500 company.
Melissa earned a bachelor’s degree in Accounting from University of Arizona and a master’s degree in Accounting from Arizona State University.
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