Owners, presidents, and CEOs understand that you have to spend money to make money but it’s often difficult to justify investing in Enterprise Resource Planning (ERP) software when you could spend that money on new equipment or other tangible assets. Implementing the right ERP software can dramatically improve every aspect of your business from employee retention to customer satisfaction with consider cost savings and increased profits. Further, ERP software can significantly increase the value of your business for owners and investors. ERP helps executive leaders to understand what’s happening throughout the business with alerts, dashboards, and tools to make strategic decisions when necessary.
With dispensary ERP, companies serving the legal marijuana supply chain finally have the tools they need to drive innovation and gain insights for expanding their operations. ERP software automates many cannabis accounting functions related to technology, services, and human resources, all while allowing cannabis businesses to organize and manage real-time data from various solutions into a single view.
It’s easy to see why businesses operating in the cannabis industry would have intricate inventory management needs, but there’s another business side to cannabis which many might not consider. The cannabis industry has complex accounting requirements that go hand-in-hand with their inventory and other business processes.
With cloud accounting software built specifically for cannabis companies, organizations within the cannabis supply chain finally have the advanced technologies to support their unique operational and accounting needs. Today’s growing cannabusinesses need to adapt in a rapidly changing environment and when they’re successful, it gets noticed. This often results in company leadership seeking investor funding or entertaining mergers and acquisitions talks. When companies operating in this space attempt to position themselves for growth, they need field-tested cloud accounting software to prove it.
In this rapidly changing industry, here are a few ways an effective, flexible, and secure cannabis ERP solution will allow you to adapt, positioning your cannabusiness for growth:
Know Your Customers – Data and Predictive Analytics
Dispensary ERP solutions allow you to compile and understand data about your cannabusiness and the marijuana industry as a whole. With a better understanding of supply and demand pattern, dispensaries can make informed strategic decisions about products and operations.
By capturing relevant data about your cannabis operation, you answer many efficiency and profitability questions. What are customers most interested in? Which products are they buying and in what quantities. How much are they spending? Are there patterns in accompanying purchases or complementing products? These insights and more help your cannabusiness to create customer personas allowing you to better service your clientele.
280E Tax Woes – Accounting
A fully integrated, purpose-built cannabis accounting software package which offers financial reporting, meets GAAP and auditing board compliance standards also needs to be robust enough to handle other complexities within the industry. Does your off-the-shelf solution ensure compliance with section 280E of the IRS guidelines which prohibits a cannabis operation from deducting certain business expenses? If you’re not sure, the answer is probably not.
With modern cannabis solutions available, your operation can fully organize financials by department across multiple locations as well. Dispensary ERP gives you all the financial reporting tools you need for journal postings, purchase orders, invoices and cash management by recording all transactional data in detail, by location.
Staying In Compliance
Regulation and managing regulatory compliance continues to be top priority for growing cannabis companies. As legislation changes, cannabis operators need varying levels of up-to-date reporting capabilities surrounding seed-to-sale traceability, product recall capability, and proper labeling among many other considerations.
Built to exceed compliance standards, your dispensary ERP delivers individual and aggregated reports, unalterable custody tracking with time stamps to provide the real-time data needed for compliance initiatives – as well as for auditors, CPAs and others who will need access to the books.
If you have multiple locations, you will need to monitor, track and record data from each of your locations, jurisdictions, or intra-industry verticals (growers, processors and dispensaries). With one centralized database and integrated reporting, individual factions of your business are no longer operating as silos and staff have access the real-time access to accurate data for regulators.
Growing Your Business – Scalability
Consider growth plans as you look for technology solutions. If your plans include multiple locations or jurisdictions, you will need cannabis-specific software to manage the complexities that arise as a result. If you decide to diversify your product line by vertically integrating other seed-to-sale products, you will need industry-specific solutions to address the inventory, accounting and compliance ramifications not offered by out-of-the-box technology.
Growing cannabusinesses need to work efficiently with suppliers and growers, accurately forecasting demand and staying abreast of current regulations. As a result, your growing company needs solutions which are flexible and customizable with built-in cannabis-specific features.
Like any other business, growing a successful cannabis business requires technology tools to readily handle its industry’s trends and business process complexities. A flexible, powerful and scalable dispensary ERP will help you address those challenges while you continue to expand your operations.
Vice President of ERP Sales, Frank Nisemboum,is a trusted advisor at e2b teknologies who has guided organizations of all sizes enabling them to establish a technology presence and expand their business through technology. His proven ability to analyze the current and future plans of a company and work with team members to subsequently bring technology solutions to the organization result in improved processes and controls that assure continued growth and profitability. Frank has worked in the ERP and CRM software selection, sales and consulting industry for almost 25 years. His strong ability to understand, interpret and match the needs of an organization to the right ERP and/or CRM solution make him an asset to all of his clients.
At e2b teknologies, our passion for solving problems drives us to deliver innovative solutions for everyone we work with. Visit e2btek.com for more information.
VIDEO: The Cannabis Industry’s Banking Crisis – Explained
The cannabis industry faces many hurdles along the path to federal legalization. One of the major obstacles faced by cultivators, processors, and dispensary owners is a lack of clear direction for financial institutions about how to provide banking services for those state-legal, licensed cannabis businesses. In this educational video, learn more about the federal banking crisis and the Congressional solution that can fix it.
Committee Blog: Progression in Packaging – Challenges & Opportunities for Cannabis Brands
Any visit to a licensed dispensary is proof of how far we’ve come with the packaging of legal cannabis. Sure, we still have plenty of standard glass jars, CR pouches, pop-tops and cans; but we also now see proprietary package structures, full branded lines commanding shelf space and packaging so beautiful it doubles as a merchandising tool. Just in the past several months, cannabis packaging design trends have been covered by mainstream media including The Dieline and Packaging Digest.
These are exciting times to say the least, but packaging and labeling remains at the crux of the serious challenges and opportunities that cannabis brands face today.
Keeping Up With Compliance
Here in California, the challenge of keeping up with compliance is beyond real. The race to meet state regs by July 1st were only met with a new set of checklists (literally) the following day. Added labels is the name of the game for any California supplier. This is a real problem for those brands who are trying to stand out with their packaging. Understandably, companies are hesitant to invest in their packaging when the regulations are still in flux. Those who are in this for the long haul need to be agile and forward thinking when it comes to packaging and labeling.
Branding… Because it Really Does Matter With limitations on how a brand can reach today’s cannasumer, packaging is a critical marketing tool. It’s the one guaranteed touchpoint we have, and just like in traditional retail environments, every second counts when trying to capture a shopper’s attention. While it’s tempting to go with the standard compliant packages, a lack of brand value will commoditize your product (and thus, the price point). Brands should ensure that their package is reflective of their unique position in the market. Whether it’s a regional play, a potency position or targeting the growing number of boomer consumers—your packaging should speak directly to who your target market is. Now is the time to create brand loyalists!
Taking a Note from Natural Products
All across retail industries, we are seeing a market demand for products that have a more “natural” approach. From clean ingredients to plant-based everything, it’s impossible to avoid this trend. As the OG natural product, cannabis brands have a real opportunity to take advantage of today’s more discerning shoppers. Tell your story, explain your growing practices, show us your social responsibility… It’s all part of the package, literally and figuratively.
A Need for Sustainable Solutions
To really take our natural story to the next level, we can all agree on the need for more sustainable options for packaging and labeling. It’s great to see some brands, companies, and organizations like W Vapes initiating recycling programs. But as an industry, we need to rally together to work on this issue. It’s definitely a challenge that NCIA’s Packaging and Labeling Committee discuss regularly.
An Optimistic Future for the Realists
For those cannabis brands who can be agile, patient and focused—there is a bright future ahead. Despite the challenges of cost and compliance, an effective package can pay for itself. And if other industries like food and beverage are integrating technologies beyond the QR code (think AR and VR), we’re just getting warmed up. As both in-store and retail experiences evolve, so will the opportunities for cannabis packaging. Form, function, technology and product development are bound to take packaging and labeling to exciting new heights.
Member Blog: 5 Things You Can Do While Waiting for License Approval
Your state passed a cannabis legalization bill and licensing applications are underway! Hooray! Now, you’re gearing up to start your canna-business. With your business plans in-hand and your application sent in, the fee paid, there is nothing to do now but wait… or you can prepare. These 5 steps can help ensure your business is ready for a successful, stress-free opening day, and beyond.
Find Solid Employees
It’s important to look for candidates, if not expressly experienced in the cannabis industry already, to at least have transferable skills; anything from customer service to professional horticulture. It’s also helpful to look into the less-obvious employee options, as in, not just growers and budtenders.
Considering the amount of technology licensed cannabis operations requires, whether it’s maintaining your dispensary point of sale hardware, or ensuring your lights are properly wired to your timing system, IT and technology professionals are vital to any well-run business.
Hiring a cannabis compliance officer can be another vital employee to consider while defining the ideal operational structure. Finding a solid compliance officer isn’t an easy task – it takes an individual who has in-depth knowledge of cannabis compliance and regulations. Not only that, but finding someone who is a problem-solver and understands how to navigate even the murkiest of regulatory waters will be essential in growing across U.S. and international borders.
Develop Your SOPs
Standard Operating Procedures (SOPs) serve as the backbone of your day-to-day operations and define how employees can stay compliant while performing tasks, outline safety and regulatory requirements, and construct standardized steps to comply with cannabis business regulations. Implementing those steps and enforcing them creates consistency from employee to employee, even in the event of turnover and new hires.
Find a Software System that works FOR You
Whether you’re a grower, manufacturer or dispensary, you’re going to have to rely on a track and trace software to keep you compliant and keep your operation running smoothly. It’s important to find a software system that works FOR you, not the other way around. Many cannabis software solutions have rigid workflows and limited functionality, which leaves you with no other choice than to operate in a way that syncs up with the software. Others offer flexibility and can be customized to match your process.
Establish Your Brand
From logos and overall design to messaging and developing a social media presence… as Jeff Bezos says, “Branding is what people say about you when you’re not in the room.” With hundreds of other canna-business out there trying to make a name for themselves, developing a strong brand has become vital in the cannabis industry. Outstanding products have come and gone, so differentiating your business in the market can be the difference maker. As the embodiment of essentially everything your business does and represents, developing a solid and unique brand identity will take plenty of thought, and plenty of time.
Keep Track of Compliance in Your State
Do you know the ins and outs of cannabis compliance in your state? If you’ve already sent in your license application, odds are you’ve mostly wrapped your head around it. But understanding it and maintaining it in your day-to-day operations are two different things.
Each state has unique cannabis laws, which as we’ve seen many times are subject to amendments. It’s up to businesses to stay up-to-date on your state’s regulations and any potential changes to them, as well as keeping your operational workflows up to speed. Keeping smart on the proposed, and sometimes implemented regulations, will enable you to stay ahead of compliance changes and implement swift changes to address them.
It can be frustrating the pace at which the cannabis industry progresses, but as one of the fastest growing and emerging industries in the world, the one thing you can’t afford to do is tread water. There’s always something you can do to prepare so when you do open your doors, you’re already 10 steps ahead of your competition.
Leading the sales team at BioTrackTHC, Steve Flaks has helped to establish the company as a leading cannabis software provider operating in over 2,000 business locations. Mr. Flaks has been featured in a variety of industry panels and publications as a subject matter expert surrounding licensed cannabis operations discussing topics including SOP’s, operational workflows, cannabis software, and seed-to-sale compliance.
Member Blog: Increased Enforcement Is Coming – Takeaways for California and the Broader Cannabis Industry
As June came to a close, so too did California’s phase-in “Transition Period” of cannabis regulation. As a result, a number of additional labeling and testing requirements are now live. And with those newly effective regulations, there are also heightened prospects for enforcement actions. But the lessons from California’s regulatory rollout do not stop at the state border.
What should California cannabis businesses be doing differently? The simplest answer is, of course, the same as in every state cannabis market: follow the rules that are in effect. But it is a universal truth of highly regulated industries that not every possible scenario will be addressed by the rules. That is, in cannabis as in all highly regulated industries there are potential ambiguities and questions of interpretation inherent in the regulations.
California Bureau of Cannabis Control chief Lori Ajax recently tried to help calm industry concerns by offering insights into her team’s enforcement mindset. Ajax noted that “[t]here’s a lot of confusion out there” on what is and is not compliant. As a result, she explained that when the Bureau finds conduct it concludes is a violation, the regulatory response will be informed by whether the business “honestly thinks they’re in compliance.”
So how should a business go about demonstrating its good faith attempts to comply with cannabis regulations, in California and in the other state-legal markets?
Start at the Top
Good compliance practices start with the tone at the top of the company. There is a reason why so many of the nation’s leading companies involve their senior executives in formulating and promoting compliance efforts. Doing so sends a strong message to the entire organization that compliance is a priority, and that the path to corporate advancement does not involve cutting corners. Putting real resources into compliance provides a powerful indicator of a company’s values, and senior executives’ time is a key corporate resource. Put another way, if a regulator is trying to decide whether you have made a good faith effort to comply with the rules, you do not want to lay the decision at the hands of an inexperienced intern.
Build Strong Processes
Leaders in highly regulated industries tend to implement strong compliance processes. Why? For one thing, clear written policies help staffers understand what they can and cannot do. And these policies are a permanent resource for your team, even when your compliance staff is not on premise. But in addition to helping your team follow the rules, strong processes also help regulators understand what you are doing. If, for example, a regulator wants to see if you “honestly think[]” you are in compliance, one of the best pieces of evidence is a clear roadmap of your efforts to be in compliance.
Maintain Focus
This is a fast-moving industry, and the rules are rarely static. A business could have a strong commitment to compliance and detailed processes, but if its compliance efforts are keyed to regulations that have been out of date for many months that is unlikely to sway a regulator. For example, regardless of what they may have done in the past, a Colorado retail licensee would likely receive little sympathy from regulators if they failed to update their policies regarding statements on possible health benefits of their products in the wake of the MED’s recent bulletin regarding retailers recommending cannabis for morning sickness. A regulator will have little sympathy for a business that fails to alter its compliance efforts in the wake of contrary guidance. Effective compliance requires vigilance.
In short, cannabis businesses in California can likely expect heightened levels of enforcement as these additional rules come into effect. But the best practices for California businesses are no different than for those around the nation: by prioritizing compliance throughout the organization and building and updating strong compliance procedures, a highly regulated business takes key steps towards demonstrating its good faith, honest attempts to comply with the law.
Michael Cooper is the co-founder and managing member of MadisonJay Solutions LLC, a leading regulatory advisor to cannabis companies and a member of the NCIA.Agraduate of Harvard College and Harvard Law School, he previously served as General Counsel of MHW, Ltd., which provides compliance services to the beverage alcohol industry, and in the litigation department of Cravath, Swaine & Moore LLP, known as one of the nation’s premier law firms for nearly two centuries.
The legal medical and adult-use cannabis market has grown to an estimated size of 7.1 billion dollars. With this growth comes an array of new opportunities and challenges for cultivation centers and dispensaries. These entities are looking for solutions to ensure they meet regulatory requirements, secure their facilities and produce products of the highest quality.
Click to read the case study
Some of the security and operational concerns for cultivation centers may include:
Compliance with state-mandated requirements for facility and security system design
Tightly controlled access
Secured storage vaults
Complete security camera coverage, with the exception of bathrooms and locker rooms
Ability for state officials to log in to the security system remotely
Monitoring of the environment in cultivation rooms
Revolution Cannabis, a cultivation center located in central Illinois, addressed these challenges with a new access control system. The company not only met state regulatory requirements but also prevented any incidents from occurring.
To learn more about how Revolution Cannabis was able to solve their security and operational challenges, read the full case study.
Tom Dillon is a marketing associate at S2 Security, the leading developer of complete enterprise security solutions. As marketing associate he helps manage S2 Security’s marketing initiatives including content development, public relations product marketing.
Member Spotlight: Simplifya
In this month’s Member Spotlight, we spoke with Marion Mariathasan, CEO of Simplifya. The company provides tools for scheduling, audit management, and tracking issues, giving users a 360-degree view of their compliance. The company was founded in 2016 by partners from Vicente Sederberg, the law firm that led Colorado’s Amendment 64 campaign, and investors with proven track records in tech start-ups.
Cannabis Industry Sector: Information Technology and Software
NCIA Sustaining Member Member Since: October 2016
Marion, tell us a bit about your background and why you launched your company?
I immigrated to Kansas from Sri Lanka when I was 9 years old. I attended both University of Kansas and Emporia State University studying Architecture, Computer Science and Computer Information Systems. After graduation, I took on my first technical role with a medical software company. Since then, I’ve been fortunate enough to have held management and executive level positions with incredible companies – large and small. In addition, I’ve been blessed with the opportunity to have either founded or be involved with many new startup-ups over the years.
Most recently prior to Simplifya, I was one of the founders of a tequila brand. After years of building and distributing the brand nationally, in 2015, we took an exit from the tequila business.
Soon after the exit, I reached out to a good family friend to learn more about the cannabis industry. The good friend happened to be Christian Sederberg of Vicente Sederberg. After a few discussions with Christian and a few others at Vicente Sederberg, it became obvious that the burgeoning cannabis industry needed an enterprise-level software solution to help the highly regulated industry tackle the everchanging compliance needs in a cost-effective and efficient way. After months of discussions and planning, in early 2016, Simplifya was born.
What unique value does your company offer to the cannabis industry?
Simplifya’s Brooke Butler presenting
Simplifya distills complex state and local regulations into a straightforward simple series of yes-or-no questions to generate management and audit reports, identify areas of noncompliance, and hold employees accountable for remediation. Simplifya helps save business owners time and money while providing them peace of mind by staying current with ever changing state and local regulations in real time and streamlining the overlap between jurisdictions and license types.
Simplifya also gives businesses the ability to atomize and store their own customized checklists and SOPs and then assign out those checklists to specific employees enabling companies to monitor business activities and employee performance.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
The cannabis industry at the state and local level has an opportunity to demonstrate that it is worthy of the changes it is seeking at the federal level. There are a number of ways to do this, but creating and maintaining a strong compliance profile is an essential building block. It’s true for regulators, who want to show they are effective with their regulations and enforcement; and for marijuana business owners, who need to overcome the stereotype of being underground operators that don’t care about compliance. By behaving like the best players in other highly regulated industries, and doing things like developing robust compliance programs, actively participating in the rule-making process, and ultimately placing a very high priority on compliance as a path to success, the industry can continue to propel itself toward federal legalization.
Simplifya wanted to be able to provide a simple and affordable tool the industry could use to be able to more easily comply with ever changing regulations and enable them to be able to spend more time focusing on their core business and perfecting their craft.
Why did you join NCIA? What’s the best part about being a member?
One of the first checks that Simplifya wrote when we launched in 2016 was membership dues to the NCIA because we strongly believe the cannabis industry needs strong representation and lobbying power on the national level. We are all working in our own ways to pave the way forward for the cannabis industry and being able to come together as a group of industry leaders with one voice is truly powerful and exciting.
My favorite part of being an NCIA member is the chance to meet all of the other interesting and accomplished men and women that are a part of growing and changing this emerging industry. Many of the NCIA members I met at my first NCIA event shared their own invaluable experiences and insights that helped guide me and Simplifya when we first started this adventure into the cannabis industry. It is so empowering to be a part of an organization like the NCIA that provides forums and regular opportunities for us to help each other grow and succeed.
Member Blog: “Don’t hate me because I’m beautiful!” (part 2 of 2)
Celebrating excellence in branding, packaging and marketing within the cannabis industry
In part 1, we explored the development of the Canndescent brand and the steps they took to launch that gorgeous canna-business. Today, we turn our eyes to hmbldt, one of the most stunning brands to recently burst upon our burgeoning industry.
Last November, while walking through the MJ Business Expo in Vegas, one exhibit caught my eye. hmbldt. Actually, I couldn’t take my eyes off their logo. It was stunning in its simplicity. The one thing I can say about these guys is they don’t like vowels. Just kidding. They fricken’ nailed it!
I loved the contemporary clean lines, the white space and the naming-by-effect convention. The packaging itself was a very well executed combination of color-coded rigid boxes with inserts, and folding carton sleeves.
When I see great work, I get excited! I know, I know… I’m just a branding and packaging geek, I can’t help myself!
Recently, I got a chance to talk to Derek McCarty, CMO of hmbldt, regarding their brand development. He credits their creative partners, Anomoly (2017 Agency of the year – Ad Age) with not only their brand and packaging development, but also the product development. “They are true strategic partners in every sense of the word,” he said. In fact, the agency has a stake in the company, as well as its founding member sitting on hmbldt’s board.
The first employee hired by hmbldt was Derek McCarty, a seasoned brand strategist. Hmmm… with priorities like that, no wonder hmbldt launched at the top of the heap. And it didn’t hurt that Time Magazine named their innovative vaping device one of the Top 25 Inventions of 2017.
“We launched in September and received the award in November. Of course, the award added credibility to the product and propelled sales throughout the state quickly. While we were extremely pleased with the award, we were elated that mainstream media led with the health benefits of cannabis in this instance,” Derek told me.
When asked how long it took to develop the brand, McCarty replied, “Our brand is a living, breathing, dynamic thing… the development will never stop. The hmbldt brand is the sum of all parts.”
And those are very nice parts, indeed.
Discussing his favorite cannabis brands, Derek cited Lord Jones and DeFonce as his favorites for product positioning, and Jetty and Bloom Farms as his choice for best benefit positioning. Adrian from Canndescent also touted Bloom Farms for strong messaging and PAX for overall brand and product positioning.
When I look at amazing brands like these, I like to believe there is something we can learn from them. I asked Derek what advice he would give to a fellow canna-prenuer on building a great brand. “Be creative in how you find strategic partners,” he said. “Look for a mutually beneficial, great value exchange. As with any great partnership, it must be a win-win for both sides.”
Adrian offered this advice. “Hold yourself to a simple standard that begins with compliance. Build a solid platform and write a good business plan. With that in place, the money and great people will follow, allowing you to create your own unique brand that solves a problem,” he said.
A world-class brand doesn’t just happen… let alone two. I’ve learned from these brands that they have succeeded by paying close attention to the details and focusing on quality in everything they do, in everything they touch. They chose their partners carefully and began with a compliant platform.
I am grateful to each of them for creating beauty in a rather barren landscape. For giving us greatness to aspire to and for helping to elevate the image of our industry just by entering it.
Thank you!
Kary Radestock, CEO, launched Hippo Premium Packaging in March 2016 offering an array of services to the cannabis market, including: Marketing Strategy, Brand Development, Social Media, Public Relations, Graphic and Web Design, and of course, Printing and Packaging. Radestock brings over 20 years of award-winning print and packaging expertise, and leads a team of the nation’s top brand builders, marketers and print production experts. Hippo works with businesses looking for a brand refresh or an entire brand development, and specializes in helping canna-business get their products to market in the most beautiful and affordable way possible. Radestock’s Creative Collective of talent and experts, allows her to offer world-class solutions to support the unique needs of the Cannabis Industry.
Member Spotlight: Cannabase
In this month’s NCIA Member Spotlight, we speak with Jennifer Beck, co-founder and Managing Director of Cannabase, a wholesale cannabis marketplace and technology dashboard. Cannabase is headquartered in Denver, serving more than 75% of marijuana licenses in Colorado, with plans to expand nationwide in 2017.
Cannabase
Cannabis Industry Sector:
Wholesale Distribution, Technology
NCIA Member Member Since:
2014
Tell me a bit about your background in cannabis and why you launched Cannabase?
Cannabase co-founders, Chase Beck and Jennifer Beck
When my husband, Chase Beck, and I co-founded Cannabase, we had a background in technology and a passion for cannabis. Not only were we amazed by the incredible science surrounding medical marijuana, but we also believed that cannabis was a much healthier alternative to alcohol for general adult-use purposes. The idea of being part of an emerging industry – helping to shape the framework while increasing its validity and chances of survival – was a really exciting idea to us.
What unique value does Cannabase offer to the cannabis industry?
Cannabase is the oldest and largest online wholesale marketplace in Colorado, providing a safe and compliant platform for businesses to connect over wholesale bud, trim, extracts, seeds, and edibles. We represent over 75% of the licensees in the state in our intuitive, automated platform, streamlining wholesale purchases and aggregating the powerful market data that drives our market statewide. Cannabase will be expanding nationwide in 2017, and is the exclusive wholesale partner of BioTrackTHC and MJ Freeway point-of-sale systems, which makes Cannabase the only firm to have direct, non-self-report access to virtually the entire Colorado market’s real-time inventory.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does Cannabase help work toward that goal for the greater good of the cannabis industry?
Cannabase was founded on the principle that legal cannabis was a statewide experiment, and the health of the industry was critical to that experiment being considered a success. As a result, we’ve treated compliance, transparency, and integrity as non-negotiable cornerstones of our company’s evolution and product development. We’re disciplined in our vetting of licensed businesses and ensuring that anyone using our product has a valid license with their state and uses the site appropriately. Similarly, we’re passionate about supporting industry groups like NCIA that are doing amazing work for the future of our industry. We believe that investing in industry groups is as important as ever, especially in light of the changing political climate.
What kind of challenges do you face in the industry and what solutions would you like to see?
We still see the ramifications of the overarching federal limitations and restrictions – primarily 280E (which squeezes capital industry-wide) and lack of banking. These roadblocks impede progress for all cannabis businesses, and make it more difficult for ancillary businesses to solve the critical day-to-day challenges faced by our customers.
Why did you join NCIA? What’s the best part about being a member?
We love the work NCIA does to strengthen, connect, empower, and fight for the legal cannabis industry. In the three years we’ve been in the cannabis industry, we’ve never experienced anything short of total professionalism from the staff at NCIA. It’s a group that never under-delivers, and has been a pillar for community and our community’s future. We are proud to be a part of NCIA and look forward to seeing what 2017 brings!
Note: NCIA member profiles highlight members and stories within our cannabis industry community. They do not constitute an endorsement or recommendation of specific products or services by NCIA.
Member Spotlight: New Economy Consulting
NCIA’s member spotlight for the month of February takes us to Oregon, where we speak with Sam Chapman, co-founder of New Economy Consulting, a political and business consulting firm for the legal cannabis industry. Sam’s background includes consulting for statewide political campaigns, small business development and media relations, as well as direct involvement as a lobbyist for drug policy reform at the local, state, and federal levels. Having Sam in the room at an NCIA event always raises the dialogue with his insight and expertise, and we’re glad to have him as part of the NCIA community.
Cannabis Industry Sector:
Regulatory Compliance and Consulting
NCIA Member Since:
December 2013
Who does New Economy Consulting work with?
NEC provides a range of services and support to cannabis entrepreneurs, investors, and local governments. We specialize in drafting state license applications, writing and navigating local regulations, screening compliant real estate, regulatory compliance support, and political advocacy.
The New Economy Consulting Team
How do you serve your clients?
On behalf of our clients, NEC handles all aspects of licensure for retail, wholesale, production, and processing facilities. We provide clients with a holistic approach, encompassing services from locating and screening compliant property, to compliant buildout design and supervision, to local and state compliance inspection support.
What makes NEC unique?
NEC is unique in that our business consulting services are directly informed by our active political lobbying. Our researchers maintain a finger on the daily pulse of regulatory movement in the industry at both the state and local level. We strategically deploy our proprietary research in support of our client’s business ventures. An example of where NEC goes above and beyond for clients is in tracking the local regulations of over 90 Oregon counties and cities. This body of research allows NEC to quickly and confidently screen property and determine that property’s compliance with current and expected rules and regulations.
Sam Chapman, NEC co-founder
What has been NEC’s largest impact on the Oregon cannabis industry?
Before I co-founded NEC, I helped write and pass HB 3460, which legalized and regulated medical dispensaries in Oregon. NEC has successfully championed many pro-industry causes including raising more than $30,000 in support of Measure 91, legalizing the adult use of cannabis.
What should clients know before contacting NEC?
NEC is a boutique firm with a strong commitment to our clients. We choose our client and partner relationships with care. Our ideal client is well-capitalized, with business experience inside and out of the cannabis industry, has a clear vision of their project goals, and shares in our vision of creating and maintaining an industry to be proud of. We take great pride in contributing to the new marijuana economy while simultaneously supporting and shaping social justice reforms at the state, local, and federal level.
You work primarily in Oregon, which is an evolving landscape when it comes to marijuana policy and regulations. Can you briefly summarize the important regulatory frameworks that exist for business owners, and what changes are on the horizon for this market?
The Oregon Legislative Committee on Marijuana Legalization is considering many changes to the existing recreational program, including the potential removal of the residency requirements for recreational licenses. The committee has historically been hesitant to allow out-of-state majority ownership of Oregon marijuana businesses. However, many committee members have recently expressed that they now view residency requirements as a barrier for local business to raise much-needed capital.
While there is no guarantee that the current residency requirements will be eliminated, NEC has already begun to identify current and future market opportunities available to out-of-state business owners and investors.
Why did you join NCIA?
NEC enthusiastically joined NCIA as a member in 2013 and supports NCIA’s strategic lobbying at the federal level and especially their focus on our industry’s need for banking reform and 280E tax solutions. We strongly feel that the National Cannabis Industry Association is the tip of the spear when it comes to fighting for the federal reforms that affect all marijuana businesses on a daily basis.
For December’s member spotlight, we zoom in on Arizona-based Hypur, an NCIA member business who is committed to “innovation with purpose” by providing solutions for one of our industry’s major hurdles: financial compliance. Navigating the various layers of regulations with mastery is an important aspect of being transparent, legitimate, and compliant, and is an essential cornerstone of NCIA’s mission and values.
Our solution is a technology platform that provides unprecedented transparency and accountability for banks and regulators, and legitimacy, safety, and convenience for businesses and their customers. With many banks and credit unions wanting to bank these booming industries, and government bodies wanting banking services available to them, we knew the demand for our platform would be robust. Hypur represents the future of commerce for cash-intensive businesses and high-risk challenging industries. Hypur’s technology provides financial institutions with a state-of-the-art compliance platform that enables them to profitably bank these businesses – revolutionizing the businesses and the communities they operate in.
What kind of banking and payment solutions does Hypur provide?
The Hypur payment network is available to clients of our financial institutions. It gives retail locations the ability to accept cashless payments from their consumers via their mobile devices. Additionally, businesses that have accounts at Hypur partner financial institutions have the ability to conduct business-to-business transfers electronically without cash.
Can you give us some insight into the unique regulations that affect cannabis business owners in your sector?
Hypur serves financial institutions, which must comply with FinCEN guidance and all BSA/AML laws that govern their institutions. They must also comply with regulatory expectations from the FDIC (Federal Deposit Insurance Corporation), OCC (Office of the Comptroller of the Currency), or NCUA (National Credit Union Association).
Why did you join NCIA?
Hypur always seeks to support leading organizations that intersect with industries of interest. We have taken note of the many important ways that NCIA is advocating for fairness, education, and awareness for the legal cannabis market, and are delighted to be a part of the NCIA community.
As we learn more about the cannabis plant and its potential uses and benefits, Cannabidiol, or “CBD,” continues to emerge as one of the most beneficial, and non-intoxicating, parts of the plant. Although there is significant research on the safety and efficacy of CBD, and some forms of CBD derived from hemp are arguably not regulated under the federal Controlled Substances Act (CSA), the Drug Enforcement Administration still considers CBD a marijuana derivative and Schedule I drug that is being illegally marketed in violation of the CSA and the Federal Food, Drug, and Cosmetic Act (FDCA).
In addition to food and drugs, nutrients and other supplements are regulated by the Food and Drug Administration (FDA) under the FDCA. The purpose of the FDCA is to forbid “the movement in interstate commerce of adulterated and misbranded food, drugs, devices, and cosmetics.” Disregarding the legality of CBD product sales under the CSA, any company contemplating the sale of such products should consider whether the products can be lawfully sold under the FDCA. Any product intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease is classified by the FDA as a drug, regardless of the product’s form or how it is marketed or labeled. Drug approval requires an extensive process involving collecting and submitting for review clinical and non-clinical data about the proposed use of the drug. While FDA has not yet attempted to regulate marijuana products sold in licensed marijuana establishments, the proliferation of states legalizing CBD for medical purposes and legalizing the cultivation and sale of hemp products has complicated the legal landscape. As CBD products move out of marijuana establishments and into retail and internet stores, they are catching the FDA’s eye.
In February 2015, the FDA sent letters to companies marketing CBD products stating that the companies were violating the FDCA by making therapeutic claims about the products, which are not approved as “drugs” under the FDCA. The FDA also recently confirmed that CBD cannot be marketed as a dietary supplement, stating that “Based on available evidence, FDA has concluded that cannabidiol products are excluded from the dietary supplement definition under section 201(ff)(3)(B)(ii) of the FD&C Act. Under that provision, if a substance has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted and the existence of such investigations has been made public, then products containing that substance are outside the definition of a dietary supplement. There is an exception if the substance was ‘marketed as’ a dietary supplement or as a conventional food before the new drug investigations were authorized; however, based on available evidence, FDA has concluded that this is not the case for cannabidiol.”
In marketing products, the FDA classifies products based on intended use. Any website selling the product or providing references to sites where the product is sold will likely be examined for content by the FDA in determining the product’s intended use. Evidence of intended use includes claims on labels and literature, the citation of publications related to the product, and claims made on any forum where a consumer may see the product. Products may be considered “drugs” if claims are made related to the product’s use for the cure, mitigation, treatment, or prevention of diseases. Evidence of such claims may include therapeutic claims, claims that the product possesses certain medical properties, or the commercial use of scientific publications to promote the product’s sale. Even simple references to scientific studies or general research, such as “cannabinoids are emerging as an effective treatment for infections,” may be considered evidence that the product is a drug.
Shawn Hauser, Esq. of Vicente Sederberg
To further complicate matters, CBD has been granted orphan drug status by the FDA for treatment of Dravet’s Syndrome and Lennox-Gastaut Syndrome. However, the FDA has acknowledged the mixed signals sent by the present controlled substance classification of cannabis, and of CBD specifically, and has publicly supported research regarding CBD’s potential medical uses in testimony before the House Subcommittee on Government Operations.
Prior to marketing CBD products, companies should consult with an attorney who specializes in FDA compliance. This due diligence can not only ensure compliance and prevent action by the FDA, but may also promote the business’s reputation as one that is professional, thorough, and trustworthy. The FDA is less likely to target medical marijuana companies that a) avoid engaging in interstate commerce and only sell products within states that have legalized medical marijuana, and b) do not make claims about the proven efficacy of CBD products. As cannabis and CBD products proliferate, recent FDA activity indicates that the FDA is monitoring retailers and manufacturers of these products and will continue to do so going forward.
Nothing herein is intended to create an attorney client relationship. This article is for educational purposes only and shall not be considered legal advice. Please consult the appropriate legal professional prior to relying on anything mentioned herein.
Shawn Hauser, Esq., is the senior associate at Vicente Sederberg, Sustaining Members of NCIA. Shawn has been working in marijuana and law in policy for almost 7 years, starting with internships in marijuana law while she was studying at the University of Denver Sturm College of Law, where she chaired the school’s chapter of NORML. Prior to joining Vicente Sederberg LLC, Shawn worked at a small law firm specializing in marijuana law, criminal defense and family law. Shawn is the director of the “Local Implementation Project” for the non-profit Sensible Colorado Action, where she works with local governments across the state to pass marijuana laws that foster responsible businesses. Shawn also serves on the board of National Hemp Association, a Denver-based organization dedicated to the re-birth of industrial hemp in America. Shawn came to Denver in 2008 from Austin, Texas, where she fostered her love for live music, while studying psychology at the University of Texas at Austin.
Guest Post: Commercial Cannabis Compliance – The Key to a Golden Age
By Mark Slaugh, Founder and CEO of iComply, LLC
As I call another contact in Colorado, the knowledge of the latest Denver Post article is still fresh in my mind. The headline reads, “Denver approves plan to increase staff to enforce marijuana regulations.” Our client, busy as usual managing plants, product, and people, sighs in desperation as I tell her about the additional $3.4m in Denver being added to the $25m budget of State regulators.
Exasperated, she says, “man, it seems like they want to regulate as few of us as possible.” She knows the horror stories etched on the tombstones of businesses now shut down due to regulatory enforcement. Forfeit in the grave are dozens of jobs, thousands in investment, and millions in opportunity.
I know the struggle of marijuana businesses to reach the high bar of compliance that has been set in Colorado for commercial cannabis operators. When I started iComply in 2011, it was with the operational understanding of early rules at an initial stage of medical marijuana regulatory framework. At the time, my work had been facilitating the operations of new dispensaries and directing a Southern Colorado industry group making its way through local laws and state legislation.
Back then, we all knew about cameras, about locks, about badging, about tracking sales. What we didn’t know was how long the arm of the Marijuana Enforcement Division (MED) was. Up until last year, the industry and regulators we still figuring it out. Many people viewed enforcement like a Sasquatch; sightings and rumors abound but with very few inspections ever conducted and even fewer enforcement actions taken.
Typical in new markets, about 60% of the industry went out of business in the first 18 months and the Division had over-projected revenues and under-projected budgets. In short, they were down to 12 employees and very little bandwidth in the field to regulate over 1,000 facilities.
To no real surprise, a scathing audit of the MED found they were inefficient and ineffective. However, shortly after Amendment 64 passed, legislators took action. The Division was robustly funded to make up for years of enforcement gaps. The industry, for the most part, rejoiced over the possibility of removing bad actors from the playing field and leveling the standard for compliant cannabis commerce in Colorado.
The only reason anyone in the national industry is allowed to blatantly violate Federal Law is if they can show clear, unambiguous, compliance with State regulatory regimes. These regulations cover the eight Department of Justice Guidelines outlined in the 2012 Cole Memo. As new states bring regulations online from CBD only, to medical and retail marijuana, the signal is clear: expect enforcement to hold businesses accountable to the law.
For experienced and novice operators alike, compliance is a challenge that is difficult to take on alone. Qualified labor shortages are the nature of the market place and budtenders and growers seldom read legalese and are able to fully comprehend the regulatory expectations of the industry. Managing compliance details is crucial and standardizing best practices is far from complete. As the industry matures in Colorado and expands nationwide, owners and operators must keenly hone in on what the future will look like:
State-wide seed to sale tracking using RFID technology, real-time analytic reporting to law enforcement, standard operating procedure requirements, laboratory testing, manufacturing safety protocols, and product homogeneity under certified processes are just a few of the high level expectations likely to govern any cannabis market in the US.
As operators expand the marketplace by opening more facilities amid multiple states, we must contend with a slew of regulatory nuances. Colorado owners are hiring a scarce qualified workforce as compliance officers to internally manage reporting, tracking, and deadlines. Rules change frequently, and interpretations vary from attorneys to individual enforcement agents in the field – making a complex operation even more difficult.
We have clients who, due to missing the filing of one form, have had over 20lbs of product sanctioned by enforcement. For 6 months, they have simply awaited action by regulators with no clear end to empty shelves and disappearing customers in sight.
States who miss the reality of rubber hitting the road are faced with the question of establishing reasonable enforcement procedures inherent to licensing. In Colorado, a record number of application denials, enforcement actions, and administrative hearings has taken the industry by force and surprise since Retail sales came online Jan 1 this year.
A few words to the wise for the Responsible and Compliant vendors of the future.
Do everything you can to mitigate the risk of non-compliance.
Document, whenever possible, the activities of your facilities.
Be pro-active rather than reactive to changing regulation.
Support industry organizations to negotiate your rules based on best practices.
Preparing against non-compliance is the first step to ensuring a compliant operation and to reducing scrutiny from Law Enforcement. How we operate will determine our fate and the whole world is watching. Our brave new world still hangs in the balance and any single operator is either an asset or a liability to the overall industry and movement. Compliance is key to unlocking the golden age of commercial cannabis as expectations rise and the industry grows.
Mark Slaugh is the founder and CEO of iComply, LLC, and has more than four years of experience in the regulated cannabis industry development, consulting and compliance business. His successful startup provides valued services to clients on starting operations, production/manufacturing/retail management, and compliance consulting, training, and certification. Additionally, he served as the Colorado Springs Medical Cannabis Council (CSMCC) industry membership and executive director, and as the Southern Colorado Regional Coordinator for the Campaign to Regulate Marijuana Like Alcohol (Amendment 64).
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