The information provided in this article is for general informational purposes only. While we endeavour to provide accurate and up-to-date information, there may be instances where information is outdated or incorrect. The contents of this article should not be taken as legal advice nor should it be relied upon in making any business, legal or other decisions. We encourage readers to consult with a qualified legal or professional advisor to obtain proper advice based on your unique circumstances. Cannavigia disclaims any liability for any loss or damage arising out of or in any manner connected with the use of or reliance on the information provided in this article.
Q: What is the least heard sentence in the world?
(This is a joke by the way)
A: Is that the tomato farmer’s Ferrari?
Getting involved in growing cannabis is not a get rich scheme. You are just another farmer that, instead of growing tomatoes is actually growing cannabis. And farming is not a “get rich quickly” scheme, no matter how many self-help books you read.
People become farmers for different reasons. Farmers usually boast a high level of work satisfaction, believe in certain goals that they can achieve and have a healthier lifestyle than most. They are also independent thinkers who prefer not to work for a boss.
So, when you start growing cannabis, this is what you become: a farmer on a mission.
But you know all of this. We all know that you will be spending more money that you thought and that the process will take way longer than planned, but there are a few other factors to take into consideration before you invest your hard-earned cash (or someone else’s) in the industry.
All around you, you will be reading about huge figures and there will be a lot of zeros attached to those figures. You will read about the Minister trying to pass the cannabis legislation predictions for taxable income. You will read about the investor making predictions about profit margins to encourage people to give money to his business. You will read predictions on turnover, market-size, how many consumers there will be in Germany in ten years’ time and growth in cannabis magazines that find its way into your inbox. These are all guestimates and mostly (if not all) hugely inflated. They are creating an unrealistic expectation for a lot of people. Don’t be one of them. It is obviously to the benefit of those people to hype figures, because everybody likes a rosy future, especially those with dollar-signs in their eyes. There is a reason those figures hit the headlines, it’s because they are surprising. For every headline there is some fine print. Find the fine print. Do your research, talk to other people with experience and mostly, let logic follow its course. Like Public Enemy says “Don’t believe the hype”.
The cannabis market has taken a huge knock, especially in California and Canada. This knock is mainly due to oversupply. This over supply is caused by big companies that are listed and have to continue to pay dividends to their shareholders. This means that they are cultivating quantity and not quality. This market is new and there is still no rhythm to it. This takes time to develop. It is important that you find your niche in the market. Sometimes a more specialised crop can attract a better price and build a more solid customer base. Customers are getting choosier now that the choice has become wider and if you understand what your customer wants, life becomes easier. You can hold a steady ship in a fluctuating market if you do proper planning. Using a consultant that shares your vision may even be a good option.
Getting your license is a long and expensive process and in a lot of cases you can only get it once you have spent the money. This means that you have to have some extra money in the kitty in case it takes longer than planned. Bear in mind that the people issuing the license is also new to this business. There are no positives around losing your temper with bureaucrats, the only loser will be you. Add extra months and build safety measures into your planning. Make sure, right from the start that you understand exactly what is expected of you and understand the business that you are getting yourself into. A lot of cultivators are coming from a place where cutting corners and not playing by the rules is the norm. Once you go legal, these tricks are a drawback and not an advantage in moving forward. There will always be things that you did not expect and there will be setbacks. This is part of starting any new business and is not exclusive to cultivating cannabis. If you have an inability to do this kind of paperwork and dealing with bureaucrats, it may be a good idea to get someone that is good with these kinds of things. Not only will this take the stress off you, but it will also allow you to concentrate on the part of the business that you are good at. Specialisation is not a bad thing. Leave the stuff you cannot do to people who can.
Most countries have banking laws that limits their involvement in cannabis. These laws will start changing as soon as cultivating cannabis becomes legal in more places, but for the moment it is still a stumbling block. This is applicable to every facet of your business, from raising funding to banking your profits or even opening a bank account in your company name. You can ready yourself for major hiccups. Working with money and managing cash flow is a very specialised business which is why CFOs are usually people who think different from the rest. They have been conditioned to do things in a specific way which is not always that easy to understand for normal folk. Many successful businesses have been run into the ground because the correct financial decisions were not made. Mastercard recently issued a directive under which even their debit cards are not allowed to be used for purchasing legal cannabis. This means that raising the money to start your business may not be successful when trying to get it from banks. This means that you have to have a financial plan in place that takes all these problems into account before you even start out. This is not something that you can solve on the fly or while problems stick out its head. Dealing with the financial side should be part of your original business plan and getting someone to deal with it (and who knows the business) can only be to your benefit.
Cannabis has been on the receiving end of bad press for way more than a century and has been illegal under UN law for decades. This means that people have a negative idea about it. Mostly they associate it with shady characters and drug barons. Even though more and more people are starting to see the light around cannabis, most still don’t and you will not be able to change that overnight. The family get together may become awkward, the neighbours may think strangely of you and some people may even find you undesirable. It is important that you have to have your arguments and facts around what you do sorted out. If you really believe in this as a product make sure that you do proper research and can counter arguments against it in a calm and rational way. Like with any other product in a start-up business you have to be able to make people understand the positive aspects of your business and why you do it. Be informed and stay on top of things by constantly reading up on new developments and legislation. There is a reason why it is becoming more acceptable to be in the cannabis business. Use those reasons when encountering negativity.
When people move from underground growing to being legal, they have to pay taxes. One of the reasons governments are so eager to start legalising, is because they can earn a lot of new money by taxing cannabis cultivators. As a new source of income for governments this means that they will be very strict on checking what’s going on in your business. Trying to duck and dive the taxman is a useless exercise and eventually you will have to cough up. Never forget the old saying about death and taxes. There may be ways to at least prolong life, but there is no way around avoiding taxes. If you do, that makes you a criminal again. So, of course a lot of money that you could have put in your back pocket will now be claimed by the taxman. Acceptance is a good starting point. Making sure that you are not paying too much is the only way to lessen your losses. Remember that every single little thing that you spend in your business is taken into consideration when determining your tax. This means proper record keeping and SOPs.
This is something few people speak about, but when you grow in certain places, even though its legal, there will be the greasing of the palm involved. This is not only for cannabis but it’s the price of doing business in certain territories. In some cases it helps to speed up a process and in some places it is just an accepted norm that certain monies have to be paid. If you do not play this game, your crop may end up in some government warehouse never to be seen again. By speaking to other cultivators in these places, you will soon find out how business is done. Over and above being illegal it is also immoral and helps corruption. Not a nice thing to have on your CV. Avoid those places, because once you have paid the first time it becomes a standard and there is no way around it. Some people see this as an extra tax and just add it to their cost of doing business. Don’t be one of those people.
As you may have noticed in conversations, in this business everybody is an expert. Even different websites have different opinions. A good example of this is the temperature that cultivating crops should happen at, where virtually every website is different. And that is supposed to be a scientific thing. So…this means that you will encounter many conflicting pieces of information. This is obviously very confusing and even if you do your own thing in your own specific way, you can even reach a point where you start doubting yourself. It is important that you surround yourself with people that you trust, whose opinion is not just an opinion and hopefully with the track record to back that opinion. If in doubt, use a consultant. It is perfectly acceptable to tap into other people’s expertise. This is a constantly changing industry and because it is still young, there are new ways of doing things that pop up almost on a weekly basis. It is impossible for you as an individual to stay on top of everything on your own. Tapping into a knowledgeable source will keep you ahead of the game.
Most countries with a strong farming tradition, have insurers that will cover your crop in case of drought, hail and other factors that come into play when growing. Unfortunately, like with the banking aspect, a lot of insurers will not touch cannabis. Slowly but surely new insurers are stepping forward to fill the void not done by traditional insurers, especially in the case of indoor cultivation. Outdoor cultivators may still struggle to find insurers. It is important to find the correct insurers because no crop can be uninsured – the financial risk is just too big. If in your territory you cannot find insurers prepared to cover your cannabis crop, you can try to insure individual aspects of the crop ie fire, equipment failure, vandalism et al. This will cost more than all-in insurance, but should still be done.
This is the final hurdle. It doesn’t matter how well you follow the guidelines and the law, if your crop is not sellable, all was in vain. There are no guarantees for any crop. As a matter of fact, there are no guarantees in any crop or new business. There will always be a certain element of doubt and gamble involved. With a cannabis crop there are a lot of things that can go wrong. You may have done inappropriate watering, improper sterilisation, improper lighting, not controlling the pH – the list is endless. A sellable crop is obviously the ultimate goal in your whole project. Making use of a seed to sale software is one way of not only insuring compliance but upping your chances of having a sellable crop. With constant monitoring keeping track of everything that is happening in the cultivating process you will automatically be one step closer to selling your product.
