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The Bumpy Path to Profitability for Cannabis Businesses

Updated: Aug 30, 2023

A burning question that's likely at the top of every cannabis entrepreneur's mind: why is it that only 24% of cannabis businesses achieve profitability? A surprising figure considering the explosive growth of this industry. However, as we delve deeper into the maze that is the cannabis industry, this enigma begins to unravel.

In this article, we aim to provide straightforward insight to the complex challenges that often impede the path to consistent profitability in the cannabis landscape. Regulatory roadblocks, the cumbersome burden of 280E tax liabilities, and the revolving door of high employee turnover rates – these are just a handful of the hurdles to be surmounted.

But fear not, because amidst these trials and tribulations, several cannabis businesses are flourishing, proving that these obstacles can indeed be overcome. The key to success lies in gaining a profound understanding of the intricate workings of the industry, enabling you to make informed decisions that steer your venture towards profitability.

Buckle up – it's time to take off those emerald colored glasses and take a look at the reality of the work and savvy it takes to avoid the common barriers to profitability in cannabis business, including:


Among the most substantial of unique hurdles to profitability is the tax burden placed upon cannabis businesses by the United States federal government. In particular, Section 280E of the Internal Revenue Code poses a unique challenge that can severely affect profitability. However, understanding these burdens and strategic planning can help businesses navigate this complex terrain.

Section 280E and Its Implications

The roots of Section 280E date back to the 1980s, intending to prevent illegal drug traffickers from deducting business expenses. However, it also impacts legal cannabis businesses today. Because the federal government still classifies cannabis as a Schedule I substance, 280E prevents state-legal cannabis businesses from deducting standard business expenses, such as marketing and rent, from their taxable income. As a result, these businesses often face effective tax rates that can exceed 70% of their income.

...these businesses often face effective tax rates that can exceed 70% of their income.

The Impact on Cannabis Profitability

This situation inevitably leads to significantly reduced profitability for many cannabis businesses. By disallowing the standard business deductions that virtually all other industries can utilize, Section 280E places cannabis businesses at a distinct competitive disadvantage. The high tax burden erodes profit margins and makes growth and reinvestment significantly more challenging.

5 Methods for Addressing Cannabis Business Taxation

Despite the challenges, there are strategies cannabis businesses can employ to manage their tax burdens and improve profitability.

1. Cost of Goods Sold (COGS)

One of the few deductions available to cannabis businesses is the Cost of Goods Sold. Under current IRS regulations, cannabis businesses can deduct the direct costs of producing their products. Therefore, understanding and correctly categorizing costs associated with production can significantly reduce taxable income.

2. Diversify Your Business

Businesses that provide more than just cannabis sales have more leeway with deductions. For example, if you sell related products such as apparel or accessories, or provide non-cannabis related services, you may deduct expenses associated with those parts of your business.

3. Use a Separate Entity for Non-Cannabis Operations

Creating separate legal entities for cannabis and non-cannabis activities can help minimize tax exposure. Non-cannabis entities aren't subject to Section 280E and can thus claim a wider array of deductions. Corporate lawyers and CPAs are usually most helpful in doing the paperwork for this kind of corporate structuring.

4. Accurate Record-Keeping

Proper bookkeeping is essential. Keeping thorough and accurate records of all expenses can aid in correctly categorizing deductible and non-deductible costs. This is best executed by having an in house bookkeeper and either an in house CPA or an external CPA that utilizes the bookkeepers records to do the more high level corporate tax accounting.

5. Hiring a Cannabis Tax Expert

Securing the services of an accountant experienced in cannabis business operations equips your enterprise with an expert adept in navigating the intricate landscape of cannabis taxes, ultimately optimizing your financial strategy for maximum returns.

Employee Turnover

The tax implications and burdens posed by Section 280E certainly pose a significant challenge for cannabis businesses, but they are not the only factor influencing profitability in this rapidly evolving industry. Another critical, and often overlooked issue, is the high cost of employee turnover, which can have a devastating impact on a company's bottom line. Just as with taxes, understanding this problem and implementing strategic solutions can turn this potential stumbling block into a stepping stone on the path to profitability.

Employee turnover is an issue across many industries, but it's particularly pronounced within the cannabis industry. Cannabis businesses are still relatively new, which can lead to unstable employment. The emerging and evolving nature of the industry can lead to significant operational changes, creating an environment of uncertainty for employees. Additionally, the physical demands and relatively low wages of many roles in cultivation and retail may contribute to turnover.

The costs associated with high employee turnover are multi-faceted. Direct costs include those associated with recruiting, hiring, and training new staff members. There are also indirect costs, such as lost productivity during the training period, and the potential impact on morale and productivity among remaining staff.

According to a study from the Center for American Progress, the cost of replacing an employee can range from 16% of annual salary for low-paying jobs up to 213% for executive positions. These costs can quickly add up and eat into a company's profitability.

5 Strategies for Reducing Employee Turnover Rates

What strategies can cannabis businesses employ to combat high turnover and pave the way towards profitability?

1. Competitive Compensation and Benefits

Although the cannabis industry might be relatively new, that doesn't mean you can undercut your employees. Offering competitive compensation and benefits can attract quality employees and inspire loyalty.

2. Training and Development

Providing ongoing training and development opportunities can boost employee morale and increase their engagement. Employees who see a clear path for growth within the company are more likely to stay.

3. Stable and Supportive Work Environment

Given the turbulent nature of the industry, providing a stable and supportive work environment can go a long way in retaining employees. This could mean clear communication of expectations, providing necessary resources, or fostering a positive company culture.

4. Recognition and Rewards

Regularly acknowledging and rewarding your employees' hard work is an effective way of increasing employee satisfaction and retention. These rewards do not always have to be financial; sometimes, a simple thank you or public acknowledgment can make a significant difference.

5. Clear Career Pathways

Employees are more likely to stay if they can envision a future within the company. Providing clear career pathways and promoting from within can help reduce turnover.

Regulatory Challenges

As we move from discussing internal organizational hurdles to external influences, let's turn our attention to an equally formidable obstacle: the regulatory landscape. Regulatory restraints can be a daunting barrier to profitability, but forward-thinking strategies and diligent compliance can turn potential setbacks into steps towards success.

Regulatory challenges in the cannabis industry are multifaceted. They range from changing laws and regulations across states and countries, rigorous licensing processes, to strict product quality controls and advertising restrictions. Each one of these components can pose a significant cost to businesses, not just in terms of monetary resources, but also in terms of time and energy, which, if not managed properly, can hamper profitability.

5 Ways to Navigate Regulatory Obstacles

These challenges don't necessarily spell doom for your cannabis venture. Here are some strategies that can help navigate these obstacles and keep your business on the path to profitability:

1. Stay Informed and Be Proactive

Laws and regulations related to cannabis are always evolving. Stay ahead of the curve by staying informed and ready to adapt. Attend industry conferences, follow reliable news sources, and consider hiring a compliance officer or legal counsel who specializes in cannabis law.

2. Create a Compliance-First Culture

Make regulatory compliance part of your company culture. This means not only following all rules and regulations to the letter but also fostering an environment where employees understand their importance. Regular training and open communication about regulatory changes can foster this type of culture.

3. Build Strong Relationships with Regulators

A positive relationship with local regulators can be beneficial. It allows for open dialogue, and regulators can provide guidance on compliance matters. Moreover, should issues arise, a good relationship can facilitate easier resolution.

4. Invest in Compliance Software

There are several compliance software options available designed specifically for the cannabis industry. These can automate and streamline reporting, track and trace requirements, and maintain records, which helps prevent costly mistakes or oversights. At the retail level, point of sales systems usually have strong compliance components built in.

5. Plan for Regulatory Costs

Incorporate expected regulatory costs into your financial planning. This includes license application fees, legal consulting fees, compliance software costs, and more. By anticipating these expenses, you can better allocate your resources and maintain profitability.

While the regulatory environment for cannabis businesses may seem daunting, remember that these rules are in place to ensure the safety and integrity of the industry. By embracing a compliance-first mindset and implementing these strategies, you can navigate these hurdles successfully.

Lack of Strategic Planning

Having unpacked the challenges of regulatory compliance in the cannabis industry and strategies to tackle them effectively, it's clear that being proactive and diligent can pave the way for success. Nothing says "proactive" like strategic planning, yet many cannabis companies broadly step over this process, and miss opportunities for growth and profit.

Strategic planning is the roadmap for your business. Without it, businesses can become reactive, rather than proactive, losing sight of their goals amidst the rapidly changing cannabis landscape.

Strategic planning is a disciplined effort to determine where a business is going, how it's going to get there, and what metrics will be used to determine if it got there or not. It entails envisioning a desired future and then translating this vision into clearly defined goals, a sequence of steps to achieve them, and ways to measure progress. In essence, strategic planning serves as the blueprint for the future of any organization, acting as a roadmap for decision-making and resource allocation.

The benefits of strategic planning for businesses are manifold. Firstly, it provides a clear sense of direction, giving organizations a well-defined path to follow, which is particularly crucial in turbulent and unpredictable business environments. Secondly, it leads to better alignment, ensuring all members of the organization are moving towards the same goals and objectives. This can enhance efficiency, foster cohesion, and reduce counterproductive activities or conflicting priorities.

Lastly, strategic planning enables better resource management by allowing businesses to anticipate needs, identify gaps, and allocate resources in a manner that's conducive to achieving their goals.

In the context of the cannabis industry, strategic planning is even more critical given the unique challenges that businesses in this sector face. The regulatory landscape is continuously evolving, market dynamics are shifting, and consumer demands are complex and often rapidly changing. Without a clear strategic plan, cannabis businesses quickly find themselves directionless, unprepared, or outmatched by better-prepared competitors. A sound strategic plan allows these businesses to navigate regulatory changes, stay ahead of market trends, manage resources effectively, and ultimately ensure long-term profitability.

10 Steps for Developing a Strategic Plan

Here are a few strategies that can help inculcate a strategic approach to bolster profitability:

1. Start with a Clear Vision and Mission

Understand what your cannabis business stands for and where you want it to be in the future. Get your leadership team together for a brainstorming session. Define what your business stands for (mission) and your long-term objectives (vision). Write concise and powerful mission and vision statements that can guide your strategic decisions.

2. Understand Your Market

Conduct thorough market research. Use online resources, surveys, and direct customer feedback to understand market trends and consumer behavior in the cannabis industry. Evaluate your competitors to identify gaps in the market you can exploit.

3. Define Your Goals

Identify what you want to achieve in the short term and the long term. Break down these goals into smaller, manageable objectives that can be tracked and measured. With your team, identify both short-term and long-term goals. Make these goals SMART (Specific, Measurable, Achievable, Relevant, Time-bound). Write them down and share them with your team.

4. Identify Key Performance Indicators (KPIs)

Establish metrics that indicate the success of your business. Set KPIs related to customer satisfaction, financial health, team performance, and operational efficiency. Ensure these KPIs are monitored and reviewed regularly. These metrics will help you monitor your progress towards your goals. Ensure that they're realistic, quantifiable, and directly tied to your business objectives.

5. Perform a SWOT Analysis

Identify your business's strengths, weaknesses, opportunities, and threats. Host a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis session with your team. This will help you leverage your strengths, improve upon your weaknesses, seize your opportunities, and mitigate your threats. Document the findings and use this analysis to inform strategic decisions.

6. Create a Strategic Map

Outline a detailed action plan to achieve your goals. This should include the actions required, responsibilities assigned, resources needed, and timelines set. Use project management tools for efficient tracking.

7. Engage Your Team

Strategic planning isn't a one-person job.. Involve your team in the strategic planning process. This can be through workshops, brainstorming sessions, or regular team meetings. Encourage feedback and ideas from all team members to ensure buy-in.

8. Review and Adapt Regularly

Schedule regular review meetings to assess your strategic plan's effectiveness. Be prepared to adapt your plan as the cannabis industry evolves and your business grows. This could be monthly, quarterly, or biannually, depending on your specific needs.

9. Implement a Balanced Scorecard

Utilize a balanced scorecard system to track your performance in various key areas like financial performance, customer satisfaction, and internal processes. This tool can be developed in-house or with the help of specialized software.

10. Hire a Strategic Planning Consultant

If you're unsure about any step in the process, hire a professional consultant with experience in strategic planning and the cannabis industry. They can provide expert guidance, help create an effective plan, and even assist in implementation and monitoring. Start your search by asking for recommendations, exploring online platforms, and conducting interviews to find the right fit.

Armed with a clear vision and strategic planning, your cannabis business will be well-equipped to navigate the dynamic cannabis market and overcome challenges.

Branding and Marketing

From taxation and casting a compelling vision, we've explored how these essential factors can drive profitability in your cannabis business. However, these elements need to be complemented by a strong, consistent brand and innovative marketing strategies. After all, in the competitive cannabis landscape, it's vital to differentiate your business, attract your target audience, and foster loyalty.

Unfortunately, a lack of creativity and consistency in branding and marketing can form another barrier to profitability. Let’s dive in to the importance of branding and marketing in the cannabis industry, explore why some businesses struggle in these areas, and offer strategies to overcome these challenges and boost your bottom line.

In an industry as diverse and dynamic as cannabis, the importance of creative and consistent branding cannot be overstated. It’s the bridge that connects your business to your target audience, enabling you to stand out in the crowded market, forge strong customer relationships, and ultimately drive profitability.

Branding and Marketing - Common Mistakes

However, some cannabis businesses underestimate the power of branding and marketing, leading to lackluster sales and stagnated growth. They make one or many of these common mistakes

1. Having a “build it and they will come” mindset

It's a common misconception among budding entrepreneurs that a high-quality product alone will be their golden ticket to success. The assumption that a stellar product can simply 'speak for itself', without any substantial branding or marketing, is, unfortunately, a far cry from reality. The cannabis industry, with its rapid growth and constant influx of new entrants, has become a noisy and highly competitive marketplace. In this environment, even the finest cannabis product risks getting lost in the crowd without a compelling and consistent brand voice and a strategic marketing plan to amplify its reach and resonance.

2. Underestimating the importance of brand image

Many cannabis business owners undervalue the immense influence of brand aesthetics on consumer perception and choice. This results in a minimal investment in crucial aspects of visual identity like logo design, color palette selection, packaging design, and marketing collateral. The resulting lack of visual appeal and brand distinction can severely impede a product's ability to stand out in a sea of competition. The fact is, humans are incredibly visual creatures, and in an industry as diverse and vibrant as cannabis, the look and feel of your brand can be as important as the quality of your products.

3. Developing branding but no marketing

An all-too-common misconception among cannabis business owners is the belief that a well-crafted brand alone is sufficient to catapult their product into the limelight. They often underestimate the vital role that sustained and strategic marketing plays in actually getting their product onto those shelves and into the hands of consumers. No matter how stunning the packaging or how refined the logo, it's not enough to simply look good. Great brands don't just magically gain traction - they need the jet fuel of dedicated marketing efforts to really take off.

4. Half-hearted brand development

One of the frequent oversights made by cannabis business owners is reducing a brand down to its most visible elements – the logo and color palette. Yes, these are important aspects of brand identity, but they only scratch the surface. A truly compelling brand goes deeper. It embodies a unique brand voice, specific placement strategies, and a distinct style of public communication. Each of these elements contributes to a holistic brand identity, which in turn, resonates with the target audience and separates the company from its competitors. Ignoring these aspects is akin to focusing solely on the icing of a cake, disregarding the flavor and texture of the cake itself.

Branding and Marketing - Finding Success

So how can cannabis businesses navigate these challenges and harness the power of branding to drive profitability?

1. Craft a Unique Brand Identity

Your brand is more than just a logo or tagline—it’s the essence of your business. Invest time in crafting a brand identity that truly encapsulates your vision, mission, and values, and differentiates you from competitors.

2. Consistency is Key

Once you’ve crafted your brand identity, ensure it's consistently represented across all platforms and touchpoints. This builds recognition, fosters trust, and enhances customer loyalty.

3. Innovate in your Marketing Strategies

The cannabis industry is constantly evolving, and so should your marketing strategies. Utilize a mix of traditional and digital marketing channels to reach your audience. Leverage social media, content marketing, and SEO to increase visibility and engage your target market.

4. Engage and Listen to your Audience

Engagement goes a long way in building brand loyalty. Listen to your audience's feedback and make them feel heard. This not only helps in retaining existing customers but also attracts potential ones through positive word of mouth.

5. Keep an Eye on the Market and Adapt

Stay abreast of industry trends and consumer preferences. Your branding and marketing strategies should adapt and evolve based on market changes and the needs of your audience.

Scaling Too Soon

Ambition is a fundamental ingredient for any successful business, and cannabis entrepreneurs are typically overflowing with it. However, one often devastating misstep lies in trying to grow too big, too fast.

In the rush to capitalize on the booming cannabis market, many businesses expand their operations at an unsustainable pace before they've adequately established the foundational aspects of their enterprise. As discussed in this article, money management, employee recruitment and retention, navigation of regulatory complexities, market feasibility, strategic branding, marketing, and overall strategy—these are the building blocks upon which long-term success is constructed. Yet, in the race to scale up, these key pieces are often neglected or inadequately addressed, leading to shaky foundations that can't support long-term growth.

Whether it's investor money or personal funds fueling this premature expansion, the grim reality often sets in when it's too late. When a business is too deeply entrenched in an unmanageable situation, fixing it becomes not only a convoluted task but also an expensive one. It's like trying to fix a leaking ship while still at sea—the water keeps pouring in while you're desperately trying to patch the holes.

Yet, this scenario is entirely preventable. By adopting a measured approach to growth, ensuring each building block is solidly in place before moving to the next, cannabis businesses can avoid the dangerous trap of premature scaling. This patience, along with the discipline to invest time and resources in establishing a strong foundation, can be the difference between joining the 24% of profitable cannabis businesses or becoming another statistic in the failure column.

5 Strategies to Prevent Premature Scaling of Your Cannabis Business

There isn't a one-size-fits-all timeline when it comes to scaling your business; the timing heavily depends on your unique situation. The secret lies in identifying and closely monitoring your Key Performance Indicators (KPIs), as these metrics will give you valuable insights into your business's capacity to operate effectively at a larger scale. Therefore, instead of adhering to a predetermined timeframe, base your decision to scale on these quantifiable measures of your business's performance and potential for growth.

1. Master Your Core Business First

Before considering scaling, make sure you've honed in on the core aspects of your cannabis business. Is your operation running smoothly and profitably? Have you developed strong financial management strategies, effective employee training and retention programs, a strategic marketing and branding plan, and have you successfully navigated the complexities of cannabis regulations? If you've checked all these boxes and your business is steadily profitable, then you might be ready to consider growth.

2. Develop a Clear, Strategic Plan for Scaling

Having a well-thought-out strategic plan is critical. The plan should outline how the business will handle increased demand, what resources will be needed, and how those resources will be acquired. Furthermore, it should include contingency plans for potential challenges or setbacks. Without such a plan, scaling efforts can quickly become chaotic and unmanageable.

3. Maintain Financial Prudence

While scaling involves investing more money into your business, it’s important to avoid reckless spending. Maintain a clear understanding of your business's financial health, including cash flow, profit margins, and debt levels. This financial prudence can guide your scaling efforts and help ensure that growth doesn’t push your business into a dangerous financial situation.

4. Prioritize Employee Development

As you scale, your team will need to grow and evolve too. Providing existing employees with development opportunities and training them for higher-level responsibilities can prevent you from over-hiring too quickly. Additionally, maintaining a strong company culture can help attract and retain talent as your business grows.

5. Regularly Review and Adjust Your Strategy

The cannabis industry is highly dynamic, and your scaling strategy should be too. Regularly review your progress and be prepared to adjust your strategy as needed. This could mean slowing down growth if challenges arise or ramping up faster if opportunities present themselves.

C-Suite Full of "Yes Men"

In the realm of the cannabis industry, one striking characteristic is the high intensity of ego that often permeates the business environment. This can sometimes foster an atmosphere where dissenting voices are discouraged and leaders shy away from the word "no." Consequently, this can manifest into a chorus of constant concurrence where criticism is seldom heard, leading to a one-sided perspective. This ship, captained by an inflated ego and crewed by yes-men, may feel like it's cruising on smooth waters, but it's really charting a course for disaster.

In the world of business, especially one as volatile as the cannabis industry, it's vital to have a balanced blend of opinions and perspectives. Decisions shouldn't be made hastily or flippantly, nor should they be so encumbered by red tape that the company loses momentum. Rather, a healthy dash of critical thinking is essential for prudent decision-making.

While the pace of the cannabis industry might feel daunting and the fear of missing out (FOMO) can add to the pressure, it's crucial to remember that not all opportunities are created equal. Some of them should indeed be met with a firm and resounding "no." By embracing this reality, businesses can make more informed decisions that contribute to their long-term sustainability and success.

10 Strategies for Better Decision Making in Cannabis Businesses

A set of clear and effective strategies exist, ready to be implemented, capable of transforming a room full of 'Yes-Men' into a team of critical thinkers. This proactive approach can ensure that your business avoids common decision-making pitfalls and cultivates an environment that truly fosters growth and success.

1. Foster a Culture of Openness

Encourage team members to express their views openly, even if they are different from the mainstream opinion. This promotes diversity of thought and helps prevent decision-making from becoming one-sided.

2. Promote Critical Thinking

Provide training and resources that help employees develop their critical thinking skills. This will enable them to challenge the status quo and contribute more effectively to decision-making.

3. Encourage Dissent

Constructive disagreement can be a valuable tool in decision-making. Ensure that employees feel comfortable expressing dissenting opinions and that these views are taken seriously.

4. Establish Clear Decision-Making Processes

Having clear processes in place can help prevent impulsive decisions. These processes should encourage thorough consideration and discussion of all available options before a decision is made.

5. Utilize External Advisors

It can be beneficial to involve third-party advisors who can provide an external perspective. They are likely to be less influenced by internal dynamics and can provide objective advice.

6. Institute Regular Reviews

Regularly review your decision-making processes to ensure they are still effective and appropriate for your business. This allows you to make adjustments as necessary to prevent the 'yes-men' syndrome.

7. Embrace Failure

Understand that not all decisions will lead to success, and that's okay. By treating failures as learning opportunities, you can cultivate a culture that isn't afraid to take risks and say 'no' when necessary.

8. Leadership Training

Train leaders to appreciate and solicit differing opinions. This includes learning to manage their ego, listening actively, and respecting all views.

9. Clear Communication of Vision and Values

If everyone in the company understands the overarching vision and values, decisions will be easier to make. They provide a framework within which all decisions should fit, making it easier to say 'no' when necessary.

10. Reward Constructive Dissent

Recognize and reward employees who have the courage to voice dissenting opinions. This will encourage more employees to do the same, fostering a culture of critical thinking and open communication.

Accepting Good Enough

In the fierce and unyielding world of the cannabis industry, each player is jostling for position, striving to take the lead. Amidst this intense competition, there's no space for mediocrity, for the "good-enough" mindset. Regrettably, due to the pressures and challenges of this dynamic industry, many businesses begin to settle for this "good-enough" standard, sometimes right from the start. Often, they are unaware of the compromises they're making, but they soon become evident.

Branding that's just "good enough" finds itself paling in comparison to what's truly exceptional. Employee training that’s merely satisfactory cannot produce the stellar reviews garnered by businesses that prioritize excellence. Operational practices that are passable, but not efficient, struggle to compete with organizations that have mastered the delicate balance of time and cost efficiencies. Simply put, "good enough" won't make the cut in the race to the top in the cannabis industry. Excellence needs to be the benchmark, an ethos too few businesses fully comprehend.

Aiming for excellence, while indeed a challenging pursuit, is not an impossible feat. It's a continuous journey that requires an unwavering commitment to betterment, a constant yearning for growth, and an insatiable quest for quality. Undoubtedly, there will be moments when excellence seems elusive. Yet, striving for the highest standards will always yield better results than settling for "good-enough."

As cannabis entrepreneurs, it's imperative to foster a culture of excellence within your organization. This involves setting high standards, offering comprehensive training programs, and promoting continuous learning and development. Investing in robust operational practices and exceptional branding strategies should be non-negotiable. Maintaining an open, receptive environment that encourages feedback, innovation, and critical thinking can be immensely beneficial.

3 Methods to Go From 'Good Enough' to 'Great

Remember, 'nearly excellent' is always a step ahead of 'good enough.' Keep pushing boundaries, challenging norms, and raising the bar. In this thrilling and burgeoning cannabis industry, excellence isn't just an aspiration; it’s a requirement for those striving to truly stand out. Here are 3 core approaches to ensuring excellence is a key component of your cannabis venture:

1. Define Excellence

For cannabis businesses, it's crucial to crystallize what 'excellence' means within the organization's context. This process involves developing clear, quantifiable Key Performance Indicators (KPIs) that encapsulate this vision. These KPIs can cover a broad range of business elements, from product quality and customer service to internal operations and market performance. By tracking these indicators consistently, businesses can ensure they are on the path to excellence and quickly identify areas for improvement.

2. Cultivating a Culture of Excellence

Encouraging a mindset of excellence at all organizational levels is key to moving beyond 'good enough.' This involves fostering a culture where every team member, from top-level management to frontline staff, is committed to achieving and maintaining high standards. Regular training and educational programs can help imbibe this culture, upgrading the skills of the workforce and providing them with the tools to excel in their roles. Celebrating achievements, rewarding exceptional performance, and providing constructive feedback are additional steps that reinforce the commitment to excellence.

3. Understanding the Marketplace

Knowing your competitive landscape is an important aspect of achieving excellence. It's one thing to strive for high standards internally, but your concept of excellence must outshine that of your competitors. To do this, businesses must keep their fingers on the pulse of the market, understanding industry benchmarks, customer expectations, and competitors' offerings. This knowledge can then inform the refinement of SOPs, product development, and marketing strategies, ensuring that your business's standard of excellence is truly a cut above the rest.

Internal Communications

The power of effective internal communication is often underestimated in various businesses, including those in the dynamic cannabis industry. Yet, clear, consistent internal messaging plays a pivotal role in the overall success of a cannabis business. Empowered with the right information, every team member can contribute significantly to the growth and profitability of the organization. On the flip side, a lack of reliable internal communication can lead to employees feeling disoriented and uncertain, which, in turn, can seriously hamper productivity and morale.

A survey by Siemens suggests that businesses with effective communication practices are likely to have 47% higher returns to shareholders. In contrast, miscommunication costs companies of 100 employees an average of $420,000 per year according to SHRM. For cannabis businesses, this represents a significant financial risk but more importantly, a substantial missed opportunity for growth.

5 Ways to Improve Internal Communications in a Cannabis Business

So, how can cannabis companies avoid falling into the trap of poor internal communication?

1. Open Channels of Communication

Encourage open dialogue at all levels. Transparency and openness foster trust and allow for problems to be solved more effectively.

2. Regular Updates

Establish regular meetings or updates where the leadership can communicate with all staff. This keeps everyone on the same page and allows for the communication of any changes in company direction or focus.

3. Leverage Technology

Use collaboration tools and platforms that make communication easier and more efficient. Tools like Slack or Microsoft Teams can help keep everyone connected and informed.

4. Training

Provide communication skills training to all staff. Good communication is a skill that can be learned and improved upon.

5. Feedback Mechanisms

Create a culture where feedback is encouraged. This will help identify any issues or misunderstandings and allow them to be rectified quickly.

By implementing these steps, cannabis businesses can significantly improve their internal communication, thereby reducing confusion and boosting overall company productivity and profitability.

Sales Mindset Deficiency

The cannabis industry, like any other sector, is sales-driven. Yet, there's a surprising trend among many cannabis businesses - an insufficient focus on sales tactics beyond mere cost-cutting. There's a strong emphasis on revenue, but the lack of an effective sales strategy is paradoxical and creates an unfortunate barrier to achieving sustainable profitability.

Research has shown that businesses in all industries, cannabis included, that neglect proper sales training and strategies often struggle with profitability. According to the Harvard Business Review, a 5% increase in customer retention rates can increase profits anywhere from 25% to 95%. However, many cannabis businesses, especially dispensaries, often overlook the importance of effective sales techniques such as building rapport, product up-selling, and customer retention, which significantly affects their bottom line.

In the cultivation and production side of the business, the neglect of sales training is also prevalent. A study by Salesforce showed that companies with comprehensive training programs have 218% higher revenue per employee. Despite this, many cannabis businesses fail to properly equip their sales teams with the skills needed to build relationships and drive sales.

Furthermore, businesses often shy away from sales incentive programs under the assumption that they are cost-prohibitive. A survey by Incentius, however, indicates that well-designed incentive programs can boost overall sales productivity by 30% to 44%, emphasizing the potential for considerable financial benefits.

So, what's the solution to these common missteps?

1. Invest in Sales Training

Dispensaries and cultivators alike must invest in comprehensive sales training. This could involve bringing in external sales trainers or developing an in-house program that equips employees with effective techniques for rapport building, upselling, and customer retention.

2. Leverage Data

There's a need to leverage data to understand customer behavior. Implementing customer relationship management (CRM) tools can provide insights into buying patterns and preferences, enabling the sales team to personalize their approach.

3. Performance Based Incentives

Businesses should consider introducing performance-based incentives. This doesn't have to be costly - small rewards for hitting targets can motivate employees and stimulate productivity. It's also critical to regularly review and adapt the program to ensure it remains effective and rewarding for staff.

In the pursuit of profitability, a well-rounded sales strategy is essential. By embracing this, cannabis businesses can elevate their revenue and solidify their foothold in this burgeoning industry.


It's essential to underscore the multi-faceted nature of creating a successful and profitable cannabis business. The first steps towards profitability certainly lie in mastering the technicalities - tax management, navigating regulatory complexities, and controlling overhead costs. It's like constructing a building; these elements lay the strong, solid foundation needed to support everything that comes next.

However, once that strong foundation is in place, the real work of differentiating your business in the crowded cannabis market begins. This is where branding, marketing, and service quality come into play. These aren't just add-ons or afterthoughts; they are the essential elements that will drive your revenue, enabling your business to stand out, attract, and retain a loyal customer base.

By diligently addressing these two broad areas - the technical foundation and the brand-driven growth, your cannabis business can transcend the norm and land among the elusive 24% of cannabis businesses that achieve profitability. Remember, this isn't a sprint; it's a marathon, requiring persistence, adaptability, and a keen understanding of both the market and your customers. It's a journey, but with the right strategy and execution, it's certainly a reachable destination.

Cann Strategy is a cannabis business strategy firm, working with cannabis business owners, both existing and new, to create winning companies.

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