In this month’s column, Rocco responds to a recent Politico article pointed to high taxes, siloed state markets and access to capital as the three main reasons as to why cannabis companies cant make money.
While all are contributors to the absence of financial success today’s cannabis markets, the article overlooks the interaction of capital access and the vital importance of a major discipline in achieving positive financial results.
Cannabis business leaders have become versed at blaming “external” risk factors, or those that are, for the most part, out of their control for their poor financial performance. While the negative impact of these contributors can not be discounted, true business success comes from maximizing the benefits from issues in a leader’s circle of influence and not the less accessible issues in their areas of concern. The time is now to replace blame with accountability <footnote>
Cannabis needs to show profitability to create sustainable growth. Profitability, in turn, is generated at the COST line, not the REVENUE line. EFFECTIVE RISK MANAGEMENT is not only a process but a culture that fuels the discipline, accountability and execution required to drive cost out of a business or operation. Discipline, accountability and execution are cornerstones of successful companies that gel to create successful markets. Thriving markets are then led by best in class who raise the bar and drive improvement in others.
Additionally, capital availability traditionally trails profitability. Now the irrational exuberance of early cannabis valuation has been replaced by concern and expectation, the limited capital will flow to the companies who are profitable. This will establish sustainability and growth within this group of companies, while the others will stumble and some will die.
Market leaders in cannabis will follow the proven market leadership route of “operational excellence” by securing the best total product costs. EFFECTIVE RISK MANAGEMENT provides the roadmap through its combination of process and discipline.
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