4 Key Things You Have to Manage in Your Cannabis Business in Order to Succeed
Don't neglect the business of managing these four key areas - or you may see your dreams of entrepreneurship go up in smoke.
Starting and running a company is hard. If it was easy, everyone would do it and every investment would be successful. Standing apart in your ability to run your company successfully will be the difference between raising capital and going home empty-handed. When you’re talking with investors, demonstrating that you have a grasp on how to produce results operationally increases the probability that your business will be successful for the long term and deliver value to you and your shareholders. This is a demonstration of operational acumen.
Management decisions come down to a combination of people and processes, instinct and experience, chasing growth and managing risk. By managing the following four areas, you’ll be able to demonstrate that operational acumen:
- Your vision
- Your resources
- Your goals
- Your employees
What you do, why you do it, how you do it, and for what desired outcome are the tenants of your corporate purpose. This starts by setting the vision for the business and creating a mission statement to inform decisions made within the organization. This, in turn, sets the culture of your business and is one of the most important ownership responsibilities that can only be led by owners.
You as a founder will define a vision statement for the company. This statement should capture the essence of why the business exists. What purpose is driving the organization, whom do you hope to impact, and what outcomes and place in the world does the business aspire to own?
Derived from the vision statement is the mission statement. The “how” to the business should be articulated succinctly through this mission statement. The mission statement is to be extrapolated by all the people involved in and impacted by your organization, ultimately leading to the operating principles that guide the day-to-day business and culture to deliver the objectives, goals and tasks needed for your company to succeed.
Driving these activities, understanding the interplay between them, and holding the organization accountable to deliver on the vision as a long-term strategic goal is vital to positioning your cannabis business for a successful pitch to investors.
There are only three resources in any business: time, people and money. The dance of the business owner is to find the resources and then manage them. Because these are finite resources, the dynamic of running a private company will require you to make decisions with imperfect information and without the fullness of the resources you need. Reid Hoffman, the founder of LinkedIn, partner at Greylock Partners, a venture capital firm and sage of all things entrepreneurial, describes entrepreneurial management as making decisions without the luxury of perfect information, without the resources to properly execute, and without adequate time to do it.
Keeping things simple cuts through the noise of operating a company. Many entrepreneurs run from one thing to the next without processing how to act or why they are acting. “Managing by the last phone call” describes how many business owners can fall victim to reacting to what just happened as opposed to being intentional in their actions. Don’t let this be the death knell for your company. Learn to run it intentionally on a daily basis.
Entrepreneurs and investors ultimately share the same desired outcome: They both seek to build value for stakeholders and then extract that value. Delivering on this mandate is the mission of the entrepreneur who needs to direct the activities of the company towards an agreed destination. Your vision and mission statement should inform your business planning and influence how you set goals and manage resources.
When talking with investors, you can collaborate to define the start and the finish together. Do you want to build a company that supports a community of cannabis evangelists and one day pass it along to your kids or family? Or do you want to build a company that goes public in the next year and hires a public markets CEO to run it? What does your investor audience want to see happen and how does this align with creating value and extracting value? In reality, the finish line isn’t actually an endpoint, but rather an agreed-upon next destination. How you align goals and then manage the race makes the difference between getting to the finish line first, second, last or not at all.
With business growth comes a larger organization to manage, and soon you will find yourself transitioning from doing the bulk of the work to hiring people and delegating and managing teams. This is not an easy transition for every business owner. The element of this equation that comes with the highest risk is the people you hire.
Recruiting great people is essential, and your success in doing so will be directly impacted by a variety of factors. How you incentivize people, the culture of your company, the benefits you provide, and the training you offer all come into play. It’s in your best interest to have an active and ongoing recruitment process to have multiple candidates even when you may not be actively hiring. When you need people quickly, you’ll be grateful that you aren’t starting the process too late.
Speaking from an excruciatingly painful experience, there is no greater threat to your business than having the wrong partners or wrong employees. Had I known more from the start, I would have avoided some very expensive lessons and litigations. To help you avoid these issues, keep the following tips in mind:
- Don’t be in a rush to hire.
- Take your time to develop performance-based incentive plans.
- Don’t be in a hurry to give out equity to employees.
- Have very clear non-compete, confidentiality and non-solicitation language in your agreements.
- Be concerned by people who create chaos and drama instead of delivering results.