9 Easy Ways to Save Money In Your Cannabis Business
Struggling to keep your business afloat? Here are some tried-and-true strategies to cut costs and add revenue.
The best place to find an opportunity is often the last place you want to look—in the thick of a problem. That was the case for the founders of cannabis startup Plain Jane, who had the brilliant idea to create low-odor hemp cigarettes but no startup cash.
Most aspiring entrepreneurs in that position would find themselves a day job before they ran headfirst into the unknown. But this gutsy trio put an ad on Craigslist for a hemp farmer who would let them live on his land rent-free, buy some of his hemp on net terms, and sell the rest using the farmer's license. It worked.
"We were living in an RV. There was no space. We did everything ourselves. We made the cigarette rolls by hand in the barn," says Plain Jane cofounder Lindsey Holthaus. But they didn't pay for either a place to live or a production facility, which saved $15,000 their first year. And just nine months after they placed the ad, sales topped $200,000 a month. Now Plain Jane is a go-to source.
You don't have to move onto a farm to save money. But you do need to come up with some creative strategies. Here are some tried-and-true ways you can ease the burden on your bank account.
1. Barter your services
Don't have the extra cash to afford marketing or advertising? Exchange your services instead. Ganja Eats' founder Chef Matt wanted to set up a food booth at a CBD event, but he couldn't pay the $10k fee. His solution? He bartered a much lower rate in exchange for promoting the event to his database of 4,000 emails. Bartering has helped me get into events I normally wouldn't be able to afford. And it often makes a connection stronger because after you barter and deliver, they are more susceptible to paying you the second time around."
2. Become a thought leader
In a crowded marketplace, it can be hard to get good brand exposure, and we all know that paid marketing can add up. But you can leverage your expertise to get yourself some unpaid advertising by becoming a speaker at industry events. Executives at the CBD company Waveland do this effectively. They develop interesting speaker pitches and get themselves on a bunch of panels at industry expos, seminars, and trade shows. Says Waveland cofounder Jen Slothower, "While you're not typically allowed to advertise your brand [at these events], consumers and industry insiders will remember you and your company when you speak." Waveland has used this strategy to cut its marketing budget up to 20 percent.
3. Delegate the big stuff
Entrepreneurs often want to do everything themselves, especially when the money gets tight. But sometimes it makes more sense to let other companies handle the heavy lift. For example, siblings Roberta Wilson and Jeff Koz, the founders of Dr. Norms, a craft cannabis company, wanted to add tinctures, topicals, gummies, and jelly beans to their repertoire, but they couldn't justify the initial outlay. After endless product testing, Dr. Norm's launched a line of brand extensions, products made by other companies bearing Dr. Norm's logo at a fraction of the cost, saving more than $50,000.
4. Cut out the middleman
When LucidMood wasn't getting enough traction from its PR firm, it made an executive decision to work directly with the media. This freed up remaining cash to send a team of neuroscientists into dispensaries to train budtenders, whose recommendations lead to 92 percent of dispensary sales. Says LucidMood's marketing director, Chris Jacobs: "We didn't see PR efforts achieving our sales-first strategy. We saw other tactics as being much more efficient and effective at what matters most to us—sales." And the high-risk strategy is paying off; just a few months in, both media exposure and sales are up. The savings: $90,000 a year.
5. Understand your taxes
Scouting a location for your company's headquarters? Compare the tax rates in your region, particularly the gross receipts tax. Low taxes can equal a long runway for your business. "In Humboldt, they don't charge gross receipts tax for canna-businesses," says Talking Trees Farms founder Craig Nejedly, "but in Oakland, they charge up to 10 percent, and neighboring towns charge 3 percent to 5 percent, so the matter of a mile or two can lead to hundreds of thousands in tax savings." That made site selection a no-brainer for this Humboldt County organic cannabis farm, which Nejedly says saved him $200,000 a year.
6. Pay it forward
When times are tough, most companies opt to cut costs by laying off employees. But that is not always the wisest move. Some cannabis companies are doing the opposite. Instead of cutting back, they're giving their employees regular bonuses and wellness reimbursements. Why? This can promote greater loyalty, productivity, and happiness, and less illness, turnover, and time off. Wht Lbl, a cultivator, processor, and manufacturer of white-label cannabis, and its sister company, The Republic dispensary, have done this since 2017, losing only three of 45 employees and saving $250,000. "In a regulated industry, training a new employee can cost tens of thousands of dollars," says cofounder Jill Lamoureux. "Keeping people on board is the way to go."
7. Generate passive income
Some companies are so laser-focused on day-to-day revenue that passive income sources aren't even on their radar. Not LeafLink, a wholesales cannabis management platform. According to Ryan G. Smith, LeafLink's CEO and co-founder, the company has set up high-yield bank accounts and cash-back credit cards. Just 2.25 percent and 2 percent. respectively in interest might not sound like much, says Smith, but the wholesale management platform's sitting money at that rate pays the rent on their five offices nationwide—and that added about $250,000 to its bottom line.
8. Go remote
Offices are so pre-pandemic. If your rent is driving you into debt, you might want to consider ditching your digs and going remote. Says Matt Gray, the founder and CEO of cannabis community Herb: "Closing our office, which was $25,000 a month in rent, was one of the most transformative things we did for our culture and brand. It allowed us to reinvest in our people through fun weekly events at local restaurants. We now explore Toronto on Friday afternoons and check out new, cool vinyl-and-tequila bars, and we have all become a family." This move has saved $480,000 to date, with a trim $6,000 a year added to the budget for family fun.
9. Pay in equity
Say your elusive first fundraising round isn't in the pipeline yet and you don't have enough to pay your team. Consider finding consultants who are willing to work for equity in the company.
"We've been surprised to see how many talented people have been eager to share their resources to help us build a stronger company, with the confidence that the cannabis sector will become more mainstream and continue to grow exponentially," and that they will ultimately be the beneficiaries, says Jason Luce, founder of the CBD company Canvas 1839 "It represents a lot of very prominent, successful, would-be extremely-expensive experts who are willing to provide guidance at no actual cash-flow cost and, at times, almost a full-time level"—at a savings of $2 million.