Cannabusiness

Deconstructed: Your Cannabis Business Plan

· Cannabusiness

While a business certainly does not need capital to be successful, many entrepreneurs find themselves in search of the perfect balance between the receipt of outside capital and the loss of internal equity. An effective business plan can mean the difference between a conversation with an investor and an investment in your emerging business.

A good business plan and pitch deck convey business goals and strategies, market and competitive analysis, organizational structure and financial information. They project three to five years ahead and take the reader down the path of intended business evolution.

A goal without a plan is just a wish – Antoine de Saint-Exupéry

While there are several ways to create an effective business plan, below is a suggested format:

  • Cover page: A simple page with your company logo, mission statement and contact information.
  • Executive summary: Your vision statement, a concise description of what your business does, what market need it addresses, why you will be successful and topline projections along with desired raise amount. A great executive summary is crucial to driving investor interest toward detail and is best written last. For those investors less familiar with the cannabis industry, it may be helpful to include size and growth statistics.
  • Business description: What does your business do? What is your competitive advantage? What traction have you gained? What markets do you serve?
  • Market analysis: Comprehensive research of the industry, market and competition. What is the impact of a large commodity price decline on your business?
  • Competitive analysis: Focus here on strengths, weaknesses, opportunities, threats (S.W.O.T)
  • Development: Describe your product or service, its features and benefits, and include a timeline for intended product and market expansion.
  • Management and Operations: How is your business structured? How does it function on an ongoing basis? This can include organizational logistics and task management.
  • Funding request: Include current and future funding requirements, types and terms of funding, and describe the use of proceeds. How have you valued your business?
  • Financials: Accurate historicals and defensible projections are key to any successful raise; include income statements, balance sheets and cash flow statements.
  • Appendix: While traditionally optional, we recommend including credit history, resumes, letters of reference, etc. in an appendix for investor review.

An effective plan for any emerging business is clear, concise and compelling. It uses charts and graphs to highlight the main numbers, avoids industry jargon, has a professional aesthetic and is no more than 25 pages in length with under 10 additional pages of appendices. The intention is to ease investor due diligence to the extent possible.

Simple wording does not mean simple thinking. An effective business plan speaks less and says more.

Based in the Bay Area, Mazakali provides comprehensive consulting services to emerging and established entrepreneurs in the cannabis industry. Take your vision to the next level with the experienced Mazakali team.

Capital: Funding Your Cannabis Startup

· Cannabusiness

One of the primary reasons startups fail is that they run out of money. Cash is the fuel that allows a business to grow. Growth is challenged by too little cash and, ironically, also by too much cash. Effective cash management is thus crucial to a startup’s growth and success.
Access to capital can be a significant challenge for many reasons. Money is always cheapest to borrow when you least need it. Loans are easiest to obtain when your ability to repay them is at its highest. Access to liquidity, while difficult in any industry, is even more challenging in the cannabis industry due to the noticeable absence of any major financial institutions. Despite these challenges, cannabis capital infusions are at an all-time high and we think will never be this low again.

2016 Cannabis Capital Raise – $1.2 Billion

According to MJ Business Daily, founder savings and personal debt funded over 88% of cannabis businesses in 2012 compared with ~72% in 2015. Continually expanding acceptance and law changes will drive this even lower as more outside capital continues to enter the industry. Viridian Advisors reported 2016 capital flows in the US/Canada at $1.2 billion. This number will increase as cannabis businesses mature and capitalize on the opportunity to scale into ever expanding markets. Funds such as Tuatara Capital (~$93 Million AUM), Privateer Holdings (~$122 Million AUM), and Poseidon Asset Management (~$12 Million AUM) are well poised to deploy capital today; future funds will deploy billions more in the coming years.
Institutional capital will continue to expand investments as regulatory evolution allows existing businesses to scale. As often accompanies scale, exits similar to the recent Whaxy acquisition by Massroots and the KIND financial partnership with Microsoft will increase. As the industry continues this maturation process, the investment climate will also increase in complexity. Given the massive amount of cash that is and will be available for deployment, the capital opportunity for founders has never been brighter. Along with this comes increased sophistication, which raises the bar for all involved.
One, of course, cannot control whether their business fits into a portfolio manager’s sector thesis or how portfolio construction and rebalancing might affect their access to capital. Capital commitment decisions are made on a variety of qualitative and quantitative factors, and founders are best served focusing on those that are within their control.
While social skills, vision, speed to market, founder discipline and grit are essential, fundraising skills and resources alone can make or break a business. Amongst other things, sophisticated investors look for audited financials, pro-forma projections, term sheets, a high-quality pitch deck, and an offering memo or a private placement memorandum before they will commit to even reviewing a company offering. Startups are well served to also have an executive summary, a defendable valuation, a target investor list, FAQ, customer testomonials, a product summary and a developmental roadmap.
There is a lot of money entering the fastest growing industry in America. With this influx of capital comes increased sophistication, heightened expectations, and a bar that is raised for all. Even with the best team, timing, business model, and discipline, a lack of cash can cripple your business. Are you adequately poised to capture this capital to maximize your growth potential?
A successful entrepreneur can create extreme wealth. With extreme wealth comes extreme responsibility. The responsibility to create wealth without exploitation, to grow it without environmental damage, and to dispose it with the greatest positive social impact.

 

Based in the Bay Area, Mazakali provides comprehensive consulting services to emerging and established entrepreneurs in the cannabis industry. Take your vision to the next level with the experienced Mazakali team.

Imagine: The Luxury Dispensary Experience

· Cannabusiness, Lifestyle

In the United States, one can only legally purchase cannabis at a dispensary. The cannabis industry continues to evolve as the legalization trend continues, and dispensaries are undergoing major makeovers as well. It is becoming increasingly common to see dispensaries look more like high-end retailers than in years past, and notable San Francisco examples include Apothecarium, Harvest and Medithrive.

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