In my two decades of experience, I've sat in a lot of different seats: in-house corporate, self-employed consultant and now a fractional CFO at an entrepreneurial firm.
My first major corporate job allowed me to move around a lot within the various functional departments. With the opportunity to learn different parts of the business, including forecasting around a major acquisition, I developed that forward-thinking approach to financial services that put me on the path to becoming a
The pandemic gave me a moment to shuffle things around. Like many of us, I took it as a blank slate to look into what mattered. As events unfolded, I was having different thoughts about how I wanted to take a more preventative approach to health, wellbeing and my response to the pandemic, and I felt very limited, given corporate and government restrictions and mandates.
That's when I connected to the cannabis industry: an industry that's supporting people to have their own freedom to choose their own path, through non-conventional medicine. I knew I wanted to be a part of that.
It took some research to get up and running — first as a consultant on large projects, then as a solo practitioner, and now as a fractional CFO with Summit Virtual CFO by Anders. And the truth is, there's more to learn about the industry every single day.
There's no such thing as knowing it all, with different regulations and market conditions from state to state and a constantly shifting legal landscape. To stay on top of it, I've subscribed to industry associations, trade groups and communities, I take demo meetings with cannabis-specialized providers to understand how their products can help my clients, and I have regular conversations with my colleagues in the industry. There's not a day that goes by that I don't learn something new.
The anything-goes, Wild West days of cannabis are over. The industry is maturing as it's coming out of the very profitable pandemic years. Maintaining consistent profitability is now a must, which means more opportunities for service professionals — legal, financial, marketing — to contribute to this complex niche.
Here's what I know about opportunities for the cannabis industry and how virtual CFO services can help small businesses in the industry thrive in the face of its challenges.
Cannabis industry
When we're talking about cannabis, we're usually talking about the flower, the female or ladies as they are often referred to. Science has discovered some 100-plus chemical compounds called cannabinoids that can be extracted through manufacturing processes into various forms such as tinctures, lotions, edibles and more. THC, the psychoactive compound that gets you high, is the most well known. It's second only to CBD, a non-psychoactive component found in lotions and gummies, that has anti-inflammatory properties.
Cannabis is so powerful because humans and animals naturally produce similar chemicals — chemicals that regulate our body to help us deal with stress and help with digestion, fight inflammation, etc. — which means our body has receptors (known as the endocannabinoid system) that also respond to the plant-based cannabinoids. As the industry develops, consumers are showing they want very specific desired results — and, if they get the proper education around the potential of cannabis, they are willing to pay higher prices for that consistency.
To get cannabis products from the plant to the consumer, there's a supply chain with several steps: cultivation, manufacturing, distribution and retail. Some businesses vertically integrate, developing and selling their own brand. In certain states, like Hawaii, vertical integration is required; stores only sell their own products. In other states, it's prohibited. And in the remaining states, it's up to the individual business — which means owners need to make a calculation about whether to vertically integrate and, if so, when.
Having the ability to accurately forecast around these kinds of multifaceted decisions is exactly what would make a cannabis company excited to invest in a virtual CFO. A virtual CFO can provide insight into the various scenarios and factors to consider when vertically integrating.
Cannabis obstacles and opportunities
Using cannabis is relaxing. Running a cannabis business isn't.
Startup costs are high — you need to find land, attract investors, and navigate regulatory and banking minefields. Profit margins are slim, with high tax rates and competition from the illicit market. It's a miracle the industry has survived and thrived for this long, growing to almost $30 billion by the end of this year.
The upside is that the market is wide open from a branding perspective. Because cannabis is still federally considered a Schedule 1 controlled substance, there's no interstate commerce allowed. That means there's no Starbucks of cannabis dominating the market.
The pandemic was positive for the cannabis industry. With dispensaries open — and almost everything else closed — people had plenty of disposable income. The legalization movement appeared to be picking up speed, as several new states legalized recreational use. Investors were leaping at these potential new horizons, throwing money at startups with little due diligence.
Now things are leveling out. Inflation is dragging down consumer spending, and many of the promising legislative state and federal initiatives have stalled or failed. Investors are exiting the market or sitting on the sidelines until things get better from a regulatory standpoint. But even the most promising pieces of bipartisan federal legislation, like the SAFE Banking Act, continue to stall year after year.
To help raise capital, cannabis companies need guidance to talk with investors, show strong metrics over time, and tell the story of how they're going to get to profitability — whether through vertical integration or another growth strategy. That's where a CFO comes in: someone who knows the industry, to level-up the sophistication with data-driven decision-making, and convince investors that the business' roadmap is solid; someone to keep investors engaged, quarter to quarter, month to month, in that communication process.
When the money was easy and the product was selling itself, there was resistance to service providers — legal, marketing or financial. Now forward-thinking cannabis entrepreneurs are recognizing the value of professional expertise in these areas that had been considered "nice to haves" — with the potential for significant payoff.
The value of non-financial metrics in cannabis retail
Because cannabis is so heavily regulated, retailers are obligated to collect all kinds of information from customers in their stores and attendees at their events. It can seem like an annoyance, one more piece of red tape to get through on the way to profitability.
All this data collection has a bright silver lining: It lays the groundwork for forecasting. While so many businesses have to be convinced to track the required data, cannabis retail businesses capture all the necessary information to understand one of the most powerful non-financial metrics: basket analytics. How much foot traffic does the store have? Who is buying what, how much are they spending, and how often? With the help of a virtual CFO, retailers can use these metrics to figure out what products to stock and how to market them.
The insights that come from this data will allow retailers to tap into a major area of growth: new consumers interested in the minor cannabinoids. In this new phase, as products are being developed and tested, the businesses with the ability to understand new customer segments will come out on top — even as the regulatory environment stalls.
Is cannabis your niche?
You'll always hear advice about the importance of picking a niche. But what they won't always tell you is that the No. 1 factor to consider isn't how much money you can make in that industry. It's got to be about how committed you are to helping those businesses thrive. That's what's going to make you enjoy it. That's what's going to make you good at it.
That advice is doubly true for CFOs interested in cannabis, whether you want to work as a consultant or in-house. There's so much to learn that you're only going to put in the hours if you're truly passionate.
As you forge your path, you need to ask yourself, "What's my end goal?" For me, it was to help small businesses deliver high-quality cannabis products to a growing consumer base. From there, I had to ask myself, "Where can I find bridges to get me there?" That means keeping an open mind to the opportunities. If your motivation is helping others, you'll get there.
For virtual CFOs interested in the cannabis niche, my advice is to start talking to folks about what you do, as early as you can. Find your voice and your message. Ask yourself who you want to serve and why. That's what's going to motivate you every day to keep going out there.
With VCFO services, especially in cannabis, you have to build trust with the industry and your future clients. The only way to do that is to have passion for what you do, to help the industry thrive — by helping to push forward policy, or finding your own unique way to contribute. If you build those bridges and partnerships within the industry, that will set you up to be in it for the long term.
There's so much opportunity for growth within cannabis, and the virtual CFO role will only become more important as small businesses become more aware of the value of forecasting in turning the industry's obstacles into opportunities. For CFOs with passion about the industry, who are willing to buckle up for the long haul, the cannabis niche has plenty of potential.
