A lot of businesses fail. And odds don’t improve if you own a cannabusiness. This is not to put a damper on the excitement of owning your own business, but the truth is, businesses fail left and right. What you need to realize though, is that it is not all a crapshoot.

The main reason for failure to many people is a lack of customers. Fewer sales mean less revenue. But simply having fewer customers is not a major contributing factor to your business failing.

Consider your present business situation. Are you blowing smoke, barely scraping by, or managing each aspect like a well-oiled machine? Look at these three causes of business failure. Take heed and avoid the ultimate cost – closing your doors forever.

Expenses, Expenses, Expenses

You simply cannot spend more than you take in. This isn’t sustainable. Certain expenses are fixed in every business – you know in advance some of your expenses. These fixed costs might include: rent, utilities, salaries, licensing, etc. And these costs must be paid regardless. These costs are base margins, meaning that the amount you spend on these must be surpassed in sales to ensure profit. Budgeting is your friend. Can you lay out an estimate of your projected expenses for the rest of this year?

Inventory, Inventory, Inventory

A fully-stocked store looks great to customers. It certainly looks a heck of lot better than dismal, sparse and just plain empty counters and shelves. But it is a fine line between wanting to look plush with product, but at the same time, creating a shopping atmosphere conducive to a pleasing customer shopping experience. Not everyone enjoys digging to find what they need.

At the same time, inventory is like super expensive! And you actually have to fill your business with product before anyone has even bought anything yet. But before that, you must figure out what to buy exactly. What is the competition doing? What is the competition selling? And who in your company is deciding what inventory? Delegating this task might be hurting you, even if your buyer has good intentions. And customers make requests. But only a few requests might not justify purchase and having a store full of them. Vendors pressure you. And vendors want you to buy, but still often offer up poor choices that simply don’t sell.

Open-to-buy for Cannabusiness

Implementing an open-to-buy system for inventory is a smart way to track product and manage your budget. And it does not matter what you sell. Because the process deals with inventory (whether you sell marijuana or gardening tools).

Budgeting is at the center of the open-to-buy system. It helps you determine what to buy, when to buy it, and it allows evaluative benchmarks to be set to alter purchase orders depending on projected revenue. Open-to-buy works best for long-term inventory planning. Once done, business owners can make realistic inventory expectations before they are too much in the thick of things and lack the time.

Begin your plan by figuring out expected sales – by month should be sufficient for most retailers, unless, you think your business is super seasonal. After this, you can develop an inventory plan. You can also delve into numerous other important analytics about your business too. This plan supports inventory needs as related to sales. It helps you keep your shelves full. Don’t forget to include potential pricing adjustments and sales you might have later on.

Open-to-buy helps you figure out whether in previous months you ordered too much or too little because it is all tied in with your actual and projected sales. It also tells you – when new products come up in the middle of the season and you want to add them to your stock –  whether you are open-to-buy them now or must wait.

Cash, Cash, Cash

How are you at handling cash flow? It is crucial to have enough cash coming in to manage purchases and meet inventory obligations. Poor cash management results in loss of:

  • Vendors due to late or no payments
  • Net term relationships
  • Discounts on orders or payments

It can cause increased borrowing to cover expenses and inventory. No one wants to do business with someone who lacks knowledge of their own cash flow. Your cash flow process is an intricate part of your business. Pay attention to it and it will guide every decision you make (and make it smarter) in your business.

Cannabusiness Consulting

Running a business is running a business. There are many shared characteristics between dispensaries and other small businesses. But cannabis is a niche market all its own. It requires specific expertise to stand out from the crowd. This is where Pinnacle comes in. We have more than 20 years of experience in cannabusiness development, cannabis cultivation, including outdoor, greenhouse, indoor, soil, hydroponics and alternative techniques. Speak with a consultant today.