In a saturated cannabis market like Oklahoma, it’s extremely difficult for small businesses to get off the ground and be able to compete. So if you’re struggling as a cannabusiness owner, you may be wondering if it’s time to sell your business and get out altogether.
However, if you know how to look at a distressed business the right way — and if you have the right experience — there are still opportunities to make it work. Once you identify why your business is in distress, you can determine the best move forward — whether that be selling your business or not.
Read on to learn what might be causing your business to struggle and how to decide whether you should sell your business.
Why Are Cannabusinesses Struggling?
According to Anthony Edward, HYC’s Director of Business, cannabusinesses fall into distress for several reasons. “It’s a trifecta of lack of funding, lack of support and help, and lack of output or foreseeable growth,” he says.
One of the biggest mistakes we see is that people get into the industry and underestimate timelines, resources, and budgets. Markets like Oklahoma are so easy to get into that people jump right in without knowing what they’re doing. They assume that because marijuana is a weed, it’s going to grow itself. But it won’t.
Businesses that don’t know what they’re doing end up running out of money before even getting off the ground. Sometimes they grow inefficiently and have to charge higher prices for low-quality products. Other times they fail to ensure compliance from the start, which ends up costing more time and money in the long run.
And, as Edward points out, these issues can stem from a lack of viable operators who are taking the business seriously. “We’ve spoken to several businesses in Oklahoma that were struggling with operators, head growers, or general managers,” he says. “It’s eaten into their profitability, efficiency, and also the quality of their products.”
People get into the industry thinking they can get these astronomical revenue numbers they see in other states. But without understanding their own markets, they greatly overshoot their projections and underperform. So the question is, can you recover from early-stage missteps, or might it be time to sell your business?
What Options Does a Distressed Business Have?
If you’re struggling in one or more of the above ways, you may think that your only option is to sell your business — and that is one option.
If you do choose to sell your business and exit the industry, make sure you do so properly. According to Edward, with expert help, you could at least get some of your investment back or be made whole on it.
But selling might not be your only option. Many people don’t think about marketing and branding until it’s too late, but improving this one area could increase your traffic and sales. Work on standing out from the crowd by establishing a credible online presence and improving your overall customer experience.
A third option is to reinvest with the right partners. If you’re only missing one puzzle piece — that is, if it was simply one bad decision or mistake that put your business in distress — you could greatly increase its equity value by bringing on the right partners and making small investments in the right people.
Whether you ultimately decide to sell your business, improve it, or reinvest, you’ll need to figure which path is best for you and pivot in a way that mitigates risk.
Is It Time to Sell Your Business?
As you consider whether you should sell your business, Edward advises evaluating your situation to get clarity on where you are right now, what your vision for the business was, and the gap between the two.
Be willing to approach the decision unemotionally and with an open mind; it can be hard to give up on your dream, but this needs to be a business decision, not an emotional one.
If you want to sell your business, take the time to get your financials and lease documents in order. Your business will look better to a potential buyer, thus increasing your likelihood of making a sale.
Make sure that additional management or investor partners are also ready and willing to be involved in making the decision, even if it’s a hard one to make.
Finally, seek out help from experts. As Edwards says, “be open-minded to directional leadership from experts in the industry. Be ready to engage and have a dialogue, and keep everything on the table until it’s not on the table anymore.” Relying on expert guidance will equip you to make the most rational, well-informed decisions.
Are you ready to take an in-depth look at your cannabis business? Before you decide to sell your business, get in touch with the expert consultants at Higher Yields Cannabis Consulting.