3 Best Practices for Not Going Bust in Today’s “Gold Rush” for Cannabis Entrepreneurs
When the rules seem to change from one day to another, it helps to have a steady and strategic hand.
PHOTO CREDIT: Getty Images
The buzz around the cannabis industry is hard for any financially-motivated entrepreneur to ignore.
The California Gold Rush of the 1840s and 1850s provides a useful and entertaining comparison and precedent: both movements promised big wins and tantalizing evidence of success, they both precipitated a sudden influx of cash into the market, and they both cultivate an atmosphere of the "wild west" when it comes to legislation and government oversight.
"California [during the Gold Rush] presented to people a new model for the American dream, one where the emphasis was on the ability to take risks, the willingness to gamble on the future," historian H.W. Brands wrote about that era, with a flair that resonates for cannabis entrepreneurs today.
An ability to take risks. A willingness to gamble on the future. And, between the lines, a desire to figure things out as they go, including the mechanics, the legalities, and the "gear shifts" of a burgeoning industry that's still learning how to drive.
It won't be an easy ride. Navigating highly unregulated areas rarely are. But here are three suggestions around challenges of "today's Gold Rush" of cannabis, along with some context for developing the solutions and takeaways for entrepreneurs in any industry.
1. Expect problems, and recover quickly.
If there's one area of the cannabis world that's especially touchy in terms of regulatory control, it's financial transactions. Entrepreneurs from Vermont to Oregon have the battle scars to prove it, from credit card processors inexplicably shutting down to suddenly losing their subscription business to near-usurious fees to fraudulent transactions on PayPal.
Why is paying for your product so difficult?
"There's a lot of gray area in the business right now," said Alexis Rosenbaum of Rosebud CBD, a company she founded less than a year ago with zero investors, that is now bringing in six figures a month. The 31-year-old solo entrepreneur referenced the discrepancies between what the federal government says is illegal, to what the Farm Bill and individual states say is legal, as giving rise to "sleazy credit card companies nickel and diming" companies like hers.
For in-flux situations like this, when there will inevitably be less-than-ethical companies looking to capitalize on liminal circumstances, the best philosophy may very well be, "S*it happens." You may not be able to shield your business completely; instead, focus on metabolizing the lesson learned and recovering quickly.
2. In difficult situations, give credit to the customer.
Here I don't mean giving "credit" in terms of money per se, but giving credit in terms of assuming customers are humane and reasonable enough to understand the challenges faced by a "wild west" industry, even when those challenges inconvenience the customer.
Because of an unexpected shut-down of her credit card processor, Rosenbaum suddenly lost her subscription business when orders were not coming through her website. She was still working on the solution when I interviewed her a few weeks ago, and she said she'd be lying if she said she wasn't freaking out about it.
Clear, concise, consistent communication with customers is the key in the meantime. "People are willing to understand as long as the business is upfront about what's happening," she said, relying on in-depth emails that describe what's happening and why they are in the situation.
The response? Very positive, with customers expressing the desire to be even more educated on the issues. Revenue doubled as Rosenbaum used the opportunity to encourage customers' friends and family to also shop with them.
Its actual occurrence is more exception than rule, but transitioning from a problematic situation via open communication to a successful outcome is a winning equation.
3. Find freedom within the inconsistencies.
The placeholderflipside for entrepreneurs of having to sway with inconsistencies of governance is the freedom to pave their own paths of delivering customer service.
One of the most effective and customer-empowering examples of this is the small "CBD Jotter" journal that Rosebud developed in partnership with Goldleaf, an Ohio-based printing company that focuses on education through their materials.
The idea started with a cannabis patient journal, used medicinally, to track the strain they were smoking or eating. The CBD Jotter journal guides everyday consumers through tracking their dosages and, in the process, learning about the amounts and timing that are best for them.
The CBD Jotter journal reflects perfectly the we're-still-figuring-this-out psyche that prevails in this category, for both entrepreneurs and consumers themselves. It's also a reminder to all entrepreneurs to look for ways to be deliver helpful, utilitarian value to your customers.
"The journey is an important piece missing in the industry, "Rosenbaum said. "Cannabis is giving consumers a way to educate themselves."