Tips for selecting a cannabis cultivator
It truly takes a village to create and operate a medical marijuana operation. Choosing partners to help build your village should be taken very seriously. If marijuana production is an element of your business plan, the choice of a quality cultivation consultant can be among the most impactful to a successful operation, given the myriad key business drivers affected by consistency and quality of product (medicine). For this reason, we recommend our clients think of their relationships with cultivation consultants in the context of strategic partnerships, rather than as outside vendors, particularly when they have little inside knowledge of the marijuana supply chain.
There are many options to consider when assembling a multi-faceted cultivation team. The strengths that an outside cultivation consultant will have to bring to a partnership will differ based on the needs of each situation and the existing capabilities of the team.
It’s paramount to do thorough reference checks on whoever you’re vetting to be part of your team. This should be to both assess capabilities as well as cultural fit.
We highlight here some of the other key elements that should be considered during the decision-making process.
Application Needs versus Operational Needs
At 4Front Advisors, we have a unique relationship with various cultivation consultants across the country because of the need to collaborate on the “front-end” of the business life cycle to secure state and local operating licenses. As a general statement, we have seen the quality of regulatory compliance content from cultivating partners improve as the industry has evolved, but we often find that there seems to be a negative correlation between people who can grow vibrant plants and write detailed application content that clearly describes production processes and compliance measures. As the industry matures and state compliance programs become more active, the need for articulate cultivation consultants will only increase. It is just as important to do your due diligence on a consultant’s application experience and the kinds of written materials they produce as it is to tour their existing facilities. Additionally, if members of the cultivation team need to be identified within an application, it is wise to make sure upfront that they can pass a background check; we recommend hiring a firm to do a complete check for you. With history as a guide, this can be a major issue.
Regulatory Needs versus Operational Needs
Since the regulatory environment for marijuana production varies across jurisdictions, creating compliant processes and workflows can have a major impact on your operational plan. A real-life example of this is plant limits. Some jurisdictions regulate the number of flowering plants that licensed producers can have in production at any one time. Surprisingly, we have seen various cultivation teams design facilities for clients that would greatly exceed the allowed supply for no other reason than a lack of understanding around state-specific rules. This often leads to confusion and an increased administrative burden around whose responsibility it is to know the specific local regulations inside and out. The workflows and operations for a successful cultivation facility in an existing market may not translate in a different regulatory environment.
A quality cultivation partner will be able to adapt processes and plans to the needs of a specific market and the relevant regulations thereof. Looking for cultivators with experience operating in different markets and jurisdictions can be a good start.
Marijuana Experience or General Horticulture Experience?
We have seen owner/operators build successful businesses by using consultants with long histories of marijuana cultivation, and we have also seen owner/operators build successful businesses by working with accomplished local farmers and “converting” them to marijuana.
We don’t believe there is a right or wrong answer that applies to every situation. In some markets, there may not be willing local horticulture teams to partner with and so bringing in outside experts is a must. In other new markets where the environment and climate is much different (e.g., the Upper Northeast versus the West), it may beneficial to partner with a successful commercial tomato or lettuce farmer that is willing and eager to adapt their systems to the needs of the marijuana plant. While they may not have the breadth of experience, in certain environments where local support is difficult to garner and/or preference is given to working with local partners, consideration should be given to working with local horticulture experts.
Relevant Experience For Your Business Model
The manner in which the state-specific regulations define how marijuana is produced, distributed, and sold to retail consumers in your market will be a big component of the driving forces of your business plan. Vertically integrated operators that have limited access or ability to participate in wholesale markets (e.g., Massachusetts) will likely operate differently than businesses with strong wholesale markets. In addition, some states restrict the sale of flowers (e.g., New York) and so this creates a stronger need for expertise in oil extraction and processing.
Different owner/operators will often have different visions for their business models. To use the alcohol analogy, are you trying to become a “big brewer” (low-cost producer with an emphasis on speed to market) or are you trying to replicate a microbrew model (niche producer with an emphasis on quality)? The cultivation team you partner with needs to be aligned with your business plan. If the goal is to become a “big brewer,” you will want to ask potential partners detailed questions about their ability to execute a large-scale commercial grow. Conversely, if the goal is to provide boutique products to serve a niche subset of the industry, you will want to ask detailed questions about quality control, growing media, genetics, and potency.
There has been an influx of cultivation consultants into the industry in the past two to three years. With so many options to choose from, it becomes important to have a methodical process to follow when selecting the right fit for your team.
We think a good place to start is to assess your internal strengths and weaknesses around cultivation, and seek a partner that will help enhance your existing strengths and mitigate your weaknesses. When making your selection, consideration should be given to the different phases of the project (licensing, build out, operations) to make sure there is a clear understanding of their role throughout each phase. Then, when you have whittled your list down to the last few names, a judgement call must be made on who you think has the best chance of translating their previous success into results that further your business plan.