Your best strategy pre-legalization
A starkly divided Washington hasn’t been able to agree on — or do — much these past few years. No major surprise there: Political types these days can barely agree on lunch.??
The federal holding pattern on rescheduling cannabis or supporting banking reform for cannabis is no outlier.?
The latest bill to make it through the initial legislative rounds, the SAFE Banking Act, is designed to move marijuana from a nearly all-cash business to the regular financial system, where you could write a check or swipe your American Express card to pay your tab at the dispensary.??
The bill, H.R. 1996, had 180 sponsors. And, despite the Beltway gridlock, it actually passed. Now it’s before the Senate, where it will likely die. (Here’s?the latest news.)?
So how do you best run your business – and seek capital – until there is a breakthrough??
Get smart help?
Even while cannabis remains illegal federally, you can find ways to run a cash business well. Find an accountant with cannabis experience. Invest in the best financial software you can find and ensure you have bulletproof financial statements. Go to a bank that serves the industry. Ask all these experts two questions: What am I missing? What should my top three priorities be??
Take the long view?
Say Congress legalizes cannabis tomorrow morning. It will take somewhere between 18 and 24 months for regulators to actually take action and implement real change that will affect your day-to-day. That means you need a long-term plan. Know what you need to accomplish before and after a possible regulatory change.?
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Pitch smart?
Don’t position yourself as the company that will lead after legalization. Detail how you are going to compete in the industry as it exists today. Save your post-legalization plans as a potential answer to an investor question. They shouldn’t be the focus. The focus of your presentation should be your business and how your enterprise can sustain a competitive advantage despite the clunky financial mechanisms cannabis businesses are forced to use.?
Need capital? Pick up the phone?
You don’t only need experts in taxation and accounting, you also need to find a specialty lender that can provide you access to capital but not erode your equity. In other words, borrow money, but don’t sell stock unless you have to.??
Talk to creative financiers. The more of these people you can connect with, the more options you will find and the more solutions that will open up. We will try to bring you the best of what they have to offer.?
Andy Obermueller?
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Federal regulatory, compliance and AI consultant. 30+ years experience in the alcohol beverage industry, & as a lawyer, handling regulatory, employment matters, labor negotiations, and federal administrative hearings.
2 年Andy, excellent post. One note, the timing from passage of federal legislation to implementation of regulations could be much shorter than 18 months. In fact, under Rep. Mace's States Reform Act, federal regulation, including the requirement to apply for a federal cannabis permit would become effective 180 days after enactment (Sec 503 (d)(1) p. 124). Six months is an extremely short time to prepare your business for federal regulation.
Experienced CPA Helping Business Owners and Individuals Thrive and Remain Compliant
2 年Getting knowledgeable help with definitely be one of the key components for the long term success of any cannabis business! Managing cash flows is essential to making sure you have cash on hand when incidents or estimated taxes occur