Save 60% Off all remaining inventory with Promo Code: ICE

Building a Financial Plan for Your Cannabis Business? What You Need to Know

September 04, 2019

TESTSTSARDSAR

Building a Financial Plan for Your Cannabis Business? What You Need to Know by Cory Parnell

All good business plans require a financial projection. Creating a financial projection is both an art and science. A financial projection will include projected sales, budgeted expenses, a balance sheet, cash flow, and sources and uses of funds. Also, a financial projection will help determine how much funding will be needed and the projected return on the investment (ROI).

For most cannabis and hemp/CBD operators, the problem in creating a financial projection is they don’t have any historical data or industry benchmarks. If we were assisting a chemical manufacturer or construction company prepare a financial projection, we could obtain benchmark financial information from third party providers. Unfortunately, these third-party providers do not have any historical data on the cannabis or hemp/CBD industries. There are a few companies on the Canadian Stock Exchange; however, most of the companies are consolidated operations of vertical, distribution, and dispensaries making them difficult to analyze.

With the explosive growth of the cannabis and hemp/CBD industries has come the need for good financial projections. On nearly a weekly basis, we either review or help clients prepare a detailed sales forecast, budgeted expenses, build a balance sheet or a statement of operations and cash flow. One of the key advantages that we utilize in helping our clients build solid financial projections is the data that we have collected over the last ten years of serving the cannabis and hemp/CBD industries.

Related: Raising Capital? 3 Things Investors Look For

In addition, we have the information categorized by type of operator: vertical, cultivator, processor, distributor, delivery, dispensary, or retailer, which is very beneficial to our clients. We also have key data where markets range from limited competition to over-supply, such as Oregon and Colorado. As an example, we can help quantify the plant yield and cost per yield for a cultivator that grows indoor vs. greenhouse vs. hoop house vs. outdoor. These analyses are very useful and facilitate educated decision making and strategic planning.

Also, an important consideration is how much working capital is needed for inventory for each type of operator. In a projection, the most common error that we find is the amount of working capital needed; the working capital is typically under-estimated.

The financial projection should reflect five years of balance sheets, statement of operations, and cash flows. Generally, we recommend a detailed forecast of operating expenses by department for at least two years. This is built by working with management and the operators and then the budget becomes a measurement tool. We also analyze production or sales capacity of each unit to be grown, produced, or sold and review our findings with management.

If you have any questions or are interested learning more about our how we can help your cannabis or hemp/CBD operations build the financial projection to support your business plan, please contact Cory Parnell, CPA, Chief Operating Officer of Bridge West at cparnell@bridgewestcpas.com.

Feature Image by Pexels from Pixabay 

A link to your site, with your site's name and description as anchor text.





Also in Education

Owning Guns is a Constitutional Right, Unless You’re a Cannabis User

September 28, 2022

Take two of the most hot-button, tendentious issues of our time – cannabis use and gun rights – combine them, and now we really have a debate. As the law currently stands, medical cannabis patients are not afforded their 2nd amendment right to bear arms. Technically, all cannabis consumers are banned from buying guns, but only medical […]

The post Owning Guns is a Constitutional Right, Unless You’re a Cannabis User appeared first on Cannadelics.

Continue Reading

Cannabis policy changes in Africa are welcome. But small producers are the losers

September 28, 2022

TESTSTSARDSAR

Cannabis policy changes in Africa are welcome. But small producers are the losers by Clemence Rusenga

Cannabis is a drug crop with a long history in Africa. Alongside coca and opium poppy, it has been subjected to international control for nearly a century. The International Opium Convention of 1925 institutionalised the international control system and extended the scope of control to cannabis. In 1961 a new international convention was adopted to […]

A link to your site, with your site's name and description as anchor text.

Continue Reading

University of Sydney to Offer Free Cannabis Testing

September 27, 2022

TESTSTSARDSAR

University of Sydney to Offer Free Cannabis Testing by Johnny Green

The University of Sydney is launching a fairly robust study in an attempt to, as the university describes it, “investigate cannabis consumption, behaviours, and attitudes among users.” Part of the study involves offering free, anonymous cannabis testing for people that cultivate their own cannabis in the Australian Capital Territory (ACT). Cannabis was decriminalized in 2020 in the […]

A link to your site, with your site's name and description as anchor text.

Continue Reading

Inventory Clearance Sale

Save 60% Off all remaining inventory with Promo Code: ICE