In fall of 2017 the Oregon marijuana industry was obliterated.
We lost something like $500k in Q4, it was the worst 6 months of my life.
Here’s the story and 6 things I learned:
We lost something like $500k in Q4, it was the worst 6 months of my life.
Here’s the story and 6 things I learned:
That summer was gangbusters. The recreational marijuana industry in OR was a year old and more than 1,000 producers were licensed to do grow.
Plants were in the ground at an incredible scale. All of southern Oregon smelled like weed.
But here’s the thing about outdoor...
Plants were in the ground at an incredible scale. All of southern Oregon smelled like weed.
But here’s the thing about outdoor...
Everybody is using the same sun, and mother nature keep em all on the same schedule.
Harvest time is October, fondly known as Croptober, and there were literally hundreds of farms who had been without revenue for 6 months by the time their 2017 crop was ready for market.
Harvest time is October, fondly known as Croptober, and there were literally hundreds of farms who had been without revenue for 6 months by the time their 2017 crop was ready for market.
1,000 grows for a population of only 4 million people.
Millions of pounds.
It was a fucking bloodbath.
Flower prices dropped literally in half.
Our business was 90% flower when it hit, and the bottom fell out.
Millions of pounds.
It was a fucking bloodbath.
Flower prices dropped literally in half.
Our business was 90% flower when it hit, and the bottom fell out.
For context in, in Spring of 2017 we saw our first million dollar month and we rode 10% MoM growth into the summer.
By October 1st things were slowing down as expected for the winter, consumers buy roughly 10% less weed in Q4.
And then the flood came.
By October 1st things were slowing down as expected for the winter, consumers buy roughly 10% less weed in Q4.
And then the flood came.
As millions of lbs entered the market, we were left holding the bag on product worth 30-40% less than what we paid for it.
With cheap weed everywhere, sales slowed to a crawl. The volume was mostly there, but the dollars weren’t.
By December our revenue dipped below $500k.
With cheap weed everywhere, sales slowed to a crawl. The volume was mostly there, but the dollars weren’t.
By December our revenue dipped below $500k.
It was a low margin distribution business at this point and the margin we had to run the business on was cut in half.
We went from $200k+/mo gross profit mo to less than $100k in 60 days.
We went from $200k+/mo gross profit mo to less than $100k in 60 days.
Our operating expenses were north of $200k when it started to slow down.
Even after cuts, by December 2017 we were burning $100k/mo more than we had.
We had cash flowed our way here, which often felt impossible even when profitable or breaking even.
Even after cuts, by December 2017 we were burning $100k/mo more than we had.
We had cash flowed our way here, which often felt impossible even when profitable or breaking even.
Manipulating cashflow day in and day out was the only way to get through it.
It’s not ‘robbing Peter to pay Paul’ when everyone gets paid in the end, but it can feel like it sometimes.
I was absolutely terrified and barely slept for months.
It’s not ‘robbing Peter to pay Paul’ when everyone gets paid in the end, but it can feel like it sometimes.
I was absolutely terrified and barely slept for months.
Supply and demand forces are powerful. A simultaneous supply increase + demand decrease flips it upside down.
The closer to the raw biomass (flower), the quicker the commoditization hit.
First flower, then oil and carts, finally edibles.
It was a race to the bottom.
The closer to the raw biomass (flower), the quicker the commoditization hit.
First flower, then oil and carts, finally edibles.
It was a race to the bottom.
The consumer impact was a positive one as prices came down to earth. A $5 single gummy is a lot more viable for the mass market than a $15 one. This kind of pricing is good for the wide spread consumption of cannabis even though it put the squeeze on the industry.
The aftermath was staggering.
1,000,000 lbs left in the system to waste
Hundreds of farms out of business
and all but 2 or 3 distributors like us out of business
Here's what I learned:
1,000,000 lbs left in the system to waste
Hundreds of farms out of business
and all but 2 or 3 distributors like us out of business
Here's what I learned:
1/ Brand and brand hard.
When this happened we were mostly flipping packs and selling 3rd party brands.
STICKS was 6 months old and doing 6 figures/mo then - it was critical to helping us power through it.
Brands > Commodities. Duh. Focus accordingly.
When this happened we were mostly flipping packs and selling 3rd party brands.
STICKS was 6 months old and doing 6 figures/mo then - it was critical to helping us power through it.
Brands > Commodities. Duh. Focus accordingly.
2/ Cut harder and faster.
When you have to make layoffs, it’s a very public signal that you messed up, and it negatively impacts people you care about.
It’s painful for everyone.
Every day you keep someone on you’re burning $ and delaying their future.
Take action.
When you have to make layoffs, it’s a very public signal that you messed up, and it negatively impacts people you care about.
It’s painful for everyone.
Every day you keep someone on you’re burning $ and delaying their future.
Take action.
3/ Understand your cashflow.
It’s one thing to run a business.
It’s another to have clean numbers.
It’s another entirely to try and manage the cashflows.
Invest the time it takes to have eyes on it.
It can take a ton of work but it’ll be worth it.
It’s one thing to run a business.
It’s another to have clean numbers.
It’s another entirely to try and manage the cashflows.
Invest the time it takes to have eyes on it.
It can take a ton of work but it’ll be worth it.
4/ L is for Liquidate.
When you’re staring at slow moving inventory and you need cash, bite the bullet and get it off your books at nearly any cost.
If it takes extended terms or a big discount - just do it.
Take your L’s and move on.
When you’re staring at slow moving inventory and you need cash, bite the bullet and get it off your books at nearly any cost.
If it takes extended terms or a big discount - just do it.
Take your L’s and move on.
5/ Insulate and stay flexible
Low overhead is obvious, but do everything to keep fixed expenses down.
This means outsource things, use temps— instead of hiring and adding payroll.
If you don't have a rainy day fund, being able to turn off expenses overnight is a god send.
Low overhead is obvious, but do everything to keep fixed expenses down.
This means outsource things, use temps— instead of hiring and adding payroll.
If you don't have a rainy day fund, being able to turn off expenses overnight is a god send.
6/ Be transparent.
If things are rough, don’t try and hide it.
Rally around it. Use it as a battle cry. Watch your people step up.
If things are rough, don’t try and hide it.
Rally around it. Use it as a battle cry. Watch your people step up.
Alas we made it! It was the hardest thing I've ever done by 10x, and the people I got to do it with are the reason we got through it.
If you’re new here, I tweet about business and rec cannabis. Go smash that follow @landforce and check my pinned tweet for more background on me.
If you’re new here, I tweet about business and rec cannabis. Go smash that follow @landforce and check my pinned tweet for more background on me.
TLDR:
-Build brand
-Cut hard and fast
-Manage cash
-Stay lean
-Take L's and move on
-Be transparent
- RT this thread ;)
-Build brand
-Cut hard and fast
-Manage cash
-Stay lean
-Take L's and move on
-Be transparent
- RT this thread ;)
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