By Arden Lee, Chief Financial Officer, Weedmaps (Nasdaq: MAPS)
When it comes to starting a business in the cannabis industry, there are innumerable hurdles to address. Licensing, cultivation partners, your physical brick and mortar space, whether you want to facilitate delivery, how to create awareness -- and the list goes on. While those are all necessary items as part of a business plan, many smaller operators in the cannabis space overlook one critical component until it’s much later in the process: the technology solution that will be the backbone of their business.
According to a recent article from Bloomberg Tax, “A solid back-office operation ensures a company is not susceptible to fraud and has an accurate picture of cost per unit and cash flow.” The article also goes on to note that if an investor or potential buyer shows interest in your company, they typically want to know what capabilities you’re able to report on, and that “investing in reporting systems especially matters from a regulatory standpoint.”
At Weedmaps, we continue to look ahead to the opportunities for those of us in the cannabis space, as we educate consumers in new adult-use markets, as well as prospective cannabis licensees. But when it comes to technology, our Weedmaps for Business software solutions provide a unique solution for cannabis businesses thanks to our 14 years of experience in the industry.
Here are two key ways the right technology solution solves critical challenges for U.S. cannabis businesses.
Inventory Control: There’s a vast range of products and brands in the cannabis space, and due to continued federal illegality, there isn’t much product crossover from state to state (brands yes, individual products, no). First, there are key categories of products (flower, cartridges/vapes, edibles, topicals, etc.), then a dispensary can carry any number of products within that category. Due to individual state laws, you might see the same brand across multiple states, but each state has its own packaging, labeling, and marketing restrictions. According to an op/ed my colleague wrote for CNBC in 2021, the technology used in more established industries doesn’t fit the needs of most cannabis dispensaries. “A restaurant might have 30 menu items, but a dispensary can have 300 or more likely 3,000, which requires vast data attribution in terms of strain type, serving size, ingredients, etc.”
Compliance: It’s been a decade since Colorado legalized cannabis for adult-use in 2012, and while the industry has grown by leaps and bounds, one thing hasn’t changed: the complexity of the cannabis industry. While some traditional retailers (like alcohol) are subjected to certain compliance standards that vary state-by-state, the myriad laws and regulations on cannabis at the state, county, and city level add an additional layer of burden on cannabis businesses -- especially when you factor in delivery.
When it comes to compliance, cannabis businesses are required to verify a number of things beyond just verifying they are of legal age. There are of course taxes -- state, and oftentimes local, as well as tracking purchase quantities in order to enforce possession limits. Needless to say, compliance is complex, and having the right technology partner to help ensure you remain compliant, is key to keeping dispensary doors open.
Lastly, as the CFO of Weedmaps I would be remiss if I didn’t also mention a fundamental, non-technology change needed for the cannabis industry to succeed: access to conventional banking. There have been a number of legislative acts brought forth by both the House of Representatives, as well as the Senate, the most recent of which is CAOA or, the Cannabis Administration and Opportunity Act announced over the summer months. You can read more about CAOA from our WM Policy team, but for those in financial circles, the Act includes removing Cannabis from the Controlled Substances Act which classifies it as a Schedule I narcotic. This change alone
would, according to our policy team here at Weedmaps, “eliminate barriers to research, improve access to banking and financial services, alleviate Section 280E tax restrictions, resolve legal uncertainty for state governments and the industry, allow patients to travel across state lines with their medical cannabis, and end the failed policy of cannabis criminalization.”
As we close out 2022, a year where we saw a number of new states open up to recreational and medical cannabis, I also look ahead in the years to come when we can evolve the cannabis industry into a more fully-formed, federally legal industry that provides consumers with the products they need, in the ways they want to shop, in order to live a better life.
Arden Lee is the CFO of Weedmaps, publicly traded on Nasdaq under the ticker “MAPS.” As CFO, Arden oversees Weedmaps business planning, strategic finance, treasury, investor relations, corporate development, accounting, controlling and tax functions. Prior to joining Weedmaps, Arden was Vice President of Global Business Planning at Nike, Inc. and spent nine years at Goldman Sachs in their Investment Banking Division.