financial analysis
of a cannabis growing opportunity
All of the elements of a new opportunity in growing marijuana should first be well researched and documented from which a return on investment model can be produced. This includes elements such as indoor grow versus outdoor grow, what grow light and how many hours of light are used, the price and source of marijuana seeds etc. The cannabis industry today is in a land grab state. Many investors are pumping money into cultivators, dispensaries etc; with the clear goal of exiting the market with massive buyouts. Unfortunately, this has led many in the industry to run their organization with little regard for short-term profitability or long-term sustainability. The true long-term winners in cannabis are going to be those who execute their company strategy on solid financials and business practices.
The dirt
Specific financial analysis services we offer:
+ Documented Research and Assumptions
Clients often come to us with an idea of where they would be interested in starting a new growing opportunity. Given how many state regulations currently work, only particular pieces of land are even allowed to engage in this activity at all. If you already have a very clear idea of what your future grow up would look like and would like some independent verification on price points or yields, we are happy to vet your figures. Similarly, if you started growing from scratch and are now interested in expanding your scale, we can give you a clear picture of what that would take to expand financially.
+ Adjustable Profit and Loss Models
Once all the research and assumptions are set in stone, we will prepare a profit and loss model for your new growing opportunity. For certain growth or cost reduction assumptions, your model will have the ability to be adjustable. For example, not every yield is going to come out exactly perfect - a conservative approach would allow you to assume that. Revenue growth and expenses increase with varying rates as well. Ultimately however, the P&L and associated profitability metrics will serve as the basis for whether starting the new growing opportunity fits with your business goals.
+ Overall Organizational Accounting Impact
In most industries, the proper accounting and taxation impacts of a new investment or project tend to take a back seat to expansion opportunities. This simply cannot be true in the cannabis industry. With section 280e looming over all of us and equally complicated state tax rules, it seems like licenses are always at risk of being snatched. With the analysis of a new growing opportunity comes the question - how do we properly integrate this new grow up into our accounting system? How do we depreciate the led grow lights? Can the grow room be capitalized? The new growing opportunity must be examined from an organizational accounting perspective to provide clear answers as to how it impacts the company's future.
+ Why Choose Green Books
Greenbooks is the only CPA firm that provides this specific service. Working with a firm that is exclusively focused on the industry provides our clients with the luxury of working with someone who has an intimate understanding of what it takes to go from seed to plant.
Take a look:
There are many factors and assumptions that go into analyzing the profitability of a new cannabis growing opportunity. The below viz highlights three very important ones including the square footage of the warehouse, the lighting system and the state of choice. Play with these options below to better understand how they might impact the profitability of this new indoor growing opportunity.
