Infographic kindly provided by CaliExtractions
The state of cannabis prices varies widely depending on where your business is. While the Midwest and East Coast have developing or restricted markets which permit companies to have sufficient margins, West Coast states such as Oregon or Washington are experiencing unheard of prices in wholesale cannabis prices of around $500 per pound. The passage of the Farm Bill will further supply these markets with CBD products. Similar problems may realize in Canada, even for companies who have made significant vertical investments.
Megan Stone recently wrote an article describing business tactics that will help dispensaries stay afloat as the competition becomes fiercer. This inspired us to take a look at security issues for companies who start to see declining margins. There are 6 questions to ask yourself so you stay secure and in compliance, but within budget regardless of what your sunk costs are:
1.Are you overpaying to replace your security equipment?
You invested heavily in excellent cameras and access control devices when you were building your facility. But if you have to replace an out-of-warranty camera, do you need to reinvest? Often, your network video recorder (NVR) or your video management system (VMS) can adapt to cameras of other brands. Use your top-tier cameras in key locations, but locate compliant HD cameras in areas of lower activity.
2.What is your hourly return on investment of your security officers?
Security officers are still an important component for cannabis cultivators and retailers. Security officers provide peace of mind to customers, employees, and owners, and can react quickly to onsite events before law enforcement arrives. However, at night a certain level of trust should be placed in your video surveillance and alarm systems. For a fraction of the cost of an overnight security guard, measures can be taken to improve the reliability and benefits of these advanced systems such as backup power, signage, and analytics. Also review if your security officers are performing redundant operations or operations that can easily be performed by a standard employee with proper cannabis security training.
3.Do you appear secure from the outside perimeter?
More people have home security signage than have home security subscriptions. Why? Because appearances are everything. A dilapidated fence is a vulnerability. An upright fence is a sign of fortitude. Are your outside cameras visibly powered on? Does your signage indicate that your safes have time delays? On the same note, don’t advertise all your security deficiencies to your employees. Loose lips sink ships.
4.Are you tempted to divert excess cannabis? (Tip: DON’T)
Historically, mass production of goods incentivized companies to create demand in new markets. Exports, government projects, clearance stores – great for other domestic production industries. Not so much for cannabis. Letting cannabis leave your state is considered a violation of federal law, and penalties can be much more severe than losing your license. The chances of a Strategic Cannabis Reserve are currently slim. Transactions of cannabis greater than the legal amount to individuals will be flagged by any seed-to-sale system. And diversion may help you in the short run, but it will ruin the fun for the rest of the industry.
5.Are you being realistic about your risks?
65% of product theft is by employees. Your security plan should prepare you for armed robberies or shoplifters or cannabis transportation liabilities. With that in mind, if margins are tight then agroterrorism-focused prevention is not likely the best investment of your resources. A policy requiring four machine-gun wielding security officers patrolling a small grow house should be reevaluated, not only for costs but for efficiency of preventing losses. And check your insurance policy for unusual events that are covered.
6.What could your location sell for?
Security can be a great real estate investment. Grows and dispensaries are constantly being sold, and if the purchaser does not need to renovate the security systems, you could get a few more dollars for it. If you have decided to cash out, then estimate the depreciation of your equipment and argue that your thorough security plan creates a better investment of money and time for the purchaser. One less headache for the new administration.
Overproduction and excess cannabis will affect everyone’s sales, be it lower prices at wholesale or retail or vertically. Are your robbery, burglary, and loss prevention tactics sensible and cost-effective? It can be tough to spend money when revenue goes down. But if and when it does, ask these questions to secure your facility, avoid financial collapse, and overcome any oversupply bubble.