As the cannabis industry fluctuates, businesses must be prepared to scale operations depending on demand. Building a scalable, but also sustainable, cannabis operation is about more than just sales or product. It’s about creating a foundation that allows your business to deal with varying volumes of transactions, inventory, and data without introducing inefficiencies or compliance risks. Your operations should be flexible enough to accommodate your current demands while being adaptable to whatever the future has in store.
Scaling Up
During upturns, your sales volume and inventory size will inevitably increase, so your operations must be able to handle that. Your production may become more complex as a result, and you may want to expand. Whether you’re adding new product lines, opening new facilities, or hiring additional staff, be conscious of overbuilding infrastructure in case of a downturn. If you do decide to invest, look for systems that will support long-term efficiency. And ensure that whatever you scale up can be scaled back if needed.
1. Increase operations incrementally or modularly. Add capacity in blocks based on actual demand, or partner with those who can provide what you lack to reduce up-front costs.
2. Maintain your cash flow and build reserves during growth phases to cushion slumps. Avoid overleveraging and watch your ‘burn rate.’ Scale in ways that don’t push your operating expenses to unsustainable levels.
3. Grow where you’re strongest. Deepen presence in high-margin, high-loyalty markets before chasing expansion. Defend your base by building brand equity and customer loyalty with retention strategies before aggressively acquiring new customers or markets.
4. Diversify selectively. If you want to diversify, offer a mix of premium and budget-friendly options to serve customers in both boom and bust conditions. If feasible, expand into sectors or geographies less exposed to fluctuations.
5. Invest in people, culture, and leadership. For long-term sustainability, hire selectively and cross-train to build a team that can wear multiple hats if needed. Encourage adaptability, learning, and resourcefulness. Create strong leaders, a key to weathering uncertainty.
Scaling Down
During a slow economy, the best way to deal with a situation that seems beyond your control is to ensure that you have control over everything you can.
1. Streamline operations and optimize cultivation to reduce waste and increase profits. For example, using data analysis on lighting, nutrients, and water usage can increase yield without compromising quality.
2. Prioritize high-margin products and markets. Evaluate strains, product formats (e.g., pre-rolls, vapes), and brands to determine which sell reliably and offer the healthiest margins. Increase or reduce efforts in specific markets depending on performance metrics.
3. Incentivize loyalty. Offer discounts, product education, or other incentives to existing clients and partners. Encourage pre-paid orders or early payment discounts to improve cash flow.
4. Communicate transparently. Be upfront with all stakeholders about the current conditions. Encourage ideas from frontline workers on efficiency and even company direction, and show investors you’re taking disciplined, strategic action.
5. Utilize scalable systems and tools. Your equipment, software and services should scale with your business needs. Discuss temporary options with your vendors such as reduction of services to control short-term costs while maintaining long-term relationships.
Conclusion
By staying agile and innovative, you can pivot quickly when needed. And by utilizing all available data, you can improve decision making throughout your operations. This will help you invest selectively in growth-enablers to give you the best return on investment (ROI) whatever the economy throws at you.
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