The cannabis industry has many legislative hurdles that affect business owners. However, companies can cut costs and make a more significant profit while reducing effort and even qualifying for funding or tax deductions.
A well-thought-out packaging strategy cuts costs and raises your cannabis business profitability. While making your products look good is essential, many cannabis businesses overcomplicate their packaging. If you have good-quality buds with vibrant terpenes, that increases bag value without having to spend too much on decorative wrapping.
Where cannabis is legal, all states require packaging to include the tetrahydrocannabinol (THC) content and manufacturer contact information. Additionally, most states have the following requirements for cannabis goods packaging:
When your packaging vendors have deals, buy in bulk. With more than enough packaging, you can strategize for the future. Choose a simple option that showcases the necessary information and highlights the quality.
One of the best ways to boost the financial success of your cannabis businesses is by stocking shelves consistently. Running out of items can prevent regular customers from returning. It costs you sales, and doing a last-minute restocking is usually more expensive.
Take stock of the strains or consumables that are popular among customers. Ensure you have enough of those cultivars. With more niche strains, you can cut costs by not buying as much since customers will likely be more interested in the classics. It’s also a good idea to have enough stock of sativa, indica and hybrid strains. If you don’t have a particular option, you can offer the customer one with similar effects.
Cannabis plants, buds and consumables all require the right equipment and technology to prolong their quality. While you may want to keep the startup costs as low as possible, this can prevent your business from thriving. Investing in the right equipment cuts down on cannabis operational costs in the long run.
If you’re in the cultivation field, an advanced irrigation system may seem like an unnecessary cost. However, it helps you cut costs in the long term and saves you on labor. If you don’t have an irrigation system, you’ll need to hire additional staff members to ensure the plants are watered routinely. Cannabis plants can be thirsty, and if they’re not hydrated, they can become stressed and reduce yields.
You can also increase your dispensary profit margin by investing in the correct drying equipment for buds. Quality drying equipment will allow your buds to dry evenly and reduce mold, lowering waste costs. Here are the top three options:
You can cut costs during cultivation by getting the most out of your cannabis plants. They require a lot of nutrients, water and other resources, so it only makes sense to get the most out of them. One of the most effective ways to do this is using low-stress training (LST) methods.
LST involves manipulating the plants against their apical dominance to create an even canopy. It ensures all branches get equal light, which multiplies your harvest and gives you bigger, juicier buds. This method also helps you get the most out of your grow area by controlling the height and width of the plant. It promotes better harvests in less space.
Little tweaks like these are what make the marijuana industry profitable. The growing phase can cost a lot. Using LST techniques increases profits and lowers expenses. It gives you more buds without costing you in equipment and resources.
Having core employees that run primary functions is pivotal. When you suddenly have a big order or harvest season is approaching, you may need more hands. Hiring temporary staff instead of expanding your team to full-time employees can effectively cut costs. You can save on payroll expenses, training, benefits and salaries.
If you need C-level staff, hire a cannabis consultant through a cannabis staffing firm that you can pay by the hour. Hiring a consultant cuts costs and also boosts efficiency by providing you with speedy solutions at a fraction of the price.
Paid ads can boost your product posts and increase brand exposure. However, they can be costly and often don’t do much for lead generation and authentic brand image.
Content marketing can help position your company as an authoritative source. It involves creating useful blogs, videos and posts that give your target audience the desired information. These techniques boost your search engine ranking. If people look for cannabis products in their area, your company is more likely to show up at the top of the search results.
In most states, cannabis products, including but not limited to flower, has, resin and consumables, must be lab tested. These tests confirm the amount of THC, CDB and other cannabinoids in the product. Testing also checks for various microbial contaminants, heavy metals and pesticides. Some states have allowable limits for contaminants, while others fail samples with any detectable amount. Some of the contaminants frequently tested for include:
Ensure you adhere to strict hygiene measures throughout each step, from cultivation to storage. Where possible, use natural pesticides like neem oil to prevent toxic levels of metals and pesticides. Contamination or incorrect results could cost your cannabis business significantly. Choose a laboratory that you trust to ensure accurate results and prevent waste.
You can significantly cut costs by taking tax deductions out for rent if you optimize your floor plan. Where possible, create more space that directly relates to the Cost of Goods Sold (COGS) so you can deduct that percentage as rent. Be wary about where you try to deduct from because deducting 100% for rent is illegal if you consider areas like the lobby or toilets where sales aren’t occurring.
The best thing you can do is work with a tax professional who is knowledgeable about cannabis laws. They’ll ensure you get all the possible deductions without breaking the law and being fined or worse. A professional can also help you work around the exceptions to law 280E so your business can get access to deductions like COGS.
Although the cannabis industry is booming, business owners are still at a disadvantage due to stigma, tax issues and limited access to financing. However, owning a dispensary is profitable if you have the right financial advisors, tax attorneys, accountants and consultants by your side.
At Polston Tax, we give you all that and more. Our team can help you find deductions, file taxes correctly and save money. We have knowledge and experience in helping cannabis businesses navigate the muddy legal waters and thrive. Feel free to contact us and let us help your cannabis business become more profitable.
