Intro to your vertically integrated cannabis business data

Key Takeaways:

  • The data you already have can help you earn more by:

    • making the most profitable products
    • increasing cultivation and manufacturing yields
    • aligning supply and demand across your business units
    • improving your team’s efficiency
  • Think about each state-issued license independently, then how they all relate
  • Start to improve one specific opportunity or challenge in one business unit, and then increase scope as you see success

Vertically integrated cannabis businesses have the most to win by unlocking their data

Vertically integrated cannabis businesses are those that own multiple types of licenses, such as a cultivation and a dispensary, a grow and a product manufacturer, or all 3 major license categories with a cultivation, a marijuana-infused product factory, and a dispensary or retail store. Owning all aspects of product supply and distribution increases complexity, and, depending on the regulations in your state or country, also has the greatest opportunity for profit and success.

The more elements you manage throughout the product and customer lifecycle, the more control you have over quality, branding, and profit. The good news is that you’re already collecting some, or all, of the data that you need to substantially improve your business efficiency and profitability! All you need is a master key to unlock your data and put it to work for you.

You can think of your business like a well-oiled machine – there are lots of moving parts and each gear needs to operate smoothly and consistently on its own so that it fits well into the bigger picture. Your data can help you fine-tune your operations and your business. With the price of wholesale cannabis dropping and the market becoming increasingly competitive, your data can give you the advantage you need to innovate and improve.

Here are just a few questions that your data can help you answer so you can increase your profits by making and selling more of the right products.

1. What are my best categories & products?

Your “best categories” or “best products” can vary depending on what you’re trying to accomplish. First and foremost, which of your products have the highest demand? Your customers (and their customers, if you sell wholesale) will dictate your top selling categories and specific products. Keeping enough inventory of your best sellers can increase customer loyalty, they keep coming back because you always have their favorite product, as well as average order values. Demand is a good place to start in thinking about your “best products”.

Another important consideration is the cost per unit of the products you’re selling. If your high demand products also have a high cost for creation, they may not be the best products for your business to continue pursuing. If you are selling a lot of product, but not making very much money on each one, it may be better to invest marketing or sales training to help promote higher margin products. Understanding the cost to create each unit of ever product SKU is another important layer to understanding your “best products”.

Beyond demand and unit cost, it’s also critical to understand sourcing capacity. If you are growing and manufacturing your own product, you have to understand how much product you’ll have and when. Sometimes, the best product is the one you have to sell to your customer right now. Especially if you sell wholesale, your best products may be the ones where you can quickly scale production if you sign more or larger accounts. If you buy wholesale, some of your best products may be the ones that you can get quickly and affordably with consistent quality.

Perhaps the most important consideration is the price at which you can sell your product. The higher the wholesale or retail revenue, the higher the true (or perceived) quality, the more room for making money. Especially when you can pair low cost and high price products, these profit centers can often be considered your best products.

Although there is often brand value to offering different products, you can waste a lot of time and money by investing resources in the wrong products for your customers or your business. Using your data to identify your best products for all the criteria important to your team can help focus and refine your product offerings while improving your top and bottom line.

2. What are my cultivation and manufacturing yields for each plant and product by strain, type, or facility? And why?

One basic understanding is that, all else held equal, greater yields in your facility means more product and more profit. Knowing the highest yielding plants and products can inform best practices and winning combinations that improve output on other strains, SKUs, or facilities.

For plants, this can be a function of your strain genetics, the nutrient recipe, or “environmental factors” such as temperature, light, humidity, carbon dioxide, and much more. For extractors, it can be driven by your materials, hardware, and processes. For infused product manufacturers, this can be limited by your people, machines, recipes, or ingredient sourcing. Knowing what products are most efficient to create, and most importantly why they are so efficient, can create a lot of clarity and direction for vertically integrated businesses should invest resources for future growth.

3. What do we need to grow, make, or buy today to supply all our customers tomorrow?

No matter how profitable, potent, or delicious your products, you always need to make sure you’re creating or sourcing enough to meet all of your customer demand. Vertically integrated businesses that include a dispensary or retail store can use historical sales from their POS or seed to sale to understand expectations for sales in the next week, month, quarter and year. Businesses that are mostly focused on wholesale accounts can use their historical purchase orders to predict demand by customer, category, and product.

Once you know the expected demand, you can work your way back to what you need to start working on and when. If you are focused on extractions or other infused products, you can use historical data from your past manufacturing batches to identify how much raw material, and how much time + labor, you need to create those products. If you are focused on raw flower, then you can use historical data from your past harvest batches to clarify how many plants you need to successfully grow and process. When you own both grows and products manufacturers, you can drill down to the point where you know that the cuttings you’re planting today are destined for specific edibles shipping to a specific store in 5 months.

Using your data to easily and intuitively understand what you need to focus on creating today to satisfy customers and growth can dramatically improve efficiency, profit margins, and top-line sales.

The answers for each of these three questions can be found in your spreadsheets, seed-to-sale, and accounting software where you’re already collecting a lot of valuable data. What other types of data are you already collecting?

What type of data is in my vertically integrated cannabis business?

Although each state in the US, and every country outside the US, has different regulations, nearly every vertically integrated cannabis business is collecting the following types of data:

  • Financial
  • Cultivation yields
  • Manufacturing yields
  • Customer sales
  • Laboratory testing

More sophisticated organizations are also tracking:

  • Competitor’s products & pricing
  • Energy
  • Supply & demand
  • Spot pricing
  • HR / Payroll
  • Compliance
  • Waste

How do I get started connecting and unlocking my business data?

You know that your data can help you grow your business, but how do you get started putting your data to work for you?

The first, most important step is to clearly state what you’re trying to achieve in plain English. For example, “Our company wants to increase revenue by 10%” or “We need to cut costs on manufacturing edibles by 20%.”

Once you’ve nailed down the core questions, hone in on data that you’re already collecting in your seed-to-sale, accounting, and other systems. Identify what specific information (reports, metrics, etc.) would help inform your decisions.

Then, isolate the number one challenge or opportunity that you want to pursue first. The diligence of prioritization is critical! The most successful businesses, teams, and data projects start off with a laser focus to start seeing quick returns. As your team gets more comfortable interpreting and using your data, you can move on to the next goal on your list to address.

Finally, get started using your data to improve your business! Make sure that your reports or metrics are simple and intuitive so that they quickly answer the most important questions. The only relevant data is actionable data. If the information you’re looking at doesn’t make sense, it’s not your fault! Reporting that isn’t understandable or actionable is either the wrong data or the wrong representation for what you need.

If you’re still stuck, we offer a free data consultation to get you started on the right path.  If you’re interested in the examples above, we have dedicated modules to help you work through each consideration.  And you can always send us a note to chat about what’s on your mind.

Overall, data can be a powerful competitive advantage in your quest to make the most integrated and successful cannabis businesses.

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2018-03-28T16:31:05-07:00