by Rick Thompson/originally appeared in The Rolling Paper April 2021
We’ve all heard the United States described as a Land of Opportunity, a place where enterprising persons of all nationalities can be born in or come to make their fortune. Thousands, if not millions, of Americans would tell you they’ve achieved that dream, and it happens every day.
Opportunity is not evenly distributed. Property does not carry equal value. Skills do not translate into equal pay. Resources are not distributed fairly. That is America.
So when a prospective business start-up plans their launch they look for the best place, as not all are equal, and they look for the best financing deal, as all are not equal, and they look for the best partners. In the cannabis industry, regulated and unregulated, these choices are doubly difficult. It’s tough, launching a business in the cannabis industry.
Yet it is at this launch period where the prospective cannabis industry entrepreneur needs to be the most resolute.
Much like the proverbial ripple in the pond, a small compromise at the beginning of a business can lead to much larger change further down the road. You can envision a business model based on success and benevolence, maybe sharing your gains with non-profits and needy causes, but if your partner plans on maximizing profits because he has a greedy pocket and big bills, your missions are not in alignment.
Likewise, with location. A wise community would use friendly zoning to create many places for successful businesses, but that isn’t the case. Opportunity in America is limited by municipal approval. In desperation, oftentimes a snap decision is made to locate a new business in a less-than-desirable retail location. In the rush just to get open, new businesses sometimes overpay for labor and services by paying rush fees.
Financing is the real witch, though. If you take on a bad financing deal, you’re screwed. As a desperate way to raise capital, some of Michigan’s biggest cannabis companies entered into sale/leaseback agreements with a particular lender. The cannabis companies sell the buildings and fixtures then lease the same things back, just to get money to go out and buy more stores they then sell to someone else and lease back. Plus, the interest rate goes up on the loans, so they pay more every single year and yet still own exactly nothing.
Now those companies are in a hole. All because greed made them agree to ridiculous terms. They want to change the system to save their businesses born from bad deals. Bad businesses are always in need of saving; if they were self-sustaining models, they would be good businesses. Cannabis businesses will look to the legislature and the MRA for changes favoring their bad business model, and we should speak out loudly against changing the rules of the game.
A compromise at the start of your business can lead to a ripple effect further down the road. Every businessman who has failed knows it, and every family balancing a budget knows it, too. When a big guy makes a bad deal, big guy fails in a big way. This is the Land of Opportunity, but some people are not good stewards of opportunity. Fortunately for them, America will always offer new opportunities for those who fail, and yearn to try again.