Marijuana Business Magazine January 2020

company can secure a loan or investment far more easily, cannabis operators find it far more difficult to find such funding. Entrepreneurs must look ahead and plan for their future needs. Because of the many challenges inherent in the industry, it is vital to accurately project what your company’s performance is going to be. Are there certain industry sectors you see gaining more traction than others? Which sectors aren't doing as well? CBD and hemp are gaining traction mainly because of their big advantage over true THC/marijuana producers: They are not subject to the limitations under Section 280E of the IRS Tax Code. They simply don’t have the same barriers to entry. Ancillary companies also are doing well, particularly merchant processors willing to take on cannabis clients; they’re making quite a bit of money. Professional services such as legal as well as insurers are doing well, too. We are seeing several firms getting hit with big tax bills because they didn’t fully understand the nuances of 280E. It’s just a matter of time before those companies that aren’t paying attention to the intricacies of the tax code limitations get into big trouble. If there is one piece of financial advice you could give to aspiring cannabis entrepreneurs, what would it be? Don’t underestimate your startup costs. It’s easy to be optimistic as an entrepreneur—and you should be. But because of how much it costs from a tax and operating standpoint, it will be tough to accurately project your prof- itability point. Be sure to give yourself more runway than you are anticipating, because it will take longer than you think to reach profitability without investment. Also, talk to a good accountant and a good lawyer who have experience in the industry. Get yourself set up properly from the outset so you don’t get into a big mess down the road. It’s very easy to make some small mistake that can cost a lot of money. Nick Thomas covers finance for Marijuana Business Magazine. You can reach him at Largest Cannabis, CBD & Hemp Testing Laboratory in the Southeastern USA. Awarded 14 Emerald Test Badges for Spring 2019. Most Awards In the Eastern United States. MEDICAL GRADE TESTING • RELIABLE RESULTS • RESULTS IN 2-5 DAYS • COMPETITIVE RATES 888-407-6675 • ACSLABCANNABIS.COM • TAMPA, FL 33573