Many operational marijuana businesses are seeking funding in 2017

Many operational marijuana businesses are seeking funding in 2017

By Eli McVey

In most sectors of the marijuana industry, roughly 50% of revenue-generating companies are either actively trying to raise capital or plan to this year, according to data in the newly released Marijuana Business Factbook 2017.

The underlying dynamics driving businesses to look for additional capital, however, vary by sector and by market, which directly affects their potential return on investment.

Many companies need additional cash after they launch – either to expand or to pay the bills until they can generate enough revenue to sustain daily operations.

Take Hawaii, for example. Most of the state’s eight licensed medical marijuana dispensaries are ready to do business but have been waiting on the Department of Health to approve testing labs.

The delay is a cause of major financial concern for these companies, which remain on the hook for significant expenses like rent and payroll even though they’re not selling any product.

Conversely, marijuana businesses in Nevada that receive additional investments will likely use the funds to expand or increase production capacity, as demand for recreational cannabis in the state has been much stronger than anticipated since the program’s July 1 launch.

Each sector of the cannabis industry faces different challenges and opportunities that impact their funding needs.

Testing labs are unique and capital-intensive businesses that require highly skilled workers to perform specialized testing procedures on technologically complex equipment. Whether a testing lab is looking to upgrade its facilities or just keep the lights on, the financial investment is substantial.

Wholesale cultivators in many markets have been hurt by falling cannabis prices, and additional funding may be necessary for many of these businesses to survive.

Operational efficiency is paramount to success for cultivators, and forward-looking growers are looking to minimize production costs wherever possible.

For this reason, greenhouse grows are becoming much more prevalent in the industry. However, the amount of capital required to switch to or incorporate a greenhouse into an existing grow site is significant.

Declining wholesale marijuana prices and rising popularity for concentrates and edibles has been a boon for infused product manufacturers, another capital-intensive segment of the industry.

Operating costs for these businesses are steep, as the extraction equipment, professional-grade kitchens and skilled personnel utilized by many of these companies do not come cheap.

A number of infused companies are looking to grow their share in existing markets, while some are utilizing licensing deals to expand into new markets.

This is all happening amid a period of intensifying competition, as new players continue to enter the market in hopes of cashing in on surging infused product sales. Needless to say, access to capital is extremely important for these businesses.

Though the market forces acting on businesses throughout various states and sectors of the industry are different, the funding needs of marijuana companies are strong.

And with a rash of new markets set to come online within the next year – combined with the hesitance of institutional investors to get involved with the industry – funding needs will likely remain strong for the foreseeable future.

Special Thanks to MJ Business Daily 

“If you can't figure it out, figure out a "work-around!" The NestEggg Group was founded with a firm belief that working exclusively with professional firms to help them see past their history into the potential of their futures. Your potential is limited only by your creativity. Jeff's business purpose— “why”—centers on changing results through viewing things in new ways. He expounds: “Changing our results requires changing our actions. Because what we do proves what we believe, only when we change our beliefs can we progress. New insights are what cause us to shift our beliefs.” So what results do you want to attain? Call Jeffrey (1-888-987-NEST) when it’s time for progress. About Robert "Jeffrey" Wolter, President The NestEggg Group, Inc & EgggsAct Tax, Inc. & Managing Member NestEggg Investment Advisors Jeffrey is a common sense and productivity strategist. He facilitates and teaches about growth, positioning, and pricing strategies; leadership; operations; business communications and philanthropy. What he does best—differently from others—is energize people while he shows them how to solve business effectiveness. He clarifies the intricate, huts new light. He encourages hope. He sets you up to make development possible. Jeffrey is recognized for his original ideas and success with practical implementation, even as he challenges the "norm". Jeffery is a skilled facilitator. His deep knowledge of his firm(s) operations and ability to understand the intricacies of All of his clients, gives way to sharp observation skills allow his grasp a firm’s nuances quickly. He then guides firm owners and their teams on their unique paths toward improved profitability, smoother operations, stronger cultures and how and when to give back. Since 1998, he's helped more than 5,024 QuickBooks users and business owners achieve results such as: expanding revenues, attracting and inspiring talent, aligning operations with long-term objectives, discovering and leveraging their differentiation, substantially increasing sales and proposal results, strengthening relationships with their clients, and finding more joy in their work. His 25+ year career background includes roles as entrepreneur, finance director, board of director for several nonprofit, creative business development, insurances agency owner, Wealth Management Firm owner, editor, Tax Specialist, Accounting Director, Mediator and more. Before creating his firm in 2007, Jeffrey was an accountant for several well know local firms and individuals. After building a successful accounting practice, he became intrigued and inspired by the uniqueness of how Insurance, Investment's/Wealth Management, Taxes and Accounting/Bookkeeping all tend to work together, he branched out and created his list of Affiliate Companies in 2012 & 2013 In 2013, joined the Intuit Accountants Council and has assisted in the continued enhancement of the popular QuickBooks (Desktop and Online versions) and did so until late 2015. In 2014 with the legalization of Marijuana, Jeff and his team have committed themselves to knowing as much about the industry and being there to offer Cannabis Compliant, Accounting, Tax & Insurance to business owners that have or need help in keeping in with the Federal government's "280E"
Contact Us

Send us an email and we'll get back to you, asap.

Not readable? Change text.