We have people out there, I’m assuming. This webinar is growing you’re let’s go starting your marijuana microbusiness. We are now live so let’s see we have 14 participants with us 18 and it’s the numbers going up.
Hi everybody. I’m Roberta King, and I’m going to be your host, and we’re going to get started as soon as.
We fill the room a little bit more participants we can’t see you, but you can see us, we assume.
We’ll give you some instructions in just a couple of minutes. So keep holding in, and we’re going to start pretty much on time, so I’m going to give it a couple of minutes for things to get warmed up and get going.
Anybody want to tell a joke no was there any questions before we got started yeah and I could throw that pull up too so for your participants. I’m going to put up a poll, and it is I’m going to launch.
It here and you can answer that question, tell us where you are we’re trying to figure out where people are from because when you registered, we did not ask you where you were from we just asked you your name and your email, so we’re trying to figure out where people are from
Grand Rapids yeah I know yeah I mean I was expecting her to throw us a bone and show up right yeah okay errors no man up there yeah all right.
We’re going to keep the poll open for another minute or you well we get started then we’ll jump into our content and get going let’s see can any of you guys understand. Who how many people we have so far joined us 25 all right 30 good. We can good progress. Hey, everybody, somebody’s trying to check somebody want to answer. Thought somebody is asking us a question already so all right I am going to leave this poll up for another 30.
Nobody from Battle Creek yet either or Kalamazoo lots of Detroit anti-air bites cool well I promised I’d end that pulse. I’m going to do that right now so under that poll, and it looks like Ann Arbor Detroit area winds the winds of course as usual.
I know it’s where everybody is so hey I’m Roberta King, and I’m with kind of communication. I’m the host and moderator of the webinar tonight if you’ve never used zoom, please know that your microphone is muted not ours. Still, the all of you participants out there and but you’re going to ask questions in the bar down at the bottom of the screen our panellists when they’re not speaking will answer questions as best we’re able. so when Scott’s speaking I’ll try to answer questions or create a will, and we’re just going to switch off so when Scott’s speaking legal matters we’ll probably go to the side we’ll do our best to get to all of the questions we have some polls which you saw one already about where you live, and we’ll do those throughout the webinar to change things up a little bit, so the webinar set to last an hour to an
An hour and 15 minutes so we’re going to do our best to keep it on time, but if we run over a little, we think it’ll be worth staying for so before you meet the panel let me explain what marijuana micro-businesses are.
A concept of this partnership was the brainchild of Scott Roberts members of our group are all experienced professionals in cannabis accounting Human Resources insurance and communication, and our goal is to provide our clients with excellent service and give them what they need to. Scott brings out the dog. No, I’m all distracted don’t do that to me our goal is to provide our clients with the services they need all in one place excellent service experience. We want to save you time and money so you can focus on creating your micro marijuana business.
Again I’m Roberta King. My firm is kind of communications I have a long career in nonprofit communications. The Red Cross the Grand Rapids Art Museum Mercy Hospital in Grand Rapids Community Foundation I started piano communication about two and a half years ago I serve
clients who work in provisioning grow and in the legal industry as well. I work with clients on strategic planning brand development media relations. Content creation special events in social media and then the rest of the panel is going to introduce themselves starting with Scott.
All right hi, I’m Scott Roberts I’m the managing partner of Scott Roberts law a boutique cannabis business law firm based out of Detroit, Michigan. I’ve been practising for nine years a couple of years in the marijuana space in addition to my law firm. I’m also an owner as well as a broker at Michigan cannabis properties and then, of course, last, but not least this is my favourite little associate this is Luna and with that all.
Hi I’m Kareena Miller I am the founder of LC Solutions Michigan, and it’s a full-service accounting and CPA firm our office is based in Flint, Michigan. Then we also have partnered up in Saginaw and Escanaba so try to support the entire state, and I’ll let Anthony introduce himself. Then I’ll come back and give an introduction to what a microbusiness is. Thanks.
I’m Anthony Sabatella president of THC123. I have worked for nine years in the PEO space, and I am the current Director of Risk Management for America’s Back Office. I started THC123 on 4/20 2018 And provide three different services to cannabis businesses and micro-businesses. We are a licensed professional businesses employer organisation, employment agency, and insurance agency all directed for cannabis-based companies and now back to Kareena.
Hopefully, everyone can see the presentation now yep all right, so what is a marijuana microbusiness micro. Is a unique business model that has come into place with the adult-use laws going into effect businesses can cultivate process and sell all under one roof. It is limited to 150 plants that can be cultivated at a time and then, of course, the processing and the sales component of that would be dependent on those 150 plants. Where can a micro business operate? That is dependent on the local municipality.
Let’s get into more details later in the presentation. Still, you know ideally, you want to have a municipality that has opted into the adult-use laws and then has a specific ordinance in place. you remember speaking to micro-businesses being allowed there you know we always say that is an excellent first step- reach out to municipalities so you know where you can operate
You’re looking to run call up the municipality and ask them you know if they have an ordinance in place allowing micro-businesses and then just, in general, the licensing. So you do have to go through and submit a full application package or a micro business.
What you’re going to need to do that is going through a background check provide information like your past tax returns and w-2s.
You need to submit a business plan and a facility plan and some other components. So the rule setlists everything necessary to provide a full application with the license application fee itself is six thousand dollars. That is across the board for any adult businesses, and that covers the background check and the compliance steps that the state goes through and then the actual license fee is $8,000 for microbusinesses. Anyone Who is going to be operating a social equity zone and may qualify under the social equity program they may be able to take advantage of some reductions on those costs and then a business plan that’s one of the components for the application submission.
So that would detail out you know the steps that you’re going to take to have a successful business and what your goals are there you also include a financial forecast and then some supplemental plans like social equity staffing and marketing plans.
Now I’m going to turn it over to Scott, and he will talk more about the legal aspects.
If you turn off your screen share, then I can do it. Alright, so we’re going to kind of start with the basics you know Kareyna had already covered.
You know this is an all-inclusive license, so it allows for small-scale vertical integration. Which you know in our opinion is going to be important down the line as you know the wholesale prices of marijuana fall and also as the market still get starts to get saturated the vertical integration. Allows you to be competitive on a cost basis in the face of halt falling wholesale prices which you know do believe will happen in Michigan. Just like it’s happened to pretty much any other unlimited state-licensed state so the micro business.
As I said, you know you grow processed packaged. So they’re consumer pretty much do everything you want it to do other than testing, and there is the ability to have a consumption lounge next to it potentially. I saw that there was a question on that so I’ll just very briefly address that so that that is something.
Where they do have to be separate facilities, but that doesn’t necessarily mean they can’t be under the same roof so a lot of times in this situation we say we put up a wall and say well they’re sweet sweepy. So you know while you can’t have them in this you can’t have a consumption lounge in your micro business.
You can’t have it right next to it, and you can have you know the door to one to be a couple of feet away from the entrance to the other.
So, someone can just kind of walkout at your micro business and walk into your consumption lounge kind of basically you know the micro-market.
There are three different kinds of license types all in one, and each of those license types is subject to the state rules. That govern those license types I can’t get into much specifics, or else we’ll be here for a few hours just listening to me talk. Still, you know all the other rules, including the security rules that apply to a cultivator, has to also apply to that cultivation aspect of your business.
You know one thing that’s different under the micro business and kind of the MRT MA generally is that there are no capitalisation requirements.
So, so that means you know the state isn’t going to require you to have a certain amount of money to start, however. Is I believe cream is going to go into more detail. That doesn’t mean you shouldn’t you know have money put aside and have a budget for your project before you kind of dive in you know there are a couple of limits on the micro business license.
You know the first one is you cannot hold an interest in any other license type including another microbusiness and while there is a provision in the state statute saying that that may go away in a few years. You know me were I did get my hands on some of the draft licensing rules and that kind of provision saying it could go away wasn’t in there, so you know for the time being. It’s going to be a situation where you can only really have an ownership stake in one micro business and micro business only also in the first two years of the program.
It is limited to Michigan residents and then finally. You know one of the questions that were resolved in the rules that were at least released a few months ago. Is that you know?
You can’t kind of partition off your retail space in a separate area or separate type of property than your growing process space. I know that’s something a lot of people wanted to do because good retail is necessarily a functional cultivation space and vice versa.
Still, the state is requiring everything to be under one roof. So what are the hurdles well you know you do have to operate a count on one facility, and you are subject to all the rules. You know the significant rules there are you know the security rule, so you know these security cameras and these, security systems can get quite expensive, and then also you know concerning processing there are a lot of regulations related to kind of fire code issues ventilations and such that govern, processing facilities especially those, that use kind of co2 processing so that’s something you’re going to be subject to those rules, and that does some cost a right amount of money to build out and comply with you know. At the same time, I do kind of say, practically speaking.
This is you know kind of an opt-in ordinance it’s a little more nuanced than that well without getting into the details you know you’re going to have to the municipality is going to have to say we don’t have an opt-in ordinance. We’re going to give you a certificate of occupancy anyway for you to go into an area that hasn’t already opted in.
So practically speaking we still consider this an opt-in ordinance you know with public use you know this is something where you’re going to have to get the separate designated consumption license.
You don’t know to get the ability to do to have a cannabis lounge without having that separate license, and finally, we’re touched on real estate a little bit you know there are not as many places.
I’ve opted into microbusinesses as we would like at least not yet the big ones that have are Lansing which is going to allow for and then Grand Rapids as well and Muskegon I think Roberto would kill
me if I didn’t mention that yeah however you know there’s still a lot of battles to be fought on this, and we’re going to kind of touch upon how best to do that in a little bit but you know the significant bottleneck right now in this process is eating municipalities to opt-in and if they are opting in to allow for different or at least staggered licensing for the retail versus the microbusiness because what we have found were a locus an example of this is if you have the same zoning for retail licenses. which are
dispensary licenses as you do for microbusinesses then you see the prices of these properties go up several folds and has the effect of pricing a lot of micro business owners out of the market.
Finally, you know one big hurdle is you know bottlenecks in your process can kind of grind everything to the halt you see if you have one failed testing across the board then all of a sudden you doesn’t have a product to sell. So you know making sure you have you do airtight cultivation system with robust SOPs.
That can ensure you pass safety testing is going to be very important as well as making sure you understand what is involved with each of those.
You know license kind of types growing processing and retail because you could be a great grower and suck at retail. You might not do very well you could be a great retail guy, but if you got the crap product it’s going to be tough, so you know you either you have to have expertise on everything or you hire someone or become partners with someone who kind of complements your new knowledge.
You know a lot of places a lot of people are considering what we kind of boutique dispensary model and that as well as the type of cannabis lounge model there are a lot of other business models. That can be used you know California has much more developed kind of micro business system, and they have I believe that last time we checked, it was over 200 micro-businesses operating in California. You know we looked over there and saw some other business models that you know went beyond the typical kind of boutique dispensary model or the cannabis lounge model, and we’re going to share a couple of them you.
Boutique, the dispensary model, is essentially just your dispensary you don’t sell maybe as many products. Still, you know you sell you know fewer products that hopefully are better and are more kind of craft cannabis because you know if you were growing 150 plants.
I would hope you can kind produced better marijuana than a facility growing 15,000 plants because you’re going to be able to sort of show the care and love for each plant. That you know a facility of that size is just not going to be able to do, you know some other business models other than the cannabis lounge is you know the taste and tour.
This model has taken off in certain parts of California where necessarily, it’s kind of like a winery where you can take a winery tour and then you know you end up in a tasting room.
Which would then require consumption lounge license and that allows people you know to see the process start to finish which is significant from a marketing perspective because it’s you know you have a captive audience there. Then you know there’s another a lot of other business ideas you know one of the things I like to say is anything that has alcohol in it you can replace alcohol. With marijuana so, you know there’s bark aids that’s a big thing in some cities.
Right now and you know I think a marijuana arcade would do just as well as a bar Kade.
Then you can also attach it to a lot of different other kinds of ancillary businesses like a spa or you know one of those you know painting with the twist and you know you can also focus more on events as well because you will be able to sell at events similar to a retailer so just kind of general business strategies because you are very limited in your plant.
You know you’re going to need to focus on getting a lot of yield per plant. Still, you’re also going to have to do that knowing that you’re going to you know need to have some perpetual supply.
Because if you know to grow these huge plants and takes just six months and all your plants are like that.
you know you may have you know weeks or if not months where you don’t have any product to sell which can be hurt, your overall numbers because it takes a long time a lot of times to recover from a shutdown of any prolonged nature. We also suggest you have a unique value proposition because you’re not a dispensary you’re not going to be able to carry nearly as many products as a dispensary. So you have to do something a little different so that you know you have a value proposition so people come to you as opposed to the dispensary that may be down the street.
I’m not going to go through the rest because I’m running a little short on time, so we’re, going to kind of go to the keys to success and that you know the number one key, and this is the biggest hurdle.
We’ve seen the municipalities you know they have the power to make a break your business model. They can say yes, we want to allow designated consumption areas; therefore, you can do a cannabis lounge. But conversely, they have the power to say no we don’t want to do that and if they don’t want to do that you can’t do it, so you know getting a relationship between municipality is, probably the best thing you can do. It’s going to determine you.
Where you can go and what property you can use, which is going to have a significant effect on your overall success. Another thing we suggest is diversifying your business model you know you don’t have to rely on cannabis sales you can sell CBD – you can sell glasswork.
You know you can sell any number of other things, and this helps both from a kind of a tax – maybe perspective and also generate some more revenue you know one thing you can do as well is you know to cooperate with other micro-business owners. There are a lot of different ways to do that one way is to kind of work with other owners to help create municipalities.
I’m going to go into more detail in the next slide, but you know there’s also the ability to come together maybe and have a couple of these in the same building or right next to each other, and kind of each carve out a little space within you know with a niche and type of work as kind of cooperative businesses you know one thing I’ve been told. I’ve confirmed is that you see a borrower will do better if there’s another bar right next door it’s like there’s science in numbers behind that and I think with micro businesses there’s the potential for that also to be the case.
You know microbusiness might very well do well when there’s another complementary business right next door, and of course, because plant count limits you. You want to maximise your yields and limit your disruptions and also, of course, work with reliable partners and business consultants.
Whether that’s the legal marketing HR or County and especially accounting because you know 280e is a nightmare as Karina will explain later and that’s probably the most significant way to get in trouble under the law. It’s not because you’re selling marijuana or violating the controlled substance act is because you didn’t do your taxes right.
So closing thoughts you know there’s a lot of opportunities in this space as long as municipalities you know give us the go-ahead, so you know knowing that you know what we one thing we did is we launched lists I believe it was yesterday. We’re calling it the microbusiness Action Network and what that is. It’s. It’s a Facebook group free to join, and you know we are going to be posting, you know city meetings and planning commission meetings.
Where you know marijuana is going to be discussed, and the hope is that everyone could kind of pitch in, and you know come to some meetings. Because you know, it’s one thing when one person is speaking for microbusinesses and 15 people speaking for retail establishments another thing.
When you have five people, six people, ten people kind of go into these meetings and talking about micro businesses at the public comment period. So we’re hopeful that that’s going to create a lot of opportunities and that you guys will all help us create opportunities for everyone so with that you know that’s my team there’s Luna again, and I believe.
We are turning it over now to Anthony going to I want to remind people that if you have any questions at the bottom of the screen, you will see the QA folder. You can jump into that and ask us some questions we’ve been getting some in the chat as well but feel free to use that down at the bottom that QA and ask us Any items that you have well Anthony gets ready.
I’m going to do another poll here, and I’m going to ask you, participants, to tell me about. Where you are in the process of getting creating your micro marijuana business, and it’s a multiple-choice question.
We’ll give you about 30 seconds to answer this question so quick answer it.
Anna looks good, can we get a link to that to the Facebook group the microbusiness Action Network put that into the Q&A; area.
I did it strike four, and I couldn’t find it, but sometimes Facebook does that. So, it looks like everybody’s in the poll is thinking about. yeah oh yeah a couple of people, who are working on their application but everybody’s kind of in the startup mode.
so, that’s good we’re in a right place to to be doing this so great so let’s move on to I just saw a share results on that Paul I could have shared it with you all. I’m sorry I’m a little bit new to this but anyway okay let’s go on to Anthony who’s going to talk about HR and insurance challenges he’s got to before I jumped in did you want to answer the last question I just came in about some food in cannabis on just real quick sure yeah so this is a question we’ve heard a lot there’s nothing in the state rules that would prohibit you from selling Food.
However, you know there is a lot of kind of health code issues that can come up when you sell food in a place where there’s smoking on the premises. So that’s something where there’s not a blanket prohibition, but there are going to be a lot of hurdles that you’re going to need to overcome to do that and that’s going to be generally something that is going to be governed by the county health.
Anthony, hi everyone I am Anthony Sabatella President of THC123. I want to talk to you today about a few plans. I want to mention a little bit about microbusiness insurance needs and kind of go over a pleasant hiring process that you could quickly implement to your hiring process over at your micro business.
A little bit about THC123 before we go in. We are a cannabis payroll and HR provider. We allow client growth on demand; we can do this through a cloud-based technology platform breezy HR and prism HR and through that, we can provide savings and labour costs to economies of scale. That’s the part that I will work on today is those later cause associated with staffing your micro business and creating a staffing plan. Some of the workshop goals here we have provided successful hiring process for your cannabis business.
we are going to evaluate your business’s efficiency to retain top talent barely.
we’re going to discuss components to building a staffing plan for your licensee review your insurance deeds and hopefully provide you with a minimum four thousand two hundred dollars in value today.
The reason we can show this savings and this value is through smart hiring. The reasons smart hiring is essential is because time equals money. The longer it’s going to take you to hire a suitable employee the cost for that hire is going to go up. This is going to be also in opportunity costs and just the value of your staff to look to hire someone internal you know a real-life example of this would be a lead budtender they will be working more of the retail operations.
I’m sure, they’ll be working a little bit more of a swing position and a micro business setting. you to know being a jack-of-all-trades you would want them to have a couple of years of at least budtending experience of not retail or commercial cannabis in some fashion. You know I also feel the experience in the medical field is very beneficial, especially with the knowledge of the different cannabinoids and terpene profiles that go along with the product that we’re selling.
Let’s say this takes one month for you to hire and you pay your manager thirty-six thousand dollars a year, which is an average salary here in that space? That’s going to cost you about three thousand dollars in labour cost, put in a sponsored ad, price to visit someone and interview them at Starbucks you know potentially get some coffees. The price per hire could easily be roughly thirty-five hundred, which is the average cost per hire across the general industry.
Before I got in the hiring process, was there any questions anyone had quickly getting into it three parts of the hiring process?
The first is the job foundation. This is where we’re going to describe the job that’s going to be part of the position that we’re looking for for our microbusiness. We’re then going to talk about screening candidates and then finalising that employment and creating a job offer to help staff your cannabis-based business. The first piece is going to be the kind of foundation that’s going to be the analysis we’re going to take a look at what tests make off that job what the conditions where the employees working in a warehouse or are they growing, are they processing is? We need to touch on the type of situation has in terms of aptitude. Also, the attitude you know is this a production based job?
Is this more of a marketing specialist where you know more of a creative mind is needed from there?
We’re going to look to create a job description. Use the answers or the questions in your job analysis, and that’s going to come to create an accurate representation for people to see what position you’re hiring. For example, for looking for a budtender position. It is going to help the operational staff report to the GM, and they’re looking for a couple of years of experience.
Well there we go into posting that job it’s going to list all the information and the previous steps this is where employers need to register the advantages. Why should they work for your micro business and not the business directly next door? Why should they work for your micro business a boutique shop in little of a medical dispensary or a vertically integrated company from there?
We need to reflect in corporate culture to bring in the people that you need to run your business the fourth part of that is receiving those applications.
You can verify if steps 1 through 3 we’re done right you didn’t receive the type of applicants that you truthfully. Were looking for it to reduce levels 1 through 3 you may have you know misguided your expectations or not listed some information that need be listed in the original job posting that may have narrowed your search.
If you do have those high potential candidates, you can kind of move forward down that screening review the applications create a shortlist. Identify those KPIs, key performance indicators, for those employees, and this is where candidates you need to shine for those you
know the update. Your resume makes sure that it stands out. They say the average recruiter who takes a look at it is only for six seconds.
So if you’re not jumping off the page in six seconds to shine it up from there, you probably like to set up a quick interview with us. Discuss your firm’s goals discuss the job opportunity at hand and engage if their characteristics fit that job opportunity from there set up a second in-person interview.
This is where I think you should narrow your list by about 75 to 90 per cent of your applicants interview the top five to ten candidates and the reason for that is is your time as business owners. Your times too right tie directly to the profitability of that company. So the more time you can spend on the revenue-generating activity.
This is where having the ability to offset and off and outsource that or source that to a hiring manager could be beneficial for you. If necessary set up a third interview from there, we get to offering the job.
What should this position pay? I see a lot of people it’s shortchanging the people that they’re looking to work with and work for them. Are you going to have any employee benefits paid time off sick leave, vacation, medical insurance, dental vision?
I know a lot of industry veterans from other industries are the use of these types of benefits, and they need to be conceptualised. If you’re looking to retain that kind of top talent in your micro business, the last piece of that is job acceptance do they accept the offer. Do you have a counteroffer from there?
You know this is how you can keep your employees happy lower your turnover lower your labour costs and increase your bottom line. I’m going to go through this real quick, why is the staffing plan essential.
If we know not how to hire now why is the staffing plan in point, we’re going to recruit the right personnel to fit your skillset in the needs of your business where we going to hire the right employee.
Then we’ll also look to use a staffing plan to help calculate you’re out brain causing of your employment needs seduced. So we got to understand what the employees need to identify your pay scale identify the number of employees. We need and then calculate the total cost of our total labour cost.
The easiest way to do this is to build out a quick org chart. This will list out the number of positions you need. If you have any questions on the pay scale, I do have some other information you can shoot or ask me for this information later. I’ll be happy to share from here we’ll calculate staff you need to calculate the labour cost. Once we know the amount of any employees you need we’ll review industry pay scales and then review some summaries
Here are a little bit of the average pays throughout cannabis space. If anybody wants to screenshot this, I’ll have this up here for a quick moment. I would use these are just examples; these are only estimates, but these are an excellent way to start on the salary for your employee’s understanding; this is not including workers’ compensation cost. Any business cost the employer-paid FICA taxes insurance medical, dental vision. So understand that also goes into the total operating cost for turning out a – for creating this business lastly . some of the insurance needs that are available out there for cannabis micro businesses.
These are for also general businesses there is no boundary on just a micro business yet. Still, lines of insurance coverage, you need to look into a general commercial liability – product liability, which is a license requirement. Underneath there is commercial property insurance crop insurance, which I know is a big one in which a lot of people are taking a look at. Directors and officers insurance is insurance that covers — those high-ranking members of your company from errors. EPLI – If there was a potential harassment lawsuit or issue in place would be done. The state statute is a workers’ compensation, cargo, cyber, and also health, dental and vision.
Hey, Anthony, we had a question a good one from actually Mac one of the participants he said what would you consider a good number of employees for a microbe that a micro business might need he was thinking between 10 and 14.
So we’re talking a hundred and fifty plants processing, and then retail would say 14 would be safe. I mean quoting 14 in your business plan, especially pitching to investors may be a right amount to put in there. I think you could get it done slightly more efficient. I would say and the ability to do that which may be tricky.
Which I think is the kind of the million-dollar question is finding those employees that can work dual positions.
If you have a lead grower that also could double as your lead extractor and processor. You know then you have a person who can be working 50% of their job at either position. I think if you introduce a couple of situations like that. Where people have dual roles with their dual skillsets that could be a value to microbusinesses great.
We had one other question from Colleen she said is there any reason a microbe is and this might be a question for Scott.
Is there any reason a microbusiness couldn’t have an outdoor girl um no I mean you know as I had said before the cultivations part of the micro business is regulated like any other cultivation.
So you know you would have to you know to comply with those rules that apply to outdoor cultivation as far as fencing having an outbuilding for curing and all that, but I don’t read anything in the regulations that would prohibit that great. Thank you
Karina’s going to be up. Next, I’m going to do a quick poll well she gets her slides ready, and this is a question about the challenges that you’re facing in your getting your business off the ground yeah multiple choice question.
If the participants want to answer a quick question that would be great in about ten then about 15 more seconds Karina’s, going to take it away to talk about everybody’s favourite issue accounting.
So there we go, and I’m going to let’s see we get a few more votes coming in on this poll hurry up we’re going to cut it up in ten seconds so we can get everything underway if you care to participate in the survey. I’m going to end it, and I’m going to share it. I think you can see that you can see the results.
So essentially the biggest challenge is all of the above that I have never owned a business before which I think all of us can feel that pain, so Karina takes it away. How are you okay so some accounting considerations Scott had mentioned earlier about 280e so that’s one of the subjects that will cover some background on our firm I started this in 2016.
we have been focusing on the cannabis space ever since. Then before the arts been a patient for a number a year so have that back-end Ariane’s – with the 280e so if you’re operating in the cannabis space in any respect, you should be aware of chewing.
If you’re not I would suggest just doing a quick Google search on it, and you’ll find a wealth of information be careful how you decipher that information. Still, you know this is something that you should be aware of so 280e limits a marijuana business from deducting its ordinary, necessary business expenses.
Like a non-marijuana business would be able to the exception to that is they can deduct their cost of goods sold. So you know what that means is once you sell a product.
You’re able to deduct the cost that it took to produce that product. So in the case of a microbusiness, you know, in general, you know the costs. That is related to the cultivation and the processing aspect of the business.
Where you know you’re growing or making your product for sale. Those costs would generally be deductible but once that product is ready. You understand further costs from that would not eat. So that would include your sales for you by tending staff.
You know any non-product related costs and actually. I’m going to go back I’m going to go forward and then again. So for a microbusiness, you know you want to make sure your record-keeping is is very well-kept for that 280e compliance.
You know again as Scott mentioned the where businesses run into trouble isn’t because they’re selling marijuana or are complying with its state regulatory requirements. But it’s because their taxes weren’t done correctly. So make sure you know as part of that overall tax planning in knowing what costs are affected by – ad and what are make sure that you have appropriate record-keeping behind that you know.
This isn’t a business that you can jump into, and you know look at reconciling your expense and revenue transactions once a year at tax time. You have to make sure that record-keeping is
consistent. All receipts in cost that you’re putting into growing or processing make sure those are intact and matching up to your accounting records. Because micro-businesses their activity is all under one roof.
There’s going to be shared costs between the different business activities that are going to have to be allocated into what you can take for a tax deduction and what you can’t so a great example is the building space.
Let’s say you’re renting a building and you have a portion of that building dedicated to cultivating into processing, but then the front part of that building is dedicated to the retail sales well the building cost us.
That is related to the cultivation and processing areas that, in general, are deductible where the
costs relating to the sales area are not deductible. So you know one thing you can do is look at your building square footage take your floor plan and do an exact allocation of the square footage that is comprised for the cultivation and processing areas versus.
That retail area you also have to parade out any office space so if you have an office manager that space and any of those costs are not deductible, any space for bathrooms conference rooms hallways all of that is also not deductible. So you know when you’re doing your build-outs and your plan for how your building space is going to be laid out.
That’s also something to take into consideration. You know you don’t want to you know waste space in areas that you’re not going to be able to make cost deductions for. So it’s essential to you know plan that from the beginning in talking about business planning.
You know there’s not a capitalisation requirement for microbusinesses like there is for the medical side. But you still need to be aware of the cost to expect you you don’t just have the licensing fees you have where. You’re going to have to purchase the building potentially have you know improvements that are going to have to go into that building.
It’s, and it’s not just standard improvements, so you may be able to you know let’s take an advanced caregiver growing space. As an example, you know all those components are still going to need to be there to support cultivation the causation side of the microbusiness. Again, you’re necessarily going to have to step it up a level to make sure that you’re compliant as well from what the state regulatory requirements are.
So there’s you know an additional cost that should be expected for that you know to make sure to budget costs for equipment needs for you know for taxes that you know you again you’re not I’m able to deduct a lot of expenses. So you’re going to end up paying a higher income tax expense effectively making sure that your inventory as well budgeted.
let’s take an example of you know what we’re running into now on the medical side where it’s it’s difficult
to pass the testing requirements and if you have a batch of inventory that doesn’t move for whatever reason you know how do you budget the cost that could be affected in that are you going to
go out, and you know maybe purchase CBD inventory to supplement that, or you know we go through some remediation process, or you know whatever those options are?
But again that’s you know the cost that you want to be aware that could come up and then with investors so
if you’re, you know if you’re looking to approach investors to invest in your micro business potentially.
You want to make sure that your business plan is very well rounded. So you know not just having
the bare minimum there that might be required for the state application, but you know going more in-depth and you know showed a well-thought-out plan and financial forecast that investor could rely on you know.
It’s a fairly deal with an investor to see a complete set of financial statements. You know they’re not going to be willing to invest money in your idea or your business unless they know that you know you’ve had it very well-thought-out you’ve looked at all the potential costs that could come up and can you know to give them a financial package. That can say here’s where your money is going to be used you know here’s when maybe expect repayment and budget that out you remember several years.
So you have an awareness of what to expect and then on the banking compliance, so there are banks that will serve the marijuana industry. Still, you know again they have additional compliance steps that they need to take so you know they’re looking for you to have complete accounting records as well essentially.
You know every dollar that goes through a banking institution they want to make sure that accounting for that is there and intact for the business. So you know again you can’t just throw receipts in a shoebox and hand them to your tax preparer at the end of the year, and you understand and say here you go and expect to be compliant for what’s needed for a marijuana business.
You want to make sure that you’re making that accounting and record-keeping compliance and financial forecast and everything a priority right from the start and then of course.
I’m going jump to this last slide now so the loose some resources that I generally give out you know for
people. Who are trying to understand a little bit better the tax implications around the marijuana industry a big one that came out late last year as a Harborside Tax Court opinion and this opinion speaks to a retailer but within this.
It puts a hard line between what a producer today a cultivator or a processor can take in adduction versus. What a reseller or retail business is ready to take so as a micro business. You know you have all three of those components, so you’re going to be following different tax codes of how-to or your inventory costs between those different business segments.
So it doe make it a little more complicated certainly very very doable but be aware that that’s you know something additional that you’re going to need to have planned out for your business. Then only some you know only some general research materials that are up. Here you know and some guidance that the IRS has also published a few years old. But it’s useful guidance to just see their perspective in their opinion on the subject Wow Karina that was great, and it generated a whole lot of questions in the Q&A.
I’m going to pick out a couple of them well you get your screen where you give your visor down and then I’ll you can ask a couple, and then I’ll let you ask them. While I’m talking about communications.
so, how about from Josh can you clarify the expenses involved in cultivating in the cultivation of products, such as equipment grow media nutrients utilities and labour are those deductible or not those are generally deductible.
so, those are costs that are required to grow your plants or to produce your processed products.
so those are usually deductible cool, and this is from Zach how does the 280e change if the bill passes to remove cannabis from the controlled substance as a controlled substance list so this is a crystal ball
I think so too 80 you would go away to a de doesn’t say it’s specific to marijuana businesses. It’s accurate to activities that are on that controlled substances list.
So if that bill passes is it’s got a long way to go so I know there’s a lot of news on it today but realise that it has a long way to go before that is a reality to start planning for but 280 would go away if cannabis were removed from the Controlled Substances list.
Great I’ll let you look at the other questions, and you can answer now in the live session, and I’m going to get ready to screen share.
I did notice another question on renting and whether you know renting a building could cause a mortgage issue with the building owner and you know this is something that has come up frequently. When we’re pursuing leasing opportunities because there is the chance that you see a mortgage has a provision about you know state compliance with federal law that would be broken. If someone was to rent to a marijuana business.
However, you know we do have some strategies for that we have been in situations where an owner will have a mortgage and still leased to us we just have to get a little creative sometimes with some of those lease provisions.
You know, and once we did we you know said that if it did get called, then we would essentially come up with the money to pay off the mortgage and then be able to dump that money from rent until.
we recoup our money in one case we did one in Metro Detroit area, where essentially it had triggered an automatic purchase option come on our part.
So there are ways to do it, and another thing we’re exploring at least in my firm is you know syndicating certain property deals.
Where you know, we’ll have a group of just pure real estate investors come in, and if they are you know, they do believe or think that. It’s an active licensee we’ll do essentially kind of purchase leaseback type transactions where we have a group of investors come in to purchase.
It with this you know the sole purpose of Licensing to a specific licensee great all right I’m going to get started talking about communication and the need for communication might seem like something. You do when you’re getting close to opening your micro marijuana business.
But you need to start working on this when you’re getting your license once you’ve committed to doing that and you enter the licensing press. It’s the perfect time to start thinking about this it gives you a focus on your business that you want to create and what you’re going to provide for customers. Remember that the concept of a marijuana microbusiness is craft cannabis and how you express that idea with your name images and words is the essence of your business.
So defining your brand is everything in anything around your marijuana microbusiness.
It includes creating a name for your business, and I encourage people to try something to find original appropriate and memorable to make sure that it does not belong to another company.
even if you find a URL for your website that fits that great name you’ve come up with that doesn’t mean that somebody doesn’t already have that same name or something similar and if it’s trademarked you run the risk of being sued for using it.
We just saw in Grand Rapids the other day that Skyy Vodka sued a distillery and it was grace guy yeah grey sky distillery was sued by Sky vodka. I will always go after the little guy if they find you and so and they so be very careful about that purchase.
Find and purchase a URL for your website but make sure that somebody else doesn’t have it and do careful and comprehensive research when selecting a company name. I have some criteria and ideas on how you can do that, and we could talk about that later. Once you’ve settled on a name, you can start thinking about a logo in a website,. We encourage you to seek professional design and development design and development assistance for both a website and a logo.
I think that’s just an essential thing for the look of your company. They’re essential to your brand meant to last, and logo is how people will first come to know. You and your website will be the centre of your communication ecosystem.
There was a question about how much should I spend a plan to spend on marketing, and I told the participant to hold on a sec. Because they were going to talk about that.
There’s no I always say flex before your shoes so planning your brand strategy or your communication plan you need to think about. What your goals are you need to start with a goal in mind I want to either make this amount of money.
I want to see this many people in the store. I want you to know what are the goals that you want to accomplish through having your microbusiness. It’s enjoyable and easy to start thinking about tactics to jump straight to that.
It’s like hey, I’m going to get my business we’re going to go to cannabis cup. I’m going to be at the bar. I’m going to be the best on Instagram. We’re going to have special events I’m going to buy this great billboard that’s right by my office.
We’re going to have this fun swag, and I’m going to send up text messages and but without a plan, these
tactics are all just unfocused and random, and you’ll get sucked in by people with great ideas and vendors with products and all of a sudden.
You’re just spending money, and you’re not reaching your goal, so I encourage people to work on a plan.
So think about your goals define your audience.
What are your key messages?
What sets you apart are you veteran-owned.
Are you local to where you’re living things like that are critical thinking about those key differentiators. You’re going to define some objectives which are sort of micro-goals about when you want to get stuff done and how to do it.
you are going to write a strategy statement, and that’s how you’re going to accomplish all of this communication work and then after you’ve done this all this work.
the goals in the audience and their messages and the objectives then you can have fun with tactics, and you can think about all those things, and you need to once you do that make sure all those tactics support the goal
That you want to accomplish and then put a budget to them and you’ll start calling people, and you’ll start getting prices on billboards and text messaging services. You know once you get over you know a thousand or so people and your MailChimp you’ll have to start paying for MailChimp and you’ve got to have to host for your website and all of a sudden you know you might not go to canvas cup this year and have a booth because that’s going to cost you a bunch of money.
So that’s kind of how this process takes place, but the reality of the expenses is going to probably put a damper on this, but you know you need to scale things down, and then you’ll adjust, and then you’ll scale things up, but you will always remember.
What you’re going to what you’re going to be doing and how you’re going to do it step back here sorry about that I wanted to show you a way that I use to define your tactics those fun things.
We just talked about, and I know that communication planning sounds kind of dull but thinking about the tactics.
I use the peso method to define tactics for the work. I do, and the P stands for paid and so any advertising or sponsorships that you might do the billboards and text messaging things like that that you pay for he is for earned media and that’s your effort in media relations and getting your story into the news. We’ve seen a lot of people in the news like that the media is hungry for cannabis stories and they are happy we just saw Anthony was in cranes the other day. We’ve seen all kinds of different stories when provisioning centres open, and we saw director Brisbane Ann Arbor hand out licenses. So the media is that for all that stuff.
So you know earned media is an essential part of what you do S stands for social or shared media. that’s your efforts in social media your Instagram account and other things you do then Oh is your owned media, and that is the assets that belong to you like your website in its content, and that is
crucial that you have that because with social media.
You know, and you’ve probably heard that Facebook makes it difficult for you to run your business and Instagram isn’t that much friendlier LinkedIn seems to be pretty good about that. but social media
aside icky it will not move your entire business forward you need all of these things in the peso method to do that and to be successful.
I want to talk about social equity too because your license that you’re going to have to get from the state of Michigan is going to ask you for social equities plan.
Scott believes it doesn’t have to be very elaborate, but you do have to have some social equity plan there?
It’s essentially a document that describes how you will work to correct or improve the lives of people who are impacted by the war on drugs or rate and racial inequity in your community.
When it comes to cannabis and while the state might not ask for a lot your local municipality will and we saw this in Muskegon. We see it in Grand Rapids and any place where there is a population of people that have been affected by cannabis incarceration and other activities that have caused harm in their lives those communities are going to ask for social equity plan.
It will fall into your communication plan under sponsorships or in your HR plan under hiring which is where you really can make a difference to do that, and I think it’s important to be creative and sincere.
When you work on your social equity plan to make it fit your business the way you see it, and I think one of the things that. I tell clients is that if you don’t know what do talk to some people who have been affected by cannabis prohibition do your research, and they will give you ideas and tell you how you can make a difference, and it will become very obvious. what your plan needs to do.
I was talking to somebody up in the U P about their social equity plan, and mostly my advice was you know you need to talk with people. Who has been affected and how did it affect them and when you do that you will have you’ll have your social equity plan in order. So that is my section right there, and we’ve got the last call for questions and any comments, and I do have one recent poll but. I want to see. We have done I have a screen presentation.
I can send you this Lesley why don’t you email me and I love getting I got a question I’m kind of jealous because Kareena got like six, and I got one stuff free communication advice right now Lesley Roberta at cannacommunication.com and if you want to send me an email. I’ll be happy to send you that.
I think we have one last poll that I want to do any of the panellists have any previous comments is there anything that you thought of that we should talk about tonight no I was reading there was an email sent by the MRA just after 5:00. It talks about grants that are available to municipalities to spread education and communication to the community about the 2008 Michigan Medical Marijuana Act.
So the caregiver was, and part of the social equity program relates to caregivers. So that I don’t
know much about this like I said that email just came through two hours ago. But that might be something to look into if you are reaching out to Miss County about that social equity plan maybe there’s you know some synergies. That can happen there okay good.
Did I’m not sharing my screen did you guys see my screen no you just your camera talking the whole time you’re going man no look at that. I was the one who was like telling everybody to share some share screens and did not do it no wonder everybody wants to see my slides well one person so sorry about that.
I will post these slides up somewhere it Scott tried to tell me can we share the decks in this webinar yeah we’re going to try to do some of that and figure out.
How to get this, I know that the webinar is going to be available as a recording and we can provide the slides. I think probably we can get them onto our website as well so dang it all right any other questions or comments how are you just came in can you turn an average house into your growth facility for your
microbusiness all of the cultivation processing and provisioning all have to be done under one location, not in a residential area different municipalities.
May have to frame organises but I know I will add you know there is a kind of a state provision defaulting against residential. However, we’ve had clients with res egg property which is very common rural areas which stone residential and agriculture and a lot of times in those situations you would be able to do it on your property.
Just not necessarily in your residence yeah due to the agriculture think about though you’re going to have a retail storefront. so you know to make sure that that’s convenient where people can still you know get there residential.
We’ve run into that too, but it’s generally the cultivation side. Still, I will say what we’ve experienced is some of those rural municipalities are more likely to prefer that model because then. You’re not so you don’t have your business so much out in the open it’s on your property. So it’s a good question for the local municipality too.
We have a couple of other questions, and we do have a few more minutes left from Josh’s item for all the panellists can you discuss the pros and cons of a caregiver transitioning to a microbusiness compared to a Class A rec business Michael.
so I’ll kick that off we know one of the pros is as a microbusiness you can do a one-time
Transfer of your caregiver plants into the microbusiness. When you first start, and you know as a microbusiness. You’re vertically integrated so what that means is that you know you can still sell at retail for you remember 3500, 4000, 4500 a pound and kind of be very comfortable you’re going to be able to continually sell your product at those prices.
When you compare that to a Class A grow where you know you’re basically at the mercy of whatever the
prevailing wholesale price is for the most part, and the wholesale price goes down as we’ve seen in other states, Colorado.
I think it’s been teetering between eight hundred to a thousand a pound and has been for the
last year – it’s going to be increasingly hard to make a substantial profit growing only a hundred plants.
When your cost of cultivation maybe six, seven, eight hundred a pot and that doesn’t leave a lot of margins left over for you, and that’s the reason.
Why I was harping on vertical integration because that really protects you in the face of falling wholesale prices and I can tell you you know right now that the wholesale price is sky-high because of we have a shortage, but that’s not going to last. You know as the prices fall it’s going to be harder and harder for these small growers to eke out a profit and the microbusiness being vertically integrated protects you from that.
Sorry it’s so tight real quick you know in terms of inventory management with that microbusiness you know caregivers have the experience to manage you know 72 plants and a lot of scenarios. You’re looking at either 100 or 150 but the microbusiness, in particular, is going to come down to how well. you manage that inventory.
So you know that caregiving experience prior can come into play in a perfect way their thank.
I just realised, I’m answering questions to you guys and not the rest of everyone this zoom webinar.
it’s freeze don’t be pardons. okay, I made one question from Zack is that I there any additional restrictions and deliveries for microbusinesses versus standard provisioning centres.
Anyone wants to take that I can answer that so this is one of those situations where you know a micro business being kind of subject to the same retail is an advantage because you know the
retailer or provisioning centres can deliver as long as they have delivery programs that are approved by the state of Michigan. They have their dedicated employees meaning you can’t
share delivery drivers between businesses.
But as a microbusiness, you can deliver, and you’re subject to the same rules on delivery by you know to create a delivery plan. That gets approved by the state as any other provisioning centre or marijuana retailer all right good any last comments ideas we are at 7:15. I think we’re all done if any of the participants want to look over in the chat section there’s.
Some there’s a bunch of emails and things like that we’ll leave this up for just a minute. So panellists can go over there or panellists yeah well. Since we were all talking to ourselves, and I was sliding to myself. You can go over there and take a look we appreciate your patience as we try this out we’re hoping to do this shortly and maybe be a little more organised and but hopefully informational and helpful to you all. So thank you for everybody for attending and for your time to my fellow marijuana microbusiness colleagues to Anthony, Karina, and Scott, it’s been great working with you on this.
So everyone has a great night, and we hope to see you all very soon take care of thanks, everyone
Thanks, Roberta, Mike. marijuanamicrobusinesses.com
Mr. Roberts is the founder and managing member of Scott F. Roberts Law, PLC, a Detroit-based business law firm. Mr. Roberts has spent his entire career representing businesses and helping them comply with municipal, local and state regulations.
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