5 Factors to Consider When Expanding Into Cannabis
Cannabis is a unique product, but successfully and profitably growing it is very much a business. To succeed and achieve maximum profitability, the operation has to be efficient. To be efficient, the owners need to plan carefully, budget appropriately, and rely on experts for guidance. This is especially true for growing cannabis indoors.
“Professional growers need to realize that growing in a 20,000-square-foot warehouse is not the same as growing in your father’s basement,” says Ron Berkhout, Sales of VRE Systems, Grassie, Ontario, Canada. “I advise growers who are starting out to take a long-term, rather than short-term approach. This means talking to experts.”
Berkhout recommends growers carefully consider the following steps to develop a sound business plan and make sure their indoor growing operation gets off on the right foot.
1. Select the Right Strain to Grow for Your Market — Then Specialize
“Depending on where your operation is located, there are different regulations on growing,” Berkhout says. “For instance, some states may regulate the operation by plant count or canopy space. This affects the operation.”
Berkhout also stresses that different cannabis strains require different growing techniques and equipment.
“The best operations bridge the gap between cannabis and horticultural growing. I recommend you find a good cannabis growing expert, as well as an experienced horticultural grower who knows how to grow the crop efficiently.”
2. Expect the Unexpected in Budgeting
“Many people think they can start out on a shoestring budget, but in my experience, that never seems to work out,” Berkhout says. “It takes more money than you may expect for a startup. If you’re growing 20,000 square feet, you have to be willing to spend a couple million dollars. To do something properly always costs more up front, but it saves money in the long run.”
Consider the use of automated equipment versus manual labor, he says. Many people think it is cheaper at first to pay for manual labor, but labor is a constant, ongoing cost (and usually the most expensive cost) in the operation.
“If you’re in it for the long haul, you’ll realize that while the up-front cost of automated equipment is more, you’ll save money over time when you don’t need as many workers,” Berkhout says.
3. Find a Location That Works
Not all locations are created equal. Many areas have numerous regulations regarding cannabis production, security, utility use, renovations, and more. It’s imperative to understand how these can affect your operation.
“When you look long-term, you need to ensure you will have enough power, gas, water rights, etc. when you are ready to expand,” Berkhout says.
Selecting the right building can be complicated, so Berkhout recommends talking to appropriate local real estate and regulation experts. If you’re looking into an existing building, you may also want to have a structural engineer and/or electrical engineer check it out.
Berkhout prefers building new to renovating an existing building, simply because it is usually cheaper to build new than to renovate later. However, if you do select an existing building, he recommends making sure it is large enough for future expansion and renovating up front if possible, so it is ready to expand when the time comes.
4. Talk to Experts, Experts, and More Experts
“When I work with new growers, I ask them if they want a Honda Civic operation, a Porsche operation, or a Maserati operation, because each has different options depending on the budget,” Berkhout says. “I tell them to be open-minded and talk to as many experts and vendors as possible so they know what they want and what they can get for their money.”
“The best thing a grower can do is find good experts they can trust: Electrical and structural engineers, horticultural growers, lighting experts, control experts, benching experts, and management experts,” he adds.
5. Professionalize Your Operation
Good equipment is the key to an efficient and profitable growing operation, and it requires investment. Berkhout notes that some equipment can be leased. Efficient growing means faster crop turns and that means more money.
“Equipment is like Legos — you can buy basic and add on from there when you’re ready,” he says.
Berkhout recommends basic equipment investments like these that will get an indoor growing operation off to a good start:
• Lighting — This is critical to growing indoors, so find a good lighting expert and trust their expertise, he explains. “Lighting companies will design customized layouts for your operation to provide the right amount of light, as well as the right spectrum for growing.”
• HVAC systems — The right growing temperature, humidity, and cooling all play a major role in keeping an indoor cannabis crop consistently healthy and vibrant. Some growers are moving beyond basic HVAC systems into specialized temperature and cooling systems for growing in the unique indoor environment, according to Berkhout.
• Rolling benches — These bench systems maximize a grower’s space (always a concern in growing) and help cut labor costs dramatically.
• Automated irrigation — Another critical labor-saving element that helps you grow consistent crops efficiently.
• Environmental control systems — Monitor and precisely control the growing environment to make sure your crop stays healthy and robust.