Budgeting for Technology and Change

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Image: Sergey Nivens / Shutterstock.com

One consistent trend in the conversations I’ve had with business owners and operators from different backgrounds across the country is increasingly obvious: Companies need to budget for change and technology. The world in an apparent standstill amid the novel coronavirus outbreak is just one more sign businesses need to be agile across their sphere of operation.

Running a successful cannabis business is not easy regardless of position on the supply chain. Our industry faces a uniquely heightened regulatory burden of overseeing and monitoring the entire process from seed to sale while navigating an ever-changing patchwork of state and local regulatory requirements.

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One of the most common and unfortunate challenges is lack of preparedness for a change in management or new digital standards. Let’s dive into each of these areas and think about some best practices.

A common line of thinking among business owners I’ve spoken with is “I use Metrc, spreadsheets, and Quickbooks, so I think I’m good to go.” The notion is especially prevalent among operators in more mature markets like Colorado and Oregon. But consider this: Compliance programs like Metrc serve the state, not businesses; spreadsheets are not secure and scalable; and Quickbooks alone is not sufficient for managing inventory and operations.

In a panel discussion with technology leaders in the cannabis space at a recent conference, the chief executive officer for a digital menu board company revealed the company was preparing to implement an enterprise customer relationship management platform that would cost more than six figures. “We have to do it to report, analyze, scale, and grow more efficiently,” he said. “It’s the cost of doing smart business.”

But how do you determine what you can afford when improving your business’ technology stack? Cannabis operations should consider their goals, financial standing now and in the future, and what solutions are available. For example, if an operator hopes to expand revenues by 200 percent within one year, that growth likely would make spreadsheet inventory tracking remarkably unpragmatic (if not impossible). With projected growth of that scope, the cost of a tech tracking solution relative to the additional revenue gained certainly bears considering. Investing in tools to support growth, standardize processes, and streamline operational controls is critical to long-term success.

Running a successful cannabis business is not easy regardless of position on the supply chain.

A common rule of thumb in other industries is to budget between 1 percent and 3 percent of total gross revenue to implement a full enterprise resource planning or inventory management system. While the percentage may be debatable, it is unquestionable that businesses should seriously consider what cost is feasible to ensure the system installed is one that will support growth goals.

Many enterprise businesses employ professionals to deal specifically with change management. In the cannabis industry the duties sometimes fall on a compliance officer, but most companies treat the tasks as a one-off regulatory checkbox and not part of the staff’s regular duties.

As your business matures, inevitably you will make the decision to bring in software or technology. The reasons for those decisions might vary based on goals and needs like reducing duplicate data entry and creating more visibility and transparency. Change management duties of this type should be assigned to a designated person responsible for helping meet the business’s goals and ensuring smooth implementation when new tools and processes are adopted.

Implementing processes for clear communication and proper training are essential when new tools and best practices are integrated into any business. Breakdowns occur too often at cannabis operations, such as when the person signing a contract has not told the rest of the organization they’ve made a change and why they made that decision. Ideally, support teams at new vendors will be armed with communications to relay the key value-add to end users and employees and train them on integrating the new products and processes into their daily routines.

It’s important the change manager asks about the onboarding process when vetting technology updates and upgrades. Budgeting for change means budgeting for time, setting proper expectations from the start, and being willing to slow down for a short period and speed up after training is complete.

Our industry rapidly is expanding across the country. As we mature to capture the opportunities in front of us and grow our businesses, it’s crucial to budget for upgrades in order to avoid stagnation and falling behind competitors. To help with this, instilling a culture of constant improvement with a point person to oversee change will go a long way to ensuring long-term success.


Colton-Griffin-Flourish-Labs-contributor-mg-magazine-mgretailerColton Griffin is co-founder and chief executive officer at Flourish Software, a provider of enterprise supply chain and inventory management software built for cannabis, CBD, and hemp operations. Previously, he worked in business intelligence and system design for Genuine Parts Company, Manhattan Associates, and ABT Molecular Imaging. He holds an industrial engineering degree from University of Tennessee.

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