Posted: Tue December 01 9:04 AM PST  
Member: Elizabeth Pearce
Tags: cannabis, 280e, financial results, accounting, benchmarking


To improve your company’s performance, one of the first steps it to know your trends and how your business compares to its peer group.   Benchmarking is often presented as a complex and expensive process, but you can start benchmarking and gain significant financial improvement with the help of a financial consultant.   Benchmarking, is more complex with a legal cannabis company using 280E accounting, but following your trends on a monthly basis, and having clear goals, allows your team to try different approaches to improving results, with regular feedback.

Industry benchmarking programs are generally dominated by the largest participants in trade association. For these firms, benchmarking involves management committees, strategic planning and the implementation of best practices policies in multiple locations. A typical large company benchmarking program has many steps, each of which takes a large organization time and process management.

The owner of a smaller company, by contrast, is David, not Goliath. Your firm has nimbleness, flexibility and can move quickly.  For a small cannabis business, benchmarking is a five stage process:

  1. Decide to Benchmark: the first and most important step. Whether your goal is higher earnings or more free cash from the business, finding the right metrics to track is helpful. 
  2. Analyze. Benchmarking is comparing these metrics over time – and if you can get similar metrics from your peers, comparing yourself to their results.  Again, with the complexities of 280E accounting, you want an accountant or financial consultant who can help you focus on your contribution margin, your asset and inventory turnover, your cash conversion cycle.
  3. Plan a Change. With information, develop an improvement plan.  It is not uncommon to have a dozen or more ideas, but it is better to implement a small number of changes each month.  Write down your list of ideas, and add to it as ideas come up.
  4. Implement. Each month selecting each month the two or three which will have the largest impact. Implement these changes and solicit more ideas from your team.
  5. Monitor the results.  Each month, review the change and the impact.  This is where David, the small, nimble, business has the distinct advantage.  Each month, you can learn what worked, and find additional changes.  Complete the circle by returning to step two.

Benchmarking becomes a tool for continuous improvement.  Your company culture will adapt to a steady diet of improvements and your employees will look to opportunities to improve your metrics. With attention and focus, your firm will steadily improve.

Elizabeth Pearce

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