“We want to partner with the brands and companies that will become iconic in the recreational marijuana industry and help them make the smart decisions that will aid in their expansion.”
That’s how the conversation that OneLoveMassive.com began with Derek John, the CEO of Austin, Texas-based Budding Financials, a company that offers a suite of services and support, plus an upcoming software platform tailored specifically for companies in the legalized marijuana space. Cash, inventory management, regulatory compliance and real-time reporting are all quite necessary in the marijuana industry in America, where at-present, 23 states have legalized cannabis. Budding Financials hopes to help marijuana entrepreneurs better navigate what is rapidly becoming a complex regulatory landscape and enable them to focus on growing their business bigger, faster.
In this interview we learn about the size and scope of the legalized marijuana industry, it’s potential growth and pitfalls, plus exactly how it can become sustainable and a part of a progressed and re-defining american business and corporate landscape.
One Love Massive: What’s your background in business, and moreover in the marijuana industry specifically?
Derek John: I’ve done accounting and freelance work for a number of startups and through personal relationships have worked with several recreational shops in Colorado, helping them to manage finances and doing inventory management. I’ve gained experience via these entrepreneurs by sharing in their concerns and their risks. I’ve helped them navigate what is a complex environment.
OLM: As far as the new business, have you worked out exact price points for what you’re offering, or is this still being handled on a case-by-case basis?
DJ: We haven’t settled on a price point at this time, as we’re still fleshing out some of the systems and understanding what is the consumer appetite going to be for a system like this. We’re working with people on a case-by-case basis, and companies can reach out by getting on our beta test mailing list. We’ve worked with several different companies in Colorado and the experience we’ve gained is what we’re using to build out the software using that information to build best practices that can be used most anywhere with minor tweaks that are due to regulations.
OLM: We’re still a medicinal-legal industry in DC, but what about the possibilities regarding recreational legalization here and elsewhere? How has this affected your business development plans?
DJ: We’re monitoring the DC market and other markets closely as we know that recreational marijuana sale could be legalized in places like these soon and we’d like to be able to get into these markets and work with interested companies.
OLM: When it comes to marijuana in America, I’m intrigued that more people don’t bring up the success of places like Amsterdam and other European locales. It seems as though they’re ahead of the curve and that they’ve figured out a l0t of how to make a commercial cannabis industry work. How does Europe fit into your business modeling?
DJ: We’ve looked at Europe a bit in analyzing how the whole [legalized marijuana] system flows, but generally, their regulations are much different. Even in somewhere like Amsterdam, they’ve dialed back the laws to reduce marijuana consumption. So, insofar as Europe, they’re really currently trending in the wrong direction to be used as a focal point or a case study in building out our platform.
OLM: What do you view as the bedrock components of a successful commercial business in the legalized marijuana industry in America? How will Budding Financials assist in the development of these components?
DJ: First, being able to manage inventory is a huge goal of starting a company. Most marijuana entrepreneurs lack the deep financial experience and acumen to really understand the business process. Being able to predict demand and not over or under-stock supply is important. When you over-stock, having a lot of cash tied up in what is called “working capital” [that may not be selling] doesn’t necessarily mean that you’re meeting demand with that inventory. In those cases, you end up cash strapped and can’t purchase another product that the market may [actually] be demanding. Our financial services are tailored specifically for marijuana companies and helping them run critical processes like cash management. We help them understand ways that they can a) manage cash so that it’s not a huge risk and b) use their cash to continue to fund their business.
OLM: So, will there come a point where Budding Financials will create a conduit from commercial marijuana growers to commercial marijuana retailers? It seems like that’s a space in the marketplace that once it’s occupied and running could be a major income point…
DJ: We’re looking into that. In Colorado, they regulate marijuana all the way from seed to sale, so whether you’re a grower or a recreational shop, you need to be able to track the product from the seed all the way to the end consumption. Having the technology in place to track the inventory process would allow us to work with growers and let them use our services. At present, we don’t work directly with the growers, but we do analyze the inventory purchases that a recreational shop makes in order to understand how inventory is flowing through from purchase to sale.
OLM: So, as marijuana grows as an industry, what are your thoughts regarding its key points of marketing itself? Like many industries are dealing with right now, what are the points of experience delivery regarding retail marijuana that should be of greatest interest and development?
DJ: As markets in places like Colorado mature, marijuana’s becoming a commodity. The next step in a commoditized industry is that there’s a focus on marketing, generating customer loyalty and ensuring that a company provides a positive experience every time that a customer is in a shop, that you can differentiate yourself by more ways than just via the product.
OLM: So, let’s talk market growth and commercial cannabis. How big of a potential market are we talking, and what are some of the indicators we should be using when we’re thinking about if we’re contemplating whether the market could expand even further?
DJ: In 2014, the market hit $2.7 billion, and is expected to grow to $11 billion by 2019. If all states legalize marijuana, the market can be as big as $37 billion. There’s a number of things that could occur that could make this market even larger or smaller. However, I would lean toward the market growing larger than $37 billion. That’s actually $3 billion bigger than what the organic food market is expected to be worth at the same time. The regulatory environment is the number one thing that we analyze to get a sense of what the market’s appetite might be. Today there’s 23 states that have legalized medicinal and/or recreational marijuana use, and there’s 11 more states looking to legalize in the near term. The potential for growth is huge. However, predicting say, when all 50 states would legalize? That’s impossible.
OLM: There’s a point where one could consider marijuana to be an industry that could become as ubiquitous as say fast food. Is Budding Financials ready to build out the company to meet that potential market spread? If so, what are the key factors that you’re focused on when contemplating how to replicate your model across markets?
DJ: With any environment, you have regulation, inventory and cash as issues. Regulations will vary from state to state a bit. However, it’s all about creating the point where you say this regulation requires “x” sort of data, and you connect a financial piece to the data itself. It’s all about tweaking the system to the area and it’s set of regulations.
OLM: Regarding regulation, this seems like the biggest issue for the future of where the cannabis industry is headed. What are some things we should be thinking about in looking at where regulation is headed?
DJ: It’s an extremely complex regulatory environment. With that brings extreme financial challenges. Legalization has only occurred in parts of the country, so at some point when legalization occurs across more of the country, I expect that a merger of regulations will occur where regulations are roughly exactly the same nationwide. Navigating individual [state] industries until we reach that point is difficult, but I’m hopeful that we will reach that point of regulatory convergence where regulations match and it will be easier to manage the entire process.
Visit http://buddingfinancials.com for more information about Derek John, Budding Financials and their suite of services.