Tumbling wholesale cannabis prices in some markets are devastating plant-touching operators and generating negative fallout for ancillary companies that provide services and products to those businesses.
In order for supplementary companies such as accountants, consultants and security firms to continue to grow and maintain healthy revenue streams, some owners are looking to emerging cannabis markets in the East, Midwest and California’s nascent recreational sector.
Others are seeking out new opportunities beyond the United States, including South America. And some are diversifying beyond cannabis.
“When the operational businesses don’t have the money to pay for ancillary services, our business also takes a hit.”“Generally, everyone’s really struggling. Prices are really depressed and going down quickly,” said Avis Bulbulyan, a cannabis consultant in Los Angeles.
Marijuana Business Daily surveyed several ancillary business owners to get a sense of how they’re adapting to the market evolution.
The executives say struggling plant-touching companies, particularly in mature markets such as Colorado, Oregon and Washington state, fail to pay their bills, opt out of essential services like security and decide to take on complex tasks such as accounting to save money.
Here’s a sampling of responses:
Dean Guske, CPA, Guske & Co., Bellevue, Washington
Clients have stiffed Guske – who focuses on taxation, accounting and business consulting – when they have gone out of business and not paid for services rendered. That’s happened particularly in states with well-established recreational cannabis economies.
“In the mature markets, this has been very, very difficult for these guys to make money, just because they’ve licensed too much production. We require retainers and we try to keep a fairly tight rein on the work we do and getting paid.”
He’s seen some success by pivoting to emerging markets on the East Coast.
“In the newer markets, people haven’t had a chance to go out of business yet. We’re helping them get their businesses set up, maybe doing some upfront consulting, maybe helping them get their books set up.”
Avis Bulbulyan, CEO, Siva Enterprises, Los Angeles
A couple of Bulbulyan’s consulting clients have burned through cash reserves paying for real estate as they wait for licensing to open up in California.
“They ended up pulling the plug on their project. We lost that business. A lot of people are dropping like flies.”
His Los Angeles-based consulting firm protects its bottom line by diversifying the practice to cover different areas of the industry, including branding, marketing, licensing and compliance. He has attracted clients in Maryland, Massachusetts and Missouri. Bulbulyan also has an eye on Florida, New Jersey and New York.
“Without these other states and without these other departments, it would be incredibly difficult to keep the doors open.”
Published: March 12, 2019