Selling a cannabis business isn’t as simple as sending out a news release announcing your intentions. The marijuana industry operates differently than other sectors because it has lots of legal and regulatory baggage. So executives who are thinking about cashing in on a business license must go the extra mile to develop a sales plan.
Seattle-based broker Justin Costello, CEO of GRN Funds, is shopping an unusual package: 12 retail marijuana businesses in Washington state. The asking price starts at $60 million.
In an interview with Marijuana Business Magazine, he spoke about how potential sellers can target and attract buyers and investors. He also highlighted the red flags to look for in any potential buyer.
How can a business looking to sell gain the confidence of a mainstream buyer or investor?
Due diligence and auditing the business. Any savvy professional investor is going to want to see that a third party has been involved in the business.
The metrics are so new in the cannabis space that people are going to want in and see what the fundamentals of the company are, and usually they’re not going to take the seller’s word for it.
Can you spell that out a bit more?
Have good accounting and bookkeeping. That’s a big one that a lot of cannabis businesses just don’t have. I’m talking about hiring a firm that does your bookkeeping, does cross-referencing, does your regulatory aspects for your bank account.
What else can a business do to make itself more attractive to suitors?
I would just say have solidified departments. In this industry, the owner or general manager of the industry wears way too many hats to be good at any one of those aspects.
Create divisions inside of your company. Create departments. Who handles what? Is it Mary in HR? Is it Jim in accounts receivable? That’s important. Make sure there are checks and balances in those departments.
Also, when people are being terminated, make sure you’re following protocol. We’re seeing a lot of litigation right now in the industry.
Doing things like exit interviews or, if they terminate someone for cause, document that, so when they go to file an unemployment claim you have the documentation to support your company. Those are all small things in the grand scheme of things that really can create a big problem if they’re not done correctly or proactively.