Scaling Your Cannabis Business: Strategies for Success

Congratulations! You’re ready to take your cannabis company to the next level. Doing so successfully, though, requires a lot of planning.

Growing your business thoughtfully means laying strong foundations before you expand. Some of what worked well as a small business may no longer serve you once you scale up operations. A smart cannabis business growth strategy puts the right components into place so you’re well positioned to operate effectively toward and beyond profitability for the long-term.

What you need to scale your cannabis business successfully

The below services are critical elements to consider when planning your cannabis business growth strategy. Lining up each one before you start scaling makes all the difference.

Cannabis-friendly banking

If you’re at the point where you’re ready to scale, you probably have access to some form of banking. However, to grow your business unencumbered, you need to make sure your financial institution (FI) is with you every step of the way. If your current banking partner isn’t openly cannabis-friendly, you may want to consider switching to one that is.

Purveyors of cannabis bank accounts are far more competitive than they once were. So, if you haven’t checked out your FI’s competition lately, you may be missing out on the opportunity to move to one that charges lower fees, or offers more services, like international wires or even business debit cards. For the first time, in 2024, Green Check experts are seeing market pressures force FIs to offer more competitive products that are moving even closer to “normal” small business accounts. You may like your FI, but there may be a better fit out there!

If your current institution doesn’t have a cannabis banking program, that could be an indicator that they aren’t wholly invested in the nuances and additional work required to service the industry. If they choose not to serve the industry, that could leave you without banking options at a critical time.

This is especially true if you haven’t been direct with your banking partner about your plant-touching work within the cannabis industry. If you’re not transparent with your FI, you may find your accounts suddenly shut.

FIs are getting far more savvy about detecting cannabis businesses than ever before. So, just because you have a nondescript name like “Paul’s Wellness,” it doesn’t mean you are exempt from having your accounts frozen eventually. Remember; financial institutions communicate with each other, so you can make it more difficult to find a new banking partner if you’ve had an account closed because you weren’t forthcoming with your former one. No matter how long you have managed to stay off the radar, they will find you and you will lose your account at the least convenient possible moment.

Thinking about switching your bank? Check out our guide on how to find cannabis-friendly banking services.

The good news is there are plenty of FIs that want to serve legal cannabis businesses compliantly. We recommend making the switch first and foremost to avoid any disruptive surprises as you expand.

Funding

Scaling any business requires capital. For most companies, that means working with a lender. Most financial institutions are unwilling to extend traditional financing options, like lines of credit or term loans, to cannabis companies. Traditional FIs are highly risk averse, and even more so for an inherently high risk industry. Thus, it may be difficult to find a bank or credit union that’s willing to lend to a plant-touching business. Some smaller financial institutions may offer modest revolving lines of credit. This is not necessarily the amount a growing business would need for capital improvements and scalability.

Fortunately, private lenders dedicated to the cannabis industry fulfill these businesses’ need for capital. The family offices and investment funds that have stepped in to avail capital to the growing cannabis industry provide a needed source of investment scaling businesses need to grow. Generally speaking, private lenders offer familiar forms of financing, including term loans, lines of credit, equipment loans, and commercial real estate loans.

Private lending dedicated to the cannabis industry is available in amounts that businesses need to scale. This can be a crucial resource for businesses ready to grow. This said, it’s critical for borrowers to conduct air-tight analyses and projections to ensure they can meet the terms of repayment from the lender.

Since these private lenders are not subject to the same laws as traditional institutional lenders, they are able to charge higher interest rates on shorter repayment timelines due to the risk level of lending their capital. Private lenders can take advantage of small businesses for this reason, so it’s smart to do your due diligence before signing anything.

In need of financing for your cannabis business? Check out our guide to cannabis lending solutions and what to expect when applying for funding.

Comprehensive insurance coverage

The risks your business faces shifts as you grow. It’s critically important to review your insurance coverage and ensure your policy is still adequate.

For example, a manufacturer adding a new facility with additional extraction equipment must confirm their new assets are covered. Similarly, a dispensary opening more locations will have more inventory and real estate to consider, and should expand their insurance policy accordingly.

And it’s not just making sure your policy covers more locations and assets, either. As your team grows, you’re likely to incur new risks. Your general liability insurance may not be enough to cover staffing and human resources (HR) related issues. So, before you expand your team, consider acquiring Employment Practices Liability insurance as well.

It’s best to speak with a cannabis industry insurance expert to confirm you have the right coverage or coverages. We recommend a thorough review of your existing insurance policies and comprehensive consideration of the risks your business will be facing after scaling. You may need to invest in new or revised policies, but it’s vital for protecting your clients, customers, and the investment you’re making into growing your business.

Which insurance policies does a cannabis company need? Check out our guide to cannabis business insurance for more information.

HR and payroll support

As your business grows, so will your team. Some experts contend that your company’s human capital is equally important to scaling as liquid capital. Maintain a happy and tax-compliant workforce with reliable and professional payroll and HR support. A dedicated approach to HR and payroll is a must as your structure shifts — another team should focus on these important tasks while you dedicate your energy to your growth strategy.

Selecting a cannabis-friendly provider gives you assurance that these experts understand the nuances facing the industry. It’s also a signal that the HR or payroll provider is invested in you and your business. Partnering with a firm that doesn’t explicitly work in cannabis runs the risk of them reversing course, like when Paychex exited the industry in 2023.

Most large players in the mainstream HR and payroll space have refused to enter weed. So, in many areas of the cannabis industry, the “name brand” HR and Payroll solution isn’t an option. Talk to your fellow operators and lean on experts, like the folks from Green Check, to find providers with cannabis-dedicated solutions. Elect to work with a stable, committed partner from the get-go.

If you’re in need of cannabis HR and payroll services, check out our guide on how to find these companies and what to look for when hiring them.

Payment processing

Small cannabis businesses may be able to handle a relatively reasonable number of cash transactions, but there are numerous reasons to broaden payment processing abilities when looking to scale.

Payment processors allow cannabis companies to accept cashless payments as well as physical cash, like ACH and wire payments. This can safeguard your company from certain cash-based security concerns, improves and streamlines your accounting processes, and makes compliance easier. For dispensaries in particular, giving customers a choice in how they pay increases sales and improves customer satisfaction.

You have a lot of options, including ACH transfers, Point of Banking, or PIN Debit solutions. It is likely best practice to stay away from credit card payments within your cannabis business until VISA, AMEX, and Mastercard change their stances on processing cannabis payments with them. What matters is that you offer customers and clients a choice.

Need support for your transactions? Check out our guide to cannabis payment processing and how to find a provider for your business.

Where to find cannabis financial services

If you’ve been in the industry long enough, you’ve probably heard horror stories about how difficult it is to find cannabis-friendly financial services. Fortunately, as more legal cannabis markets have come online, more financial institutions than ever offer their services to cannabis businesses. You just need to know where to look — which can be a job in itself. This is where Green Check comes in.

We built the Green Check Connect Marketplace, a network of verified, compliant cannabis businesses and financial institutions, as a one-stop-shop for cannabis operators to find reliable and enthusiastic businesses ready to help them grow. Banks, lenders, payment processors, insurance brokers, HR professionals, and payroll companies are all part of the Green Check Connect Marketplace, and they’re ready and willing to work with the cannabis industry.

To see why more than 10,000 businesses trust us to connect them with valuable partners, join the Green Check Connect Marketplace today.

It takes a village to scale a cannabis business
As your business grows, it just doesn’t cut it for members of your team to wear many hats to get things done. Finding trusted partners and assembling a reliable team is critical to your cannabis business growth strategy. Whether it’s managing employees, getting financing, or obtaining insurance coverage, no one succeeds by going it alone. And thanks to Green Check and our network of cannabis-friendly financial services, you won’t have to.