Are you an operator in the cannabis industry on the West Coast? Do you ever feel like you are walking a tight rope stretched over the Grand Canyon and any misstep is certain death?

You are not alone! I feel your pain. We are all walking that same tight rope. For those currently experiencing the highs of a booming market in their state, brace yourselves—every boom inevitably meets its bust. The inherent volatility of emerging markets is only heightened in the cannabis sector. With a constantly shifting regulatory environment, daunting bureaucratic hurdles, oppressive tax burdens, including the dreaded double taxation, and an ever-looming black market, the challenges are abundant and amplified.

Just a few years ago, the cannabis industry was the beacon of promise. The market buzzed with excitement, bursting with startups and innovations, and many foresaw it as the next gold rush. For a moment, it felt like we were on the precipice of a new era. Investors flocked, enthusiasts rejoiced, and there was a palpable sense of unstoppable momentum. But as with many booming industries, the inevitable challenge of oversupply reared its head, leading to a sudden and alarming deflation of what once seemed a bulletproof bubble. Businesses, both fledgling and established, found themselves grappling with the unforeseen repercussions. Now you lay awake at night, staring at the ceiling, searching for strategies, and feeling the weight of responsibility for your team’s livelihoods. It’s a dark lonely feeling.

Despite the challenges, there’s an opportunity for resilience. The market might be tough, and many might exit, but for operators who have the right skill set, fortitude, and vision, the changing scene can be a gold mine. There is a saying that applies here, “real money is made at the bottom of the market not the top.” Markets are cyclical and this market will rebound. The key is to weather the storm, stabilize, pivot if necessary, refine the processes, and prepare to rise like a Phoenix from the ashes as the market rebounds and ride the wave back to the top.

Drawing from 2018 and 2021’s lessons, here are seven guiding principles that helped us not only survive but start to thrive through the down market:

1. Understand the pace of the cannabis industry – 1 day = 1 week, 1 week = 1 month, 1 month = 1 year, 1 year = 10 years. The cannabis industry moves at lightning speed. New technologies emerge, fads come and go, and companies and brands come and go. Adaptability is the key here. Remember it’s never the smart or strong that survive, it’s the most adaptable. Stay hyper vigilant!
2. All big decisions have a 90-day shelf life – As a result of the pace of the cannabis industry and ever-changing landscape, we approach our decisions as if they only have a 90-day shelf life. Every choice must be reevaluated within this timeframe to determine its continued relevance. Remember that three months in the cannabis industry is really like three years anywhere else. In a stable industry I would argue this type of approach creates second-guessing and indecisiveness. It can for sure and It’s definitely cumbersome to approach decision making this way.  In a volatile industry however, if you can harness the power of this approach, it will force you to stay sharp and on the cutting edge of the industry.
3. Create Options – When faced with a choice, always choose the option that creates more options for you. Options are your friend, and you will need an army of them!
4. Diversification is key – Never go all in on any one thing. In a stable mature industry, I would argue to stay hyper focused on your core offering. However, in the volatile cannabis industry that can be a death sentence. To be clear, diversification in this context means to have options. Focus on your core offering for sure, but build into your model options, a plan “B” and “C”, and preferably actual infrastructure. This will allow you to pivot immediately upon a change in the market.
5. Lean and Mean – Always be CapEx lite and run lean and mean. The industry is cyclical, and it takes time to learn the cycles and how they will affect your revenue and profitability. Don’t overcommit resources on projects. Build your war chest and use it slowly, deliberately, and wisely.
6. Leverage Existing Infrastructure – Always utilize existing infrastructure when possible. Billions have been spent before you came along…leverage it! There are cultivators looking to lease you space or partner with you, there are distributors looking to lease you space or partner with you. The same is true for retail and manufacturing. Do not waste your money or anyone else’s on infrastructure.
7. Horizontal Over Vertical – Horizontal integration is the answer in the cannabis industry, not vertical integration. Start aligning yourself with other operators that compliment your offering and build a team of operators. A team of expert specialized operators, that all complement each other, will outpace a vertically integrated company any day of the week.

In the relentless whirlwind of the cannabis industry, several pivotal truths emerge. The rapid pace necessitates adaptability, compressing what would be years of evolution in other sectors into mere months. Decisions made hold relevance for a short time, often requiring reassessment every 90 days due to the industry’s volatility. Success requires not just a singular direction but a myriad of pathways, a readiness to pivot, and a diverse toolkit. By staying capital expenditure light, leveraging pre-existing infrastructures, and championing horizontal partnerships, businesses can streamline operations and harness collective expertise. It’s not just about reacting swiftly, but proactively creating options and contingencies at every juncture.

Now is your moment to redefine your approach in this turbulent market. Ground your business in fluid, adaptive tactics tailored for the cannabis world. Remember, in this race, it isn’t sheer power or intellect that will see you through, but your ability to adapt, innovate, and collaborate. Lean into the chaos, embrace the uncharted waters, and forge partnerships that bolster your strengths. Together, as a united front of specialized operators, we can not only survive the challenges but set the pace for the industry’s future. Rise to the occasion, be the harbinger of change, and let’s shape the next chapter of the cannabis industry together!