21 Mar “Normalizing”
There is a lot of discussion around “normalizing” the cannabis business.
I have never liked the word “normal.” When my husband and I first got together, he used to say, “You are so normal, I love that about you.” He quit saying that after hearing my repeated response, “That is not a compliment, Bill.” Normal is not special or unique. Normal is boring!
The word “normal” in the cannabis space also takes on different connotations depending on your viewpoint and position in the industry.
For example, it is “normal” in business to sell and buy on terms. Working the “float” of no interest money, due at some time in the future, can free up capital, help cash-flow management and allow time to turn the items purchased into cash before the bill is due and payable. It works because it flows throughout the entire supply chain, ending with the end consumer, commonly paying with a credit card, thus continuing the float but with interest.
The practice was called “fronting” in the old days and people commonly got burned on both ends of the transaction. When we moved over to the regulated side of the market, I was really happy that the rules in Washington were explicit that payment for product purchased was due upon receipt. But I am hearing from retailers who want the option to pay on terms, “like normal business.” There is even a bill in the hopper that will attempt to put terms for cannabis transactions into law to force the practice. But we are not normal business! None of our suppliers offer us terms for downstream costs of goods purchased. I must write a check or dig into cash to pay for each transaction. Personal credit cards are an option if I want to pay interest while crossing my fingers that the credit card company will not be alerted the purchase is for cannabis commerce and close the account, which has happened.
Consumers must pay with cash for their weed — no credit, no check, no front. Terms will put growers in a real cash flow squeeze; paying for our cost of goods without terms while extending them to our store partners. Terms only work if they flow throughout the supply chain like “normal business.”
So, “normal” is not yet where we are in this industry. I am concerned that the cry to be treated like “normal business” can be skewed to sound very logical, but can also be cherry-picked to benefit limited sections, too. Creating laws that attempt normalization for a limited segment while not addressing the entire industry is not complementary to the whole. We need lines of credit before we can absorb a float. Unlike in the unregulated days, there simply isn’t enough profit margin to take the risk of receiving payment on terms.
The cannabis business is unique. It is special and certainly not boring. Until we get banking and favorable lines of credit, we cannot be expected to do “business as normal.”
Read more articles by Shawn DeNae at https://www.marijuanaventure.