While the cannabis industry has been red-hot as the pace of legalization grows across the United States, all dispensaries have found themselves on the wrong side of a ledger sheet during a particularly slow or expensive month. Budgeting is key for any business, from a dispensary to a grow-op—and as a business owner, setting a budget can go a long way towards ultimate success or failure. Here are tips for building a dispensary budget so that you are not caught short of funds.
"Data, data, data," said Sherlock Holmes. "I cannot build bricks without clay." Data is the most valuable tool in a business owner's arsenal, responsible for insight into buying, selling, spending, and saving trends. Before you sit down to make a budget, be sure you have all the numbers you require:
The first two numbers indicate your business impact and saturation, while the second two numbers balance money coming in against money you need to spend. All four together indicate how well your business does on four particular thresholds.
The key behind the revenue threshold is how much you sell, and at what price. Customers multiplied by their monthly spending equals your total revenue. These three numbers together provide an analysis of how well your business succeeds at tapping into the market: what percentage of community customers are choosing to buy from you? Levels of two to three percent are the desired range: more than that and you may be riding a hot streak; less than that and you may be missing out.
Calculate the increase in volume of sales and customers over the span of the last 6 to 12 months to see average spending per customer and whether this trajectory is rising or falling. Finally, calculate sales and price per product to see what is moving, and what gives the most return.
Staff payroll is often the largest item in a budget, and while a mom-and-pop dispensary may not need more than a handful of employees, dispensaries with ambitions of growth will need many. Take the time to review the total number of purchases and customers against staffing levels to see whether you need more people on the floor, or perhaps have fat to trim. Measure employees by the wages they earn and carefully consider the market cost of attracting new talent.
How does your dispensary put cannabis into a customer's hands, and what are the steps required for this final exchange? These questions are asked in the operations section of a budget. Business operations reflect the areas of a budget where there is room for growth: where do you want to invest your money to get the greatest return?
That may be an easy question or a hard question to answer depending on your needs. The operations side of a budget will reflect everything from the building you sell your products in to the pens that customers use at the register. Factors ranging from security to utilities affect available money, while any money paid towards an external service (like advertising or accounting) falls under this umbrella as well.
At the end of the day, your dispensary business ultimately comes down to one number. You're either in the black or in the red, happy for a good month or in need of a better month to come. You will need to prepare this for yourself, but also for other owners, investors, and business partners.
Profit and loss is your business heartbeat: you'll be able to see when and where you are healthy, while getting insight into where you're coming up short. Finally, you adjust variables on all the first three thresholds to be able to make sure the next time you balance the numbers, you're more likely to get an improved result.
If you have opened a dispensary and are looking for funding so you have enough cash to grow, CannaBusiness Financing has the resources. You can get pre-approved in as little as 48 hours, so get started today.
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