This is an informative article I wrote for WCC….
There is a great deal of interest in developing cannabis organizations these days as more cities are allowing for safe access in the community, more patients are realizing the benefits of cannabis as a medicine, and demand for high quality and unique cannabis products continues to grow. From senior citizens wanting to cultivate plants in their garage to supplement their incomes to business investors who want to develop chains of dispensing collectives across the country, it is clear that folks realize there is opportunity in cannabis.. No longer is it just people willing to be outlaws who are laying roots in the industry. Soccer moms, medical professionals, and regular everyday 9-to-5ers are taking a look at developing cannabis organizations. The industry has spawned a niche market that has emboldened creativity and created opportunity in an economy in desperate need of opportunity. An industry that has lived underground for the better part of a century is now emerging into a mainstream and accepted reality.
What has began to happen like never before in the cannabis industry is real competition and supply and demand. As more growers dig in and plant increasing numbers of plants every year the supply begins to catch up with the demand. As more collectives begin to open in areas competing for patient loyalty, patients are benefiting by expanded services and increased value. The market factors that affect most industries are beginning to take hold and producer and providers that are willing to evolve are continuing to prosper; while others who may lack the ability to market and sell themselves and their products are getting left behind. An era of professionalism has begun. While there is still a sense of “cooperative competition,” there is a definite competitive environment for resources. Even though cannabis businesses are supposed to be “not-for-profit” entities, there is still a certain level of income that has to be ascertained by an organization to enable it to operate smoothly, pay staffers, and expand. Cannabis organizations are competing for resources with branding, advertising, promotions, and public relations. No matter what the type of organization, there is a competitive market vying for limited resources, and great organizations will thrive where others will fail. This normalization of the market has caused some to long for the good old days, but the fact is that cannabis is becoming a serious business and with that comes success and failures. Learning to develop a great organization can help to avoid common pitfalls and create positive impacts on the community.
Types of Organizations
As the market expands and inventive folks use their ingenuity to fill the needs of the community we see more types of primary and support organizations being developed. Primary organizations would be considered those that directly deal with patients and medicine. These organizations consist of dispensing collectives, cultivation collectives, production collectives, delivery caregiver services, medical professional conglomerates, and personal cultivation ventures. Support organizations include patient activist organizations, legal services, consulting firms, public relations services, cannabis related goods companies, insurance providers, and even cannabis art producers. These organizations continue to evolve and push one another to provide better products and services. The cause and effect of this increased competition is more convenient, higher quality, and greater valued goods and services. Here are some brief descriptions of some cannabis organizations:
Medical Cannabis Dispensing Collectives/Cooperatives or Dispensaries: These are normally storefront organizations that facilitate the transactions between patients that produce cannabis and those who need cannabis. The defining factor that defines this type of organization is retail sales. In California, the State Board of Equalization demands that these collectives pay sales tax on patient transactions. In 200,8 Attorney General Jerry Brown wrote, “It is the opinion of this Office that a properly organized and operated collective or cooperative that dispenses medical marijuana through a storefront may be lawful under California law.” This affirmation has enabled hundreds of thousands in patients to access cannabis safely through well-lit and clean facilities that provide a variety of types of cannabis. Most dispensing collectives are filing as Mutual Benefit Corporations, clearly denoting their not-for-profit missions; but it is possible that any type of corporation or business can be operated as a not-for-profit organization so long as no individual or group of individuals is pocketing the income at the end of the day. The legality and proper operations have been a contentious issue. Patients, providers, and public officials struggle to understand laws and rights that are hazy at best. The dispensing collective creates a closed-loop system of providers and patients. This allows the organization to control the medicine supply and offer quality options to the patients they serve.
Cultivation Collectives/Cooperatives: A group of patients who collectively cultivate medicine in order to share the cost of operation and burden of labor in the cultivation process. Commonly a group of patients will share in the expenses of rent, supplies, equipment, and utilities to make the process more feasible and to produce a higher quality product through shared knowledge and experience. These collectives combine resources and benefit patients by allowing those who may be more talented in cultivation to handle the actual growth process, while others may commit financial resources, help to trim the finished plants, or handle administrative tasks. Whether indoors or outdoors there are many tasks that go into cultivating quality cannabis. Many patients rely on others to assist in cultivating their medicine, as they may not be physically able or have the time to commit to doing it right. At times, these collective members are also all members of a dispensing collective and may provide excess medicine to the larger dispensing collective to help recoup costs, thus lowering the financial burden of the group. Cultivation would seemingly be the most legal organization under State law, as the direct crop-sharing model does not involve retail sales.
Production Cooperative/Collectives: Much like the cultivation collectives, these are organizations of patents that produce medicines for patients to use. These collectives may focus on creating finished products for patients, such as cannabis foods, tinctures, topical medicines, or extractions. They specialize in converting raw materials into unique and desirable finished products. This sector has been traditionally overlooked by legal regulations, but many cities are beginning to figure out how to create a legal environment in which they can work. More than the whole plant medicines on the market, this sector of products is experiencing a marketing revolution. Traditionally these organizations provide their medicine to dispensing collectives that they are members of. These organizations continue to expand methods by which patients can ingest and use their medicines more safely, effectively, or discreetly. Many popular products have found small niches in the industry to create a foundation and have grown into great organizations.
Delivery/In-Home Caregiver Services Organization: These organizations care for patients directly in their homes, bringing medicine to patients in areas that have no dispensaries or to patients who are uncomfortable with, or unable to go to, a dispensing collective. Patients who wish to remain low profile or do not enjoy the traditional dispensary atmosphere often desire these services. Some live in areas where dispensaries have been banned, but delivery services have been tolerated to provide patients with access. These services range from a single caregiver that provides in-home care services or a collective of caregivers that distribute through online menus and customer service centers, and a fleet of delivery drivers. It is unclear whether these services should be classified as primary caregivers, based on the in-home care provided, or collectives that bring medicine to a patient in their home rather than a storefront. Either way the organization should operate in a not-for-profit manner and adhere to reasonable compensation standards.
Medical Professional Conglomerates: These organizations are groups of doctors who specialize in cannabis and help patients understand if cannabis medicines are right for them. While there have been perceived abuses in some of these organizations, many provide an understanding service to patients whose traditional care physicians may not understand the benefits of cannabis for their conditions. Most well run organizations these days provide 24-hour verification for law enforcement and collectives to verify patients’ status. The doctors help to educate patients and help them understand if cannabis can help them.
***With exception to organizations of doctors and medical personnel, all other organizations are considered illegal under federal law and it should be understood that these organizations are taking part in an act of civil disobedience in providing cannabis.***
Developing a Mission and Vision
The mission and vision statements of an organization declare why this organization is important and what its guiding principles are. A great mission statement tells what you do, why you are successful, and what the organization is driven by. It gives those involved a clear picture of what they are a part of and why that is important. Some say the mission of the organization is the single most important factor in success. Failure to clearly define or successfully implement the mission can create confusion and chaos. Efficient organizations will know the mission clearly and have a clear plan of how to make it happen. Think of the mission as the organizations reason for being.
The vision statement paints the bigger picture. It can define where an organization sees itself heading and what the important steps are that will get them there. It can establish morals and ethics for the organization to build upon. A great vision statement will explain what the organization is working to accomplish and how it will best interact with the world around. It provides a baseline introduction to the character of the organization. The company’s vision can give inspiration to the mission and help stakeholders to better understand why this organization is great.
Thorough Planning
The importance of planning is immeasurable. For an organization to successfully navigate the many nuances of the cannabis industry it is imperative that a detailed and informative plan be developed. Business plans and organizational analysis lays out clearly the strategies, structure, marketing, branding, goals, operations, core competencies, and other important details about the organization. This enables clear and open communication to happen and can help to get everyone on the same page. Whether a start-up or a business that has been established for decades, it is never to early or too late to begin planning for the future. A great business plan will inform, educate, and paint a clear picture of who the organization is, how they operate, and why they are successful.
A great organizational plan is an invaluable tool when presenting your business or organization to public officials, landlords, proposed business associates, employees, lenders, and loved ones. It let’s them know everything they need to know about why this is a beneficial organization. Failure to properly plan will always lead to confusion and misunderstanding. A plan can guide the organization smoothly and provide a reference to periodically check in on and measure the organization’s success. It is necessary to adjust the plans where needed and update the goals and mission regularly. No organization gets it completely right the first time around, no matter how hard they plan. A great plan will give insight to the reader about how this organization will be structured, how it will operate, and why it will be a success. It will map out goals and make clear the methods and standards by which the company will carry out its mission and vision. Thorough planning is a must.
Non-Profit and Not-For-Profit Operations
Americans for Safe Access has written at length on what these terms mean in relation to medical cannabis in California. As of now, Colorado dispensaries are not required to be not-for-profit, although they are heading in that direction. Laws vary from state to state, but organizations in California need to adhere to these standards. Below is ASA’s description of what this means for organizations:
California Health and Safety Code Section 11362.765(a) says that nothing in the law authorizes the cultivation of medical cannabis for profit. The Attorney General’s guidelines are very brief on this topic, stating “Nothing in Proposition 215 or [Senate Bill 420] authorizes collectives, cooperatives, or individuals to profit from the sale or distribution of marijuana.” There is no reason to assume that this brief passage from the guidelines mandates the establishment of a statutory nonprofit corporation as described in California Corporations Code Section 5000, et seq. However, operators may chose to organize a medical cannabis collective as a California nonprofit corporation, as discussed in greater detail below.
Regardless of the organizational structure, a medical cannabis collective should operate in a “not-for-profit” manner to comply with the Attorney General’s guidelines. Not-for-profit operation describes the behavior of a business or association that is not operated for a commercial purpose, or to generate profits for its owners. Any business, regardless of its formal structure, can operate in a not-for-profit fashion by reinvesting excess revenue (after salaries and other overhead) in services for members, advocacy for patients’ rights, or other noncommercial activity.
Operating in a not-for-profit manner does not mean that patients and caregivers who own or operate a collective can not be paid a reasonable wage for their services. Patients operating not-for-profit collectives should be aware, however, that the perception of excessive profits is what motivates this provision of the guidelines. Paying reasonable salaries is acceptable, but other indicia of excessive profits should be avoided – bonuses, dividends, conspicuous spending, etc.
Many collective operators choose to incorporate their collectives as California Nonprofit Mutual Benefit Corporations, as described under California Corporations Code 7110, et seq. Doing so gives the collective a bona fide nonprofit identity, something that resonates with elected officials, law enforcement, media, and neighbors. This is a sensible choice for most operators, and increasingly the norm for new facilities. Creating and operating a nonprofit corporation is more difficult than doing so with a commercial business model, and may present special issues around taxation and transfers in ownership. Operators should seek the advice of a qualified business attorney with experience in nonprofit law.
These guidelines will help an organization be in compliance with the law. It is possible that in the future this aspect may be clarified and that cannabis organizations may be able to realize a profit. As for now, excess income must be invested into the organization or community.
Staffing Great People
The people who make up an organization are what can make it great or can make it a complete failure. Creating a staff that is knowledgeable, that provides great service, and has a strong sense of work ethic will make an organization great. The staff is not just the face of the organization; it is the heart and soul as well. Look to hire people that believe in the mission of the organization and understand the importance of the work they do in the cannabis industry. Whether dispensing, cultivating, producing, or care giving, a highly trained and efficient staff will give your organization a competitive advantage. It is important to treat a staff with respect, while at the same time creating clear boundaries and expectations for their performance. Staff morale is the single most important issue, as happy employees perform their duties better and are less likely to be involved in shrinkage issues. Staffers enjoy being told that they are doing a good job and that the organization appreciates their work. People can be trained to be great, but they must have an intellectual curiosity, and be naturally motivated. Look to hire people that seem like they can follow instructions and have the desire to be an asset to the organization.
Morals and Ethics
Any great organization is founded on a sense of morals and ethics that guide the organization. Karma works the same for organizations as it does for people. If an organization does not do its best to be honest and good stewards of their community, they generally fall victim to lack of honesty and unsavory behaviors themselves. Giving patients great value, treating people with respect, helping people in need, operating transparently, and ensuring quality are all moral and ethical responsibilities that cannabis organizations should adhere to. In the cannabis industry there are still serious legal threats to our community, so unethical or immoral actions by competitors can be catastrophic and destroy livelihoods, as well as take away peoples’ freedoms. It is necessary to consider all of the ramifications of actions, as we work to enhance safe access in the community. For those dispensing medicine to patients it is important to consider what is a fair margin of income for the collective and adjust price points where possible. For producers and cultivators, it is important to take the necessary steps and avoid shortcuts in the production process to ensure patient safety. We all have a responsibility in the cannabis industry to provide safe and effective medicines at the best value to patients in need. Anything less is unacceptable.
A Great Industry to Be A Part Of
You have a responsibility to develop a great organization because you are in a great industry. Not many times in our lives do we see an emergent industry that provides opportunity in a new and exciting field. At the same time you get to provide health and wellbeing to patients in need. I love cannabis. I am thrilled to wake up in the morning and know I am in an industry that is revolutionizing the way people think and one that is changing the world. The cannabis industry is about far more than business. It is a social and political responsibility that we all share to present our industry in the best light. By joining this industry we take on a certain responsibility to fight the good fight and do our part to change the perception of this sacred plant. If JFK were a cannabis enthusiast (and he probably was), he would tell us, “Ask not what the cannabis industry can do for you, but what you can do for the cannabis industry.” This outlook will help ensure that an organization you develop, operate, or are a part of is a great organization. Now get to work.
Mickey Martin operates T-Comp Consulting providing “solutions for the emerging industry of cannabis medicines.” For help on making your organization great contact mickey@tcompconsulting.com.