Cannabis companies looking to sell their businesses should focus on profits first.
That’s the advice of Julie Herzog, a partner at Fortis Law Partners and Full Velocity Consulting, who spoke Thursday at the “Peace Out! Insights into Exit Strategies” session during MJBizCon 2021.
“Buyers are looking for acquisitions of companies that are No. 1,” Herzog said. That can either be first in a product category or a geographic area.
“These buyers are looking to scale up and to enter markets they might not already be in,” she said.
While creating profits and demand, Herzog said companies should also plan ahead to make the process easier and more attractive to potential buyers.
Do you have a ticket to MJBizCon in Las Vegas, October 19-22?
Tens of thousands of cannabis executives already have reservations for the most anticipated event of the year:
- 1,100 exhibits for cultivators, manufacturers and retailers.
- 70+ presentations, plus a keynote by Shark Tank’s Daymond John
- Networking and partnerships
- Hire people who love to keep your house in order, especially when it comes to cannabis-specific headaches such as compliance, taxes and accounting.
- When selling, be wary of stock deals, because the price fluctuations can impact tax implications.
- Start early with good record keeping. The lack of financial support documentation is one of the biggest deal breakers.
- Understand that buyers will want contracts, agreements and ownership of intellectual properties.
- Be prepared to tell your story of success. Create the slide deck now with numbers that demonstrate your story and show how strong your culture is.
Herzog said selling a company can seem scary, but it shouldn’t be if you prepare yourself.