The cannabis industry is unique in that it represents an entire marketplace and business culture comprised of startup companies. With this notion in mind, many cannabis companies have developed business plans focused on “making it today.” As such, they don’t give much consideration to cannabis business valuations. Who can blame them? Most business owners are more concerned with “how they are going to keep the lights on” than with what their business may be worth in a year. Yet, for forward-looking business people, these same uncertainties should be motivation for always understanding the value of their business. This notion is especially important relating to cannabis.
What are Business Valuations?
Business valuations are intensive internal auditing processes that help you understand what your business is worth in a given market. Generally, business owners are motivated to get a valuation when they are interested selling their business, expanding operations, or acquiring funding. When this decision is made, a third-party valuation firm creates a thorough portfolio of a company’s worth based on data, forecasts, and market performance.
Business valuations use objective measures to develop an understanding of your company’s value. For most valuation firms, this process includes an expansive list of yearly financials, owner income, balance sheets, ownership agreements, employee salaries, cash flow statements, vendor contracts, sales forecasts, business plans, and exit strategies. Depending on your company’s size, structure, and market niche, these data gathering processes can grow quite complex. The most complicated valuations are generally with retail, inventory-based businesses.
Objective figures and numbers provide a logical point of departure in weighing more subjective elements of business valuations. To illustrate, valuation processes can vary between firms, with different companies utilizing different methods such as market capitalization, times revenue, and liquidation value. For cannabis business valuations, this part of the process is particularly important. Because, the startup nature of the industry makes most businesses more valuable via forecasting, as opposed to established revenue. Finally, valuation firms will use the value of your competitors’ businesses, as well as current market trends, to further develop the worth of your company.
Why are Cannabis Business Valuations so Important?
For business people, the cannabis industry is both exciting and frightening. As such, the market constantly fluctuates under the pressures of both cannabis regulation and an overabundance of small businesses regularly entering the field. The enterprising entrepreneur realizes that this volatility presents both threats and opportunities. To capitalize on this instability, instead of fear it, cannabis business valuations give you the opportunity to pivot with internal changes and exit strategies. By understanding your worth, you open the door to liquidity. These actions ensure you safely invest your time and money.
Cannabrand feels that the best time to begin your cannabis business valuation process is now, when your company is still in the startup phase. Because, when your company is young, you can weave the valuation process into your day-to-day operations moving forward. This foresightedness will give you a real-time, constant understanding of what your company is worth. Also, understanding your value will help you develop logical strategies for expansion, partnerships, and exits. Finally, knowing your worth will help quell the many anxieties related to owning a business in the unpredictable world of cannabis.
Cannabrand’s Business Valuations Services
With Cannabrand’s recent merger with Voyage Business Resources, we’ve created a valuation service that merges our hard-won industry knowledge with a business brokerage platform. We designed this service specifically for the cannabis space. Therefore, unlike firms from outside the industry, Cannabrand’s valuation team has an insider’s perspective on challenges of the cannabis business. To illustrate, the type of business you operate directly influences the estimated value of your company. More specifically, plant touching businesses are greatly affected by such financial factors as federal tax codes.
Utilizing our expansive network and in-depth knowledge, Cannabrand’s valuation program is designed to promote stability and growth in a variety of capacities, including startup, expansion, and exit. We can provide:
- Mergers and Acquisitions
- Financing
- Litigation Matters
- Business Succession
- Estate Planning
- Growth Strategies
- Valuation Improvement
- Supply Chain Management
- Market Strategy
- Real Estate
Jay Spencer heads up our valuation services as part of the Voyage Business Resources merger with Cannabrand. In addition to his new role at Cannabrand, he is the CEO and Principal Broker of Voyage Business Brokers. His team specializes in the listing and selling of businesses, also known as Mergers and Acquisitions. Jay has been licensed in a position of Public Trust & Servitude for a combined 28 years.
Starting at the age of 18, Jay served 3 years in the US Army protecting our nation. He was assigned to a Military Police Combat Support Unit. He also served 15 years as a Federal Law Enforcement Officer and protected our communities. As a licensed Real Estate Broker for 14 years, he protects the assets of residential clients, commercial clients, and business clients. With approximately 44,000 licensed Real Estate Brokers in the State of Colorado, only 1% of all licensed Real Estate Brokers are certified to sell houses, buildings, and businesses. Jay is in the top 1%. However, he prefers to exclusively sell businesses as a Business Broker and help business owners with their exit strategies. Jay currently manages over $100,000,000 in assets. Now he’s on our team to help you manage yours.
Cannabrand’s business brokerage services will help you discreetly market your company for both investor and sales opportunities. For more information about cannabis business valuations and our brokerage platforms, please contact us!