Ever heard the saying that it pays to give 110% effort? How about the early bird gets the worm? Like most industries, operators in the cannabis space that comply with regulatory requirements and strive for operational excellence will likely be more profitable than their less dedicated competitors. Those who take efforts to master and prove compliance early in their business lifecycle generally navigate the licensure process quicker than other applicants, thus increasing speed to market, getting a leg-up on competitors, and reducing the time it takes to reach profitability. Besides increasing speed to market and lowering the risk of deficiencies and fines, having a robust compliance program has the following less tangible, but equally important benefits.
Company Culture: When company leaders communicate respect for regulations, compliant policies and procedures, and embed an expectation that ethics matter, employees are more likely to feel pride in their company and work harder to reach company goals. A positive company culture creates a definite competitive advantage, allowing companies to attract better quality candidates, to more efficiently produce trusted and profitable products, and positively build a brand that attracts dedicated and passionate customers who bypass competitors and ignore lower priced products to purchase products from companies they like and trust.
Reputation: While some say there’s no such thing as bad press, when a company receives a publicized fine for improperly testing products or improperly storing cannabis and cannabis products, or any number of other potentially damaging issues, some people take notice. Why buy a potentially harmful product from the company with the fine rather than a proven and trusted product from a competing licensed cannabis company? Why take the chance?
Added Efficiencies: Quality compliance programs typically include centralized documentation and easy access to regulations, policies and procedures, which reduces the amount of time staff spends searching for answers to regulatory and policy questions. Robust onboarding, training, and retraining empowers employees with understanding and confidence, improving efficiencies. Multiplied across employees, departments, facilities, and regions, little added efficiencies add up to bigger profits.
Reduced Stress: When employees are properly trained on compliant policies and procedures, when department leaders have clear expectations and understand both regulatory and internal requirements and standards, when executives have faith that the company compliance system will identify small problems before they become big problems, everyone is calmer during the workday and sleeps better at night.
Ready Proof: When a regulator comes knocking or a potential supply chain partner seeks answers, a robust compliance system saves the day, helping companies make a friend in the regulatory agency and in the case of a new supply chain partner, close the deal. Being able to point to established, compliant policies and procedures, and deliver reports that show a company regularly conducts internal audits of all critical and regulated procedures will provide ready proof that the company values compliance and operational excellence.
Streamlined Decision-making: Formalizing and documenting company compliance allows cannabis operators to streamline decision-making. When everyone knows the rules, it’s easier to decide whether or not a proposed new policy or procedure makes sense. When compliance programs set expectations and boundaries, it’s easier to be creative while staying within acceptable parameters, facilitating a nimble rather than slow response to new ideas or evidence that it’s time to update an established policy or procedure.
Improved Valuation: Having a robust compliance and tracking system allows cannabis operators to answer the hundreds of questions posed by potential buyers. These questions typically cover all aspects of a company’s operations including policies and procedures, regulatory compliance, contracts, financials, and more. Tracking required information and maintaining company files in an organized and accessible system allows sellers to respond efficiently to questions and produce documentation to support valuation, ward off reasons to discount, and close a sale, merger, or acquisition. For example, If a prospective buyer asks about how a company stays in compliance with cannabis security or safety protocols, sellers who are able to produce readily accessible policies and procedures that address exactly how the company complies, and show that internal audits are conducted on a regular basis to confirm the company meets or exceeds the relevant standards, will likely receive higher valuations and more offers than less detail-oriented and compliant companies.
In the end, companies that prioritize compliance and operational excellence rather than treating it as an afterthought benefit by having an improved company culture, more loyal customers, more profitable operations, and the opportunity to receive a high valuation and better offers when it comes time to sell.