Vetting an operation

When looking at a potential cannabis related investment, due diligence is key. Most first time investors will try to adopt traditional business tactics in an industry that still lacks standards.

In order to mitigate risk, you want to go in there and make sure that the operation is already running like a well oiled machine. This can be very difficult with start up operations, however knowing the personnel and having the right people in the right positions will at least set you up with a good foundation.

Always make sure that there is a business plan in place, and the numbers in that plan are accurate with the current cannabis market. Often numbers are very inflated in a commodity who’s price is only dropping.

Also consider what that business would look like if cannabis was legal everywhere and was no longer difficult to acquire. If the average Joe could walk into CVS and buy an eighth, would this project still be profitable? Often times not but businesses filling a void or a niche will still do very well. Ancillary businesses and new ideas are always popping up.

Lastly, does the party receiving investment have a solid plan and timeline of how to use the investment money? Will they use it all at once or in tranches as needed? If in tranches, set goals along the way that they need to fulfill in order to continue being funded.

Thats all for today folks.

• Dave .