It’s a thrilling time to be a part of the cannabis industry. RoseRyan helped a client through a transaction in 2014, and hasn’t looked back. It’s become even more exciting now that we’ve launched our own consulting firm, Kukuza Associates, that focuses solely on finance solutions for cannabis companies.
Kukuza is a Swahili word for growth and potential, and that sure sums up the opportunity for cannabis companies today. Our brand-new consulting firm delivers particular finance solutions to cannabis companies of all sizes and across all market segments, from cultivators, extractors and manufacturers, to distributors and retail operations. They all can accelerate their growth when they have tip-top professionals managing their finance teams.
Cannabis: Exciting, Fast-Paced Industry
From the time RoseRyan started providing finance expertise to a biotech cannabinoid company undergoing a reverse merger five years ago, we’ve knew that this industry was ready to professionalize and take off. Its fast pace and changing compliance landscape have kept us on our toes (and that’s just how we like things—the tech and life sciences industries are similar rocket ships).
There’s a ton of positivity to go around as more innovative companies come to market and the sector poises for remarkable growth. In other words, it’s huge. Both public and private cannabis companies managed to raise $13.9 billion in capital last year, and 33 states, including California, have legalized marijuana for medicinal or recreational purposes. Consumer spending on cannabis is expected to reach more than $23 billion by 2022, according to cannabis data firm BDS Analytics.
At the same time, there’s heightened risk as these companies have to navigate the barreling-forward pace of a skyrocketing industry. Coupled with the tremendous growth is also tremendous volatility. Licensing has been a challenge. Ups and downs in supply and demand have caused enormous price swings in various states. Some states are struggling to cope.
Cannabis companies not on solid footing risk making misguided strategic movies if they don’t have timely, accurate information about how their business is really doing. They need to make the right moves, with a sharp CFO to navigate the profitability angles, the end game, the fundraising strategy and investment game plan. To get through it while also steering the business to higher levels, a focus on strategy and finance operations is essential. But so far few accounting firms have responded to this challenge—as a recent Accounting Today cover story noted, while also mentioning we are one of the few “pioneering” firms that have done so.
Based off of RoseRyan’s initial offering for the cannabis industry, Kukuza’s six finance solutions, listed below, build a solid foundation for budding businesses and guide them through the wild ride ahead.
- Assessment: Quickly diagnose the gaps in finance, accounting and operations.
- Strategic finance advisory: Provide CFO and controller expertise to make the right moves.
- Outsourced accounting: Create systems and processes, and provide day-to-day accounting, cost accounting, audit prep and ongoing support.
- Financial reporting and analysis: Dig into the numbers for key insights.
- Internal controls: Mitigate fraud and reduce business risk.
- Business transaction support: Ready the company for an IPO, M&A or RTO.
Why an Initial Assessment Is So Critical
We recommend a rapid assessment to start. In initial meetings with a cannabis company, Kukuza will conduct an up-and-down review of their financial operations and quickly discover the gaps. What’s needed depends on where the company is in the business lifecycle, and what’s around the corner. Here’s what Kukuza CEO Dave Roberson, who is also a VP at RoseRyan, recently told Accounting Today about these quick assessment experiences: “We don’t go in and say, ‘We’ve got the answer, what’s the question?’ We have a lot of questions so we can understand the clients’ problems.”
Then, once the specific needs facing an individual company is evaluated, the next step is creating an action plan for filling in those gaps and determining the level of outsourced finance support that’s needed, whether on an ongoing or as-needed basis.
What Cannabis Companies Need Now
As any company grows and complexities manifest, so does a need for specialized skills and resources. But it’s not always in the budget to bring in a CFO and accounting team in-house. The wise course might be to tap these resources only when necessary. So, the company may need to bring in an outsourced accounting team, to ensuring accurate financial reporting, to close the books, do some financial modeling and take on a cost accounting project. It’s helpful to have access to experts who can be relied upon at a moment’s notice for a quick question or a helping hand for a short amount of time.
Sometimes a more thorough analysis or the expertise of a CFO is exactly what’s called for to get the company going on the right path. One of the most pressing issues facing these companies is the need to scale intelligently. For that same article in Accounting Today, Maureen Ryan, who is a VP at both Kukuza and RoseRyan, said:
“They’re growing rapidly, and they don’t have the talent to scale their operations. Our people are extremely operational—when a company is in hyper-growth mode, you need the ability to plug and play. What you need isn’t always known, and may change in the next 12 months. People in hyper-growth mode or looking to scale quickly, they’re very interested in us, and it doesn’t matter what part of the industry they’re in.”
Through Kukuza’s six finance solutions for cannabis companies, the firm first finds the gaps in their finance and accounting capabilities, then provides CFO and controller expertise as well as outsourced accounting precisely when needed. Kukuza can provide other supportive roles like financial modeling and budgeting, when and where’s needed, so that the cannabis company can scale intelligently. Kukuza helps strategize these companies’ next move—upward. Learn more about Kukuza at KukuzaAssociates.com.