How a Dispensary’s Financial Foundation Shined During COVID-19

  • Last modified: December 15, 2020

COVID-19 pandemic wreaked havoc on everyone’s 2020 plans—and cannabis companies were no exception. As in-person interactions shrunk, for instance, some companies had to rapidly rethink how they operate or risk alienating customers or missing out on a new opportunity.

Fortunately, for those companies that already had a solid foundation in place, they could quickly adapt to shutdown orders, uncertainty in their supply chains, and new customer expectations.

Humbleroot is one such company that offers a powerful story for how other companies can be prepared for sudden, unexpected events or crises. What’s interesting is the Sacramento, California, mobile dispensary had recently gone through the process of strengthening its financial foundation, to give it better, timelier insights into the state of its business on a real-time basis. While the pandemic hasn’t been easy for any company, Humbleroot was, in a sense, prepared and actually benefited in some ways.

 The Pandemic’s Impacts

In March, everything changed. Shelter-in-place orders in California kept everyone isolated in their own homes—which meant demand for Humbleroot’s services was about to go up. With a focus on cannabis delivery throughout the Sacramento area, Humbleroot fulfills orders through its mobile delivery system and has a reliable track record of meeting customers’ requests. Soon, they saw their business go up 20% to 25% in volume.

The higher demand was a great development on its own but was made even better by the fact that Humbleroot had recently undergone a review of its pricing strategy and had upped their prices. They hadn’t made the decision lightly.

A Recent Financial Upgrade

Three years after its founding, the startup was growing fast and quickly becoming a known brand in its area. However, visibility into the business was cloudy. It was operating on thin margins. They had a solid business model but needed financial expertise to put them on the right financial journey and give them insight into whether they were making the right decisions or not.

Like other entrepreneurs, they had bootstrapped to take their idea from a spare room and $1,200 in cash, plus 12 pounds of medicinal cannabis consigned from Thao House, to a viable business. They built up their brand, sourced locally when they could, and earned customer loyalty through a rewards and referral program. But they knew they were missing something.

It wasn’t until a meet-up with Tracey Hashiguchi and Dave Roberson, my Kukuza Associates colleagues, that Humbleroot realized they needed to significantly upgrade their financial operations. A rapid assessment with our cannabis consulting firm helped the company better understand their financial situation. The assessment quickly explored the company’s financial systems and plans for growth, revealing gaps and room for improvement.

So, over the course of six months, Humbleroot and Kukuza worked together to hit the “reset button” on the startup’s finance and accounting. Everything was cleaned up to bring more transparency and more reliable information to the business, from how data was entered into QuickBooks to updates affecting inventory, cash holdings, balance sheets, and even the IT and HR side.

Everything was done to create a steady stream of more current data, to help the company make better decisions over time and come up with key metrics and a roadmap for what they wanted the company to look like—realistically—in the years ahead. A major conclusion from the reset and accounting scrubbing was that a pricing change was a smart move for the start of this year.

While we couldn’t know then how customer demand was about to soon change dramatically, we could tell based on the current figures that the slight increase wouldn’t be a turnoff to Humbleroot’s services either. The systems that had been implemented seemed to indicate that demand would not be adversely affected by the pricing adjustment.

In fact, what ended up occurring was an uptick in Humbleroot’s sales and a significant rise in gross margins. Six months into the change, revenues grew from $3 million to $9 million a year.

With a clearer view of the business and firmer financial footing, the mobile dispensary can now take more positive steps forward—toward branching out its geographic footprint. They’ve decided it’s time to hire a bookkeeper, which will also help them keep watch over the five metrics identified by Kukuza as critical for measuring how the business is doing.

When so many companies are struggling, it’s been a huge boost to help a company like Humbleroot do so well during this time of uncertainty. With a strong foundation, as well as its winning business model, this fast-moving company is poised to keep thriving.

The post How a Dispensary’s Financial Foundation Shined During COVID-19 appeared first on Cannabis Business Executive – Cannabis and Marijuana industry news.

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