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Expanding to a New State? 4 Things to Consider

Expanding your business across state lines is a great way to increase your footprint, customer base, and of course, your sales. However, it can be difficult to begin expansion in such a young, heavily regulated industry in which each state has disparate traceability and reporting requirements. Rest assured, we have compiled a list of the 4 most important things to consider when expanding your operations across multiple states:

1) The State Compliance System

Of course, the most important thing to consider when expanding your business is the regulatory seed-to-sale tracking system. Expanding to a state that has a different regulatory system than the one you are currently operating in can cause dilemmas to arise. Each system has different requirements for various aspects of your operation. Seed-to-sale tracking solutions like Metrc and BioTrack are configured to meet the different regulatory requirements in each market. For example, Metrc in Colorado might not be configured the same as Metrc in Michigan and some states may require you to use certain available functions (like recording additives or recording waste prior to harvest) where other states do not.

Luckily, with the help of enterprise resource planning (ERP) software solutions, such as 365 Cannabis, the complications that could manifest as a result of these differences are alleviated. These ERP solutions will not only integrate into the different state seed-to-sale tracking solutions, but they will also help facilitate your compliance needs from state to state and allow you to consolidate your data, so that you will maintain complete visibility across every location in your organization.

2) The Legal Environment

Another factor to consider when expanding your operations is the legal environment of the new state. Recent legalization data from DISA Global Solutions shows that 12 states in the United States have fully legalized marijuana, 27 have limited legalization, and 11 have yet to legalize in any way. Having a solid understanding of the legalization status of each state is instrumental in procuring first-mover advantages, enabling you to secure huge profit margins and market share.

On the other hand, moving into a new state prematurely could be extremely volatile and result in significant setbacks. All too often, companies that attempt to undergo expansion into new states too soon face potential pitfalls such as insufficient capital and technological limitations due to unstable regulatory environments. This happens frequently in the cannabis industry, where laws are ever-changing, and businesses are constantly blind-sided by new legislation and struggle to meet compliance. Finding the right technology partner to help you navigate these complex regulatory environments is essential to your success. 365 Cannabis and their dedicated compliance team stay on top such regulations to provide your company with the clarity it needs to expand.

3) Taxes

Inevitably, different tax rates will apply to different states as you expand. It is important to consider these rates when considering expansion. Each state has its own method of taxing cannabis. The most common types of taxes are placed on sales, wholesale transactions, and local government duties.

Most states tax cannabis as a percentage of the retail prices. These tax rates can range from 0% in Alaska to 37% in Washington. Some states also have a tax on the wholesale purchase of marijuana. For example, Nevada enforces a 15% excise upon growers for the wholesale sale of cannabis. Additionally, some localities can levy taxes on retail sales. With so many different layers of tax to consider, manual data entry can be a risky, time-consuming task. To avoid costly penalties, business owners would benefit greatly from an ERP solution equipped with the capabilities to handle taxes for multi-state operators. The core of 365 Cannabis, Microsoft Dynamics, has been successfully deployed globally and can handle all manners of tax for multi-state and even multi-country operators.

4) Your Company’s Scalability

An honest readiness assessment of your company’s scalability can make or break your business. Attempting to expand before your operations are ready to scale could easily lead to operational inefficiencies and could lead to the loss of countless dollars and hours. In the cannabis industry, it is not unlikely to find multi-state operators using multiple systems to manage their enterprise. Typically, these systems do not fully integrate with one another and cause outages, miss-matched data, and accounting errors, especially when they are asked to handle operations in across departments and state. These errors make it difficult to forecast your profitability.

Just as you should be able to predict future performance, to scale a company you must implement a system that helps you see what your business will look like one month, one year, and even five years in the future. 365 Cannabis is a GAAP compliant ERP solution that will allow to you easily expand and evaluate your company’s cash flow forecast without having to worry about losing your financial data as you scale.

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