Selling Your Cannabis Business


Guide To Selling Your Cannabis Business

Planning and marketing are crucial to running a business and selling one is no different.

One of the most stressful things you will ever do in your life is sell your business. There’s no denying that selling a business is a challenging task. Therefore, you can’t just hire an expert and depend on them to execute the process for you without requiring a significant amount of work on your part. In addition to being extremely difficult and full of potential landmines and other setbacks, the process is just highly taxing.

Here’s what to keep in mind when selling your cannabis business:

How To Sell Your Cannabis Business

Be Diligent With Your Financial Statements And Tax Returns

You can’t truly assess the worth of your company or how well it performs without this. In order to demonstrate trends in sales, expenses, profitability, and cash flow, you need to have comparable financial statements for at least three years.

In case your company’s financials don’t reflect the performance you believe they should, now is the right moment to find out the reasons behind it and try to implement changes before allowing any potential buyers to take a closer look. 

Keep Your Data, Records, And Contracts In Order

All of these things need to be organized and readily available for the due diligence process to be successful; hurrying to get things ready will cause problems. If the information they require is missing or too disorganized to sort through, prospective buyers will back out or lowball an offer.

Identifying what you have and the gaps that need to be filled can take longer than you anticipate. Being organized will help you even if you don’t plan to sell your company in the next six to twelve months.

It’s just not as much fun as pursuing new sales or producing new products, which is why many business owners put this off. Seek assistance if you find it difficult to focus on it.

Protect Your IP

It is imperative that the business has taken the necessary measures to safeguard its valuable intellectual property rights before initiating the sale process. In general, a buyer will want to see evidence from any sellers that they are the owners of any important intellectual property rights and that their records with the relevant registers are kept updated and secure. 

Identify Regulatory Roadblocks

Closing a deal will take time because any sale of a cannabis company would probably need state and local regulatory approval.  The parties must get the necessary approvals from state and local licensing authorities during the time between signing a purchase agreement and finalizing the acquisition. This will probably involve the buyer submitting the necessary paperwork.

For example, in some states, the specifics of securing the required municipal approvals for a new “owner” will vary according to the locality. Getting regulatory approval can be extremely challenging because different localities have different rules for selling cannabis or granting licenses.

Interestingly a few cities in the country specify that the license is void if it is sold, assigned, or even attempted to be sold or assigned due to the merit-based nature of the licensing structure. The municipalities only grant a small number of licenses to companies that would be run and/or controlled by particular people whom they thought were worthy enough. Thus, any proposed transfer of ownership to an unproven newcomer not included in the original application would be met with rejection and require both the city’s approval and a new structuring framework.

To cut the story short, securing a cannabis deal requires having a thorough awareness of the state and municipal regulatory environment.

Pay Attention To The Market

Buyers’ willingness to provide you with the best deal might be significantly impacted by market conditions.

Buyers will seek to capitalize on the opportunity during recessions. However, sellers will be able to get the premium valuations mostly during times of expansion.

Hire A Winning Team

Selling a business involves teamwork. To ensure that the transaction happens according to your expectations, you need to put together a team of experts.

Get on it, if you want to sell your cannabis business sometime soon.

Ensure The New Owners Of Your Business Share The Same Values

Your business is your identity and can seem to be a reflection of your personality. This is why you should sell your company to a buyer who will continue the legacy you have established. Look for a possible buyer who will make sure the company stays true to its mission, quality, and brand. This is especially crucial if the company will continue to use your name.

Wrapping Up

Although selling a cannabis business can be an exhausting and lengthy process, business owners can achieve great financial success if they prepare ahead of time and pay close attention to every detail. Working with experienced legal, financial, and tax experts who are familiar with the specific legal and regulatory requirements of the cannabis industry is essential. Business owners can successfully sell their cannabis company and make a profit by following the correct processes and obtaining the necessary approvals.

If you need any assistance, you can contact our team of consultants.

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