Business analysis and accounting for cannabis startups

Expert business analysis and accounting services are vital in starting and scaling a business, especially in the cannabis industry.

We recently asked Kenneth about money management in the cannabis space and how Equibis works to help small businesses overcome potential financial pitfalls and thrive without huge capital. These Q&A also cover the biggest challenges facing cannabis startups, Kenneth’s work promoting diversity in the cannabis space, the unique financial challenges facing social equity entrepreneurs and others from underserved communities, his best advice for cannabis startups, and more.

Scroll down to read the full interview!

Ganjapreneur: After years of finance and accounting experience, what made you want to work with cannabis entrepreneurs?

Kenneth Mason: I think what you will find in a lot of people are our personal connections. I had my family locked up, a family caught in violence over cannabis. My first time consuming it was around 12/13. I grew up in south Chicago and in all honesty, weed has always been a part of everyday life. After attending school and eventually becoming a chartered accountant, I left the world of auditing to start my own business with small businesses in so-called underserved communities. Most companies do not have access to high-level CFOs and strategic business consultants. So my heart was determined to make that kind of impact on these companies from the communities I grew up in. As I solidified myself in the community, I began to join social justice initiatives around cannabis. and I quickly saw a need from a business perspective. I immediately started researching, learning, and helping cannabis companies that I eventually developed relationships with.

What is the biggest challenge cannabis companies face when it comes to accounting and finance?

I can imagine that everyone now knows that my significant hurdle is 280e. It’s part of the Internal Revenue Tax Code. To put it as simply as possible, a cannabis company cannot make tax deductions from its gross income. A quick example of how devastating this tax number is. For example, let’s say a company has $ 100,000 in sales and spends $ 99,000 on rent, marketing, employees like office managers, etc. You only have $ 1,000 in profit. The IRS says you cannot deduct marketing, certain salaries, etc. because cannabis is still a federal illegal drug. The average business is taxed on profits of $ 1,000, while the cannabis business can easily be taxed on an amount closer to revenue of $ 100,000. How can a company pay 25 percent on $ 100,000, which is the equivalent of $ 25,000 when it only made a profit of $ 1,000?

How does working with Equibis for a cannabis startup differ from working with other accounting services?

Most accounting firms provide you with the basic accounting and tax duties. Some offer examination services. These are things that you must have. But the reality is, if you do your taxes for you at the end of the year, it won’t make your business successful. It won’t help you meet your financial goals or create a financial plan. What sets Equibis apart is our focus on accompanying your company every step of the way towards achieving your sales goals, profit targets, short and long-term planning goals and much more. I often ask new startups how much money they want by the end of next month. Next year? I haven’t got a real answer yet. We don’t just look at what happened last year or last month. The value we offer comes from our ability to plan for the future, to show you where your business is currently headed and what needs to happen to be more successful in the next month. By looking ahead, we can also avoid the “hair on fire” crisis mode that most companies work with. If my team can show you, “Hey, we’re assuming the business is negative cash flow in two months, let’s postpone the purchase of the new machine for a few weeks when we have more money.” We’ll help that To keep doors open.

Do you serve customers in other markets and regions or are you mainly staying in Chicago / Illinois?

Equibis is a 100% virtual company. We serve nationwide. However, we like to come over a few times a year, it’s always fun.

What is the “profit-first model” and how does it affect the services Equibis offers?

The goal of any business is to be profitable. Every entrepreneur deserves his company to look after him financially. Profit is therefore usually our top priority. It is really easy. If you are not profitable, business fails. Therefore, we help make business decisions with the perspective of how they will affect short and long-term profitability.

What services do you provide to underserved communities and how did this become part of the Equibis mission?

Most of these companies cannot afford a CFO who can easily reach $ 100,000 to $ 200,000 a year. We offer many of the same services you would normally find with a corporate CFO. We run the finance department. We look at pricing strategy, cost analysis, employee performance plans, tax planning, employee benefits, all of these things and make sure it is done correctly and also in such a way that the company is still profitable today and tomorrow.

Why is it imperative for social justice applicants and other underserved small businesses in the cannabis industry to have financial representation?

Many people start businesses or get into the cannabis industry because of their passion for these things. Unfortunately, passion is not enough to run a successful company. When you have a company that understands many of the difficulties from not just business, social and personal perspectives, you can work with people you can trust.

Are the financial challenges facing social justice applicants different from those facing MSOs and other larger operators?

In short, yes, most social justice applicants do not have the capital to self-fund their ventures. I believe that is why you see the various states trying to pass bills that would support these applicants financially and operationally. There is no question that social justice applicants deserve many seats at the table, but they also deserve the support to hold those positions. Large operators have the means not only to fund their ventures, but also to survive unforeseen events like a pandemic or waiting for licenses to be issued. One example is in Illinois. Social justice applicants who did not have that much capital struggled to hold onto a lease in hopes of obtaining a license that the state withheld for a year.

Are cannabis companies at higher risk of being screened? How does working with Equibis reduce this risk and / or help with an audit?

Absolutely. The IRS published an article apparently saying that increased focus on auditing the cannabis industry is better use of time, as these audits are more likely to uncover problems. It’s complicated. So not only do we make sure that cannabis companies file and pay their taxes properly, but that they are 100% audit ready. Part of working with us means that we set up processes to cover our bums with every audit. What this also does is take the stress out of the owners. It results in us passing audits with less owner involvement.

Besides preparing and avoiding costly mistakes, what are some of the additional benefits cannabis startups can get from partnering with a financial advisor?

You have a well-designed, structured plan for how you can achieve all of your business goals and ultimately your goals in life.

What are some common financial mistakes you see in the industry and how should cannabis companies deal with them?

Some common financial mistakes that I often see are not good standard cash practices or a plan for the flow of money within the company. With standard cash practices, it’s important to have good theft and fraud prevention policies and procedures in place, and to know where every dollar is at all times. When it comes to cash planning / management, smaller businesses don’t take the necessary steps to look at their cash position and say, “This money is being put aside for monthly bills, this amount is going to be used for taxes, this is going to be used for payroll, this is goes to additional inventory. And at the end of the month, our cash balance should be $ XXX. They spend money without tracking and without any idea of ​​what position they will be in in the future.

What is your advice to entrepreneurs starting their first cannabis start-up?

Put your A-Team together and make sure you have people who cover every important part of the business, from compliance to finance to human resource management. Also, make it a priority to systematize and document everything as well as possible. In order to scale and grow your business, you need to improve your operating system and document it in a way that is easily repeatable.

Thank you again Kenneth for answering our questions and sharing your expertise! To learn more about Kenneth Mason or Equibis, visit

Cannabis industry

Ganjapreneur interviews business leaders, activists and experts in the cannabis industry who have useful insights to share. If you know someone we should interview, please do not hesitate to let us know.

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