4/20 is, arguably, the biggest holiday in cannabis culture, drawing out everyone from daily smokers and tokers to the most casual of cannabis users.
As a cannabis business owner, you know that it’s not all fun and games, and that it takes work to plan for an event this big. Now that it’s in the rearview mirror, here are some lessons for improving future 4/20 events:
You can’t be overprepared, so there’s no such thing as planning too early— you can start now, if you want, but a good rule of thumb is six months ahead of time. Planning early allows you to set goals and stay focused, while also giving you plenty of time to change course should problems arise.
It also gives you ample time to set up your sales plan and determine how this event will help reach your business goals. When planning, take into account things such as target audience, budget, and sales goals. Incorporating your accounting services team provides further insight into finance.
Launch New Cannabis Products and Promotions
4/20 usually brings a spike in sales to the cannabis industry, to the tune of up to 50% even during the pandemic! In 2021 year-over-year sales and traffic both jumped by about 10%. Numbers are still rolling in from 4/20/2022, but ahead of time, we expected 2022 YOY growth to increase by 100%. Moreover, we think it will continue growing by up to 28% for the next six years.
Even though 4/20 is a big event, depending on the day it falls on, it’s not always the best day for a launch. In 2022, 4/20 fell on a Wednesday, a day when people are busy with work, school, and other appointments. To account for that, many dispensaries save the big events for the weekend.
Have Adequate Supplies On Hand
When planning for your 4/20 promotions, ensure that you have enough supplies for the event. Out-of-stock items cost companies over $600 billion in lost sales revenue. On average, cannabis companies report a sale spike between 30-50% for 4/20. That’s money that you’re missing out on without taking inventory into account.
Restocking is more unpredictable due to supply chain issues caused by covid. Gone are the days of carrying just enough inventory for your needs. At least until the supply chain levels out, the golden rule of restocking is “if you can get it, you had better get it.” Of course, you could always make it easier on yourself and hire some expert accounting services to handle inventory management for you.
To estimate your inventory needs, figure out your Inventory Turnover Ratio (ITR) and Day Sales Inventory (DSI), which tells you how much inventory you’re selling and how often to restock:
ITR is calculated by:
- The total cost of your goods divided by the value of your inventory (for example $100,00020,000 = 5).
- ITR indicates you need to restock five times a year on average.
DSI informs you of how long it takes to sell through your inventory. Calculate this by:
- Dividing 365 by whatever your ITR was (for example 365÷5=73).
- This means that you sell through your inventory in 73 days on average.
You never want to miss out on a sale due to being out-of-stock, so make sure to factor the explosive growth of the cannabis industry into your plan.
Prepare for an Influx of Cash
The MORE act will hopefully change things, but currently banking options are limited for the cannabis industry. Because of this, the cannabis industry is very cash heavy. Needless to say, your business must have cash handling procedures in place. If cash handling is new to you, here are some basic points of procedure:
- Keep a cash log, recording the who, what, when, and total amount of a transaction
- Anytime cash is being moved, two employees should be involved
- Store cash in a safe and limit access
- Check registers at open and close and compare to sales that day
Cash handling procedures keep track of your cash flow, absolutely. However, investing in accounting services is the best thing you can do to protect your finances.
Lean on Your Accounting Services Team
Your accounting team is vital to the success of your business, so including them in your business plan ensures your strategy is a financial and logistical success.
In addition to ensuring your books are compliant and you’re following appropriate compliance and reporting requirements, your accounting team can also track business performance and future projections to keep the plan on track.
In addition to fostering growth, accountants can assist businesses just starting up in forming a solid business plan. Accounting services assist with duties such as market analysis reporting and highlighting the financial details investors look for when seeking financing.
Don’t Forget to Have Fun
4/20 is always a funky, fun time. And you probably got into this business out of a passion for cannabis — so have fun with it.
Along the way, also take advantage of the opportunity to fine-tune your sales strategies and pay attention to business trends. A well-executed plan, good timing, and proper resources can make all the difference in raking in some extra cash during 4/20.
Don’t forget to tag in your accountant to help with the new growth. This isn’t their first rodeo, and their sage advice can point your cash flow in the best direction to boost your business.
After all, your firm has valuable insights after working with clients across your industry and seeing best practices in action. And you’ll benefit from that knowledge when it comes time to developing — and working — your plans, strategies, and processes.
Like longtime teammates, the longer you work together, the better you perform. Every new quarter they gain more insight into your unique business. Using this data, they can create future forecasts to help you improve plans.Need help elevating your 4/20 sales? Contact Accounting for Green to see where a higher level of accounting can take you.