In the first quarter of 2020, Jay Czarkowski stepped away from the cannabis industry to build his new family home, only to return two years later to a different reality post-COVID-19 pandemic.
“It is definitely a different world. The biggest thing I notice is that the exuberance has gone. The 300-mile-an-hour tailwind we’ve always had at our backs has been replaced by a headwind.”
He added, “capital’s a lot harder to come by, and with price compression - which is a normal thing in any industry - a lot of people are being forced out of business.”
In 2009, Jay and his wife Diane opened Boulder Kind Care, the first licensed cultivation facility and medical marijuana dispensary in Boulder. Within months, it would receive the first of two “Best of Boulder” awards in the dispensary category.
“There was no regulation back then, no compliance or licenses. It was the Wild West,” Czarkowski says of the early years.
The Czarkowskis weren’t looking to open a consulting company. Still, in 2012 they were approached by a group of entrepreneurs from Connecticut who wanted to apply for a cannabis cultivator processor license in the state and needed some consultation.
Fast forward to 2022, and the company that would become Canna Advisors has won clients hundreds of limited licenses in limited market states, according to Czarkowski. They also helped found the National Cannabis Industry Association and were founding members of the Arcview Group.
Today, Canna Advisors mainly focus on new and emerging cannabis markets, including Alabama, which is in the process of establishing a medical cannabis program.
Consulting in an era of falling cannabis prices
Czarkowski does not appear to have a doomsday approach to the price compression that has hit the cannabis industry over the past year.
As he sees it, “we’ve seen the price compression for over a decade now. It’s just a natural progression of the industry. It’s really simple. It’s based on supply and demand like anything else.”
He added that falling cannabis prices “make it harder for the cultivator to make money, but as long as the dispensary runs a tight operation in terms of procurement and purchasing and everything else, it shouldn't affect a retail operation that much. If they’re buying [cannabis] for less, then that means they’re selling it for less too.”
Czarkowski also pointed to cannabis operators with a manufacturing license but no cultivation license. Such companies need to purchase plant material from cannabis manufacturers, and the average price of this wholesale marijuana can significantly impact their business.
“They don’t have a cultivation license, so they’re at the mercy of some of these cultivators to acquire plant material with which to process oils,” Czarkowski said, adding, “wherever there’s a yin there's a yang, right?”
Advising on cannabis compliance
According to Czarkowski, his clients are typically well-funded with significant former business experience. They also have good connections to the local community and, perhaps most importantly - good legal representation. Regardless, there is a clear pathway toward compliance adherence success.
“A big part of our success at winning a large number of licenses over the years is that every application that we help prepare maps very specifically, point-to-point, every point in the regulations. We make sure every regulation for that state is picked up in our application content.”
Tips for aspiring cannabis professionals
Considering everything that has happened in cannabis since the first quarter of 2020, it can be daunting to try to figure out how to start a cannabis company in the post-COVID-19 world. But the same clear principles apply.
“Number one, the state is going to want to see that you have a good plan and team put together. A business plan is important, and so is an understanding of the finances,” Czarkowski said.
He added that “a financial model of a proposed business is very important, as well as assembling the right team. Your team is probably more critical if you are going for a cultivation or a manufacturing license.”
Another significant component is financing and the ability to show state authorities that you have the capital lined up to execute your plan, according to Czarkowski.
But even if the state gives you a cannabis license, “if a local municipality doesn't like you or doesn't want you, they could prevent you from ever opening just by not issuing a building permit.”
But these issues are not unique to cannabis, according to Czarkowski.
“Gaining local support and having the real estate lined up is as critical [in cannabis] as it is for any other business. Nothing I mentioned is even specific to cannabis. This holds true for any business you’d want to open.”
Will there be better times ahead in 2023?
With cannabis layoffs in the news and the industry grappling with oversupply and low prices, it can be hard to be optimistic about the industry's immediate future.
Mentioning banking issues and the costs of securing capital, Czarkowski says, “there have just been all these forces that have been dragging on the industry, and it's finally taking its toll.”
But for Czarkowski, who remembers the “Wild West Days of cannabis” and the time 13 years ago when his bank shut down his four-year-old daughter’s savings account, there is a sort of optimism that stems from knowing how far we’ve come.
“Of course there are better days ahead.”