The secret to beating a recession for the cannabis industry

November 30, 2022
credit card and debit card processing for marijuana

By being able to accept credit cards at your dispensary, you can help beat the recession.

Cannabis stocks seemed to recover after President Joe Biden released those convicted of possessing minor marijuana under federal law from their sentences, and market attitude toward MJ improved.

However, among the many headlines in the media about whether or not we are in a recession, there is more (perhaps good) news for cannabis.

Consider how investors frequently see the sin or vice industries as "beacons of hope in dismal financial times," outperforming other sectors during downturns (historically, these were the gambling, alcohol, and cigarette sectors).

According to Investopedia, consistent consumer demand for its products "helps pull down equities during recessions."

Cannabis hasn't gone through a recession yet.

The legalization of marijuana sales for recreational purposes occurred four years before the 2008 recession. As a result, same-store sales of cannabis goods considerably surged between 2019 and 2021 during the COVID-19 boom.

Because of this, it may be appropriate to include marijuana on the list of vices, according to the performance of the sin sector.

However, since it's still unclear if or how severe a recession would be, it's a good idea to start planning what you can do to better position your business for success in the case of a downturn. By being able to accept credit cards complianty at your dispensary, you are bound to see success.

Cash flow is crucial.

Previous, effective tactics shape a new strategy.

Companies frequently try to extend payments during recessions.

A system to collect slow-paying receivables can help maintain a constant cash flow and give you information about your client's financial situation. However, slow payments can strain cash flow.

Credit is the logical conclusion of accounts receivable. However, the lending terms businesses can offer are probably not very flexible because they frequently reflect the industry norm.

The agreement includes the provisions. What's difficult is identifying reasonable credit risks. How often have you been given an excellent business credit because you thought it would pay on time, only to discover that you were the surrogate bank?

The time to alter the fees and be more watchful about late payments is before the recession. Our ATMs for dispensaries help give you cash flow for your dispensary

Do you have a customer who is perpetually late?

A cash-on-delivery option might be best. However, every business encounters problematic clients.

Even though conditions may get slightly worse in prosperous times, it may be required to conduct a pre-recession earnings analysis to assess whether a particular client is worthwhile. It could be time to transition that client if there is no gain seamlessly.

It might be time to bargain for the finest conditions for your company now that the credit shoe is on the other foot and you know your company pays its bills on time.

If there is a recession, you will likely maintain favorable terms because you are a reliable payer, and your short- and long-term cash flow could benefit.

Create a Reserve

You have an advantage in the game if you have funds aside for a rainy day.

Regardless of whether a recession occurs, it's a brilliant idea to start saving money now. Simple to say, a little more challenging to do, but keeping a portion of income for a rainy day is never a bad idea, recession or not.

While spending management is a continuous effort at almost every company, it's also feasible that things loosen up a little when things are going well.

When you examine your expenditures in light of impending difficulties, you may find areas where cost-cutting can enable you to better prepare for upcoming challenges.

However, excessive cost-cutting might be harmful. Thus a scalpel is preferable to a machete in this situation. You will already know what to do if you have a resilience plan.

Companies typically reduce inventory when they expect a recession since having too much on hand uses up cash. A possible goal here is inventory optimization. Prepare enough in advance and keep a safe supply with suppliers and plans if demand remains constant or rises.

Flexibility is essential to keeping a balance between having enough inventory to support sales and not too much that it becomes an overstock because history may not always provide information.

You could look at product profitability to cut unproductive lines, depending on where your company falls in the industry. Projects that might be postponed can also be chosen to be rolled back or put on hold without placing an undue strain on the company.

Along with budgetary restraints, other factors need careful thought.

R&D and acquisitions

The benefits and drawbacks of research and development are complex.

The loss of competitive edge comes at the expense of immediate savings.

In both situations, investing at least a portion of the money saved up in expectation of a slump can yield enormous rewards once the economy starts to pick up again.

Once more, a surgical method is necessary. Your R&D roadmap can recommend a course of action that will eventually enable you to add bells and whistles.

Consider investing more resources in the aspects of your marketing strategies that are working the best and putting the nice-to-haves on hold, depending on where your company is in the industry, from equipment manufacturing to retail.

Remember that during uncertain times; clients might be more cautious with their purchasing and hunt for better-value options.

Intentional connection building can strengthen current customer relationships and encourage new ones, grow market share, and more.

It might be time for mergers and acquisitions if history is any indication.

Investor interest in cannabis has already returned. As a result, adding additional skills on favorable terms may be appropriate to strengthen your competitive position going forward if your business is strategically sound and financially stable.

In retrospect, you might realize that the precautions you took to prepare for a slowdown turned out to be best practice in any situation, which you can change as part of a long-term resilience strategy.

Dashboard reviewing compliant credit card processing for dispensaries.

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