The secret to beating a recession for the cannabis industry

March 3, 2024
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 have been recovering since President Joe Biden pardoned people convicted of minor marijuana possession under federal law, which has improved the market's attitude towards marijuana.

Among the many media headlines about whether we are in a recession, there is some potentially positive news for the cannabis industry.

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.

Including marijuana on the list of vices could be justified, considering its impact on sinful behavior.

It's not clear how bad a recession might be, so it's a good idea to plan how to improve your business in case of a downturn. By being able to accept credit cards compliantly 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 for collecting late payments can help keep a steady cash flow and provide insight into 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 encompasses the stipulations. The challenging part lies in determining credit risks that are reasonable. Have you ever given good credit to a business, expecting it to pay on time, only to realize that you were the one financing them?

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.

It's important to conduct an earnings analysis before a recession to see if a client is worth keeping, even if things are going well.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 probably get better payment conditions because you always pay on time, and your cash flow in the short and long term could improve.

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. Saving money is always a good idea, even during tough times like a recession.

Managing spending is a continuous effort in most companies, but it's possible for things to become more relaxed when things are going well.

When you review and analyze your spending in anticipation of future difficulties, you might identify areas where you can save costs and improve your readiness 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. One potential objective here could be to optimize inventory management. Prepare enough in advance and keep a safe supply with suppliers and plans if demand remains constant or rises.

Flexibility is crucial for maintaining a balance between having sufficient inventory to support sales, while avoiding overstocking. Historical data may not always be reliable.

You could look at product profitability to cut unproductive lines, depending on where your company falls in the industry. Projects that may need to be delayed can also be selected to be paused or put on hold without causing excessive stress to 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.

Invest some of the saved money when the economy is expected to decline. This can lead to big returns when the economy improves.

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.

Focus resources on the best-performing marketing strategies and put less important ones on hold, based on your company's 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. Consider acquiring more skills on favorable terms to strengthen your competitive position. This is especially important if your business is strategically sound and financially stable.

Preparing for a slowdown can be a good strategy in any situation. It's important to be adaptable for the long term.

Dashboard reviewing compliant credit card processing for dispensaries.

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