In the U.S., 99 percent of companies are private, with 3,000 going in and out of business every day. Access to information on these companies has been a challenge with traditional sources. “We were born out of a frustration with the lack of good insight into private companies,” explained Jim Swift, CEO of Cortera. “It’s really hard to make decisions when you don’t have any data to go on.”
Because of this, Cortera set out to make business easier by helping supply chain industries understand the various companies they interact with in order to manufacture and sell their products. Of course, the business of cannabis falls under this umbrella of “supply chain industries,” and as the sector has expanded, Cortera has been an early player, helping owners put in place better business practices. Here, Swift explains how companies can protect themselves financially and how business owners can best prepare for the future.
Cannabis & Tech Today: What can cannabis businesses do to protect themselves financially?
Jim Swift: Number one is knowing the health of your customer. That’s really important, especially for earlier stage companies, because if your customers aren’t healthy, it directly impacts your sales because they can’t buy from you … The most important thing in protecting your business overall, I think, comes from a deep understanding of your customers. What’s going on with them? Are they growing? Are they healthy? Are they still going to be around?
Then, the second thing is taking the same types of analytics and looking back at your suppliers to make sure that they’re healthy. If you have a growing customer base but you have an unstable supplier base, you’re going to have a hard time preserving your reputation and delivering. It really does boil down to just understanding who you’re selling to, who you’re buying from, and making sure that chain is as efficient as possible and you know what’s going on.
C&T Today: As legalization continues to spread, how can businesses responsibly scale up their operations?
JS: I think the first thing is to build and document processes because as it becomes legal in more places, what’s going to happen is the volume of everything is going to go up. A lot of businesses fail or don’t grow as fast as they can because they didn’t build simple processes that would allow them to handle more volume. If you aren’t ready for it, it’s the kind of problem that can crater you.
For example, picture a world where it’s legal federally, and so you can issue credit. Now the stakes are getting higher. It’s not cash business anymore, so you have timing-related issues. You deliver a product and then you have a 30- or 60-day window before you see cash from the product…
You have more orders coming in, and you have more credit building up. If you don’t have just basic processes for being able to verify that the customer can pay you back, extend the right terms, follow up promptly with collection reminders and other things, then you start
to build those processes when the volume is high and you’re going to lose more money than you need to. It may not drive you out of business, but why waste any money that you don’t have to?
Have simple processes for understanding every new customer that comes into you and keep tabs on them. Have simple rules and processes in places for when you follow up. For example, they promise to pay you in 30 days. If they haven’t paid you in 30 days, what happens? Have a process for that … If you don’t put those processes in place early, they’re really hard to implement when the freight train is going 100 miles per hour down the tracks.