Key Takeaways
- Cannabis leaders face operational and financial challenges that require clear plans and effective communication.
- Hiring should align with company needs, focusing on existing finance teams before adding a CFO.
- Funding strategies must reflect the company’s goals, with careful consideration of capital needs and investor expectations.
- Regular and honest communication with investors is essential, especially when market conditions shift.
- Scenario planning helps cannabis leaders prepare for uncertainties, ensuring they explore multiple options.
In a recent conversation, strategic advisor Dennis O’Malley and finance executive Rachel Wright discussed the operational and financial challenges facing cannabis companies—and why clear plans, reliable reporting and investor communication matter.
Cannabis companies often look to hire a CEO or chief financial officer when they encounter organizational problems. But those hires may not address the underlying issue, strategic advisor Dennis O’Malley said in an interview with Rachel Wright on Financing Your Cannabis Future, a show on the Beard Bros Media Network.
“Somehow there’s misalignment,” O’Malley said, describing a common challenge in his advisory work. Investors, boards and executives may have different expectations, while company leaders are occupied with day-to-day operations and lack the time or support to step back and assess the business.
Rather than serving as an interim or fractional CEO, O’Malley said he and his colleague Hannah O’Brien provide what they call an “office of the CEO”—supporting existing leadership teams with planning, decision-making and communication.
O’Malley entered the cannabis industry in 2016 after a career in technology and later served as CEO of cannabis company Kaliva. He said his family’s involvement was motivated in part by the industry’s social impact, including efforts to expunge records. That mission, he said, can be overlooked when companies focus on business pressures.
Hiring should match the company’s needs
Wright, whose firm Verdant Strategies works with cannabis businesses on financial matters, said companies should assess their existing accounting and finance teams before deciding they need a CFO.
A small dispensary, for example, may not need a controller and CFO, she said. A larger, vertically integrated company may need accountants and a controller, along with fractional CFO support for strategic planning.
Wright said she begins by examining a company’s growth plans, target markets and potential exit strategy. Those plans can reveal whether the company’s current team is equipped to execute—or whether its ambitions need to be narrowed.
O’Malley said many operators make decisions without a clear view of cash flow, profitability or investor expectations. He recommends establishing basic financial reporting and a consistent process for sharing updates with investors.
Funding plans should start with the end goal
The advisors said cannabis companies should clarify what they want to become before raising capital. A business seeking steady cash flow may make different decisions from one pursuing rapid growth, a sale or a public listing.
O’Malley said companies should consider their funding options, intended use of funds and time horizon before deciding how much capital to raise. He also urged operators to identify what differentiates their business beyond past sales or claims of being a market leader.
Creating an investor deck can help, he said, by forcing leaders to explain their business and competitive advantage concisely. “If you distill down what their story was in ten slides, there’s ninety percent overlap,” he said of companies that have not clearly articulated what sets them apart.
Wright emphasized that investor communication should be regular and candid, particularly when market conditions change. She said she often helps operators explain financial results, business conditions and realistic expectations for returns.
O’Malley noted that investor updates can be difficult when a company’s books are incomplete or unreliable. Still, both advisors said transparency and alignment can help prevent misunderstandings between investors and management.
Scenario planning can preserve options
The interview also addressed the uncertainty facing cannabis businesses, including changing market conditions and federal policy. O’Malley said companies should prepare scenarios that outline how they would respond to different developments, rather than relying on a single forecast.
That planning, he said, should connect a company’s goals to its strategy, funding needs and specific initiatives. Wright described the approach as maintaining “Plan A, Plan B, Plan C” and preserving options.
O’Malley cited two examples from his advisory work: a sizable single-state operator weighing whether to prioritize profitability or pursue expansion, and a smaller manufacturer exploring a joint venture as an alternative to raising a larger amount of capital.
In both cases, he said, the central question was not simply how to raise money, but what the funding would accomplish and whether it supported the company’s goals.
