Top 5 Things Investors Need to Know About CBD Processing
When it comes to CBD processing and the hemp extraction industry, investors have become increasingly interested in their involvement. With the CBD industry projected to grow by the billions within the next few decades, the potential for monetary gain as an investor in this industry is a promising prospect. Of course, as with any investment, there are a number of considerations to keep mind of before diving into the CBD processing industry.
With the booming of the CBD industry in recent years, profits are ever-increasing for extraction businesses. Of course, this often draws in partnerships and profitable investment opportunities, but also creates its own set of concerns that are necessary for an ideal business venture. Whether you are new to the industry, or an CBD extraction veteran, would you know the most important considerations before investing?
In this episode of extrakTALKS, Dr. Jon and Randall Thompson discuss five important considerations for any investor interested in investing in the CBD industry. Some of these considerations discussed are: Where is the CBD industry headed? What are the potential risks involved in investing? Necessary information to maximize operating profits, objectives necessary to improve top line revenue, and scale up strategies for hemp startups and operating businesses. By implementing these five factors, your chances of success are exponentially increased – listen up in this episode of extrakTALKS to find out how.
LISTEN to this episode:
[05:00] – Give Away winner
[07:33] – The investor’s perspective
[08:55] – Randy’s Top 5
[09:45] – Dr. Jon’s Top 5
[11:50] – Operational Excellence – https://youtu.be/NXBGHQiDWZU
[12:17] – Randy’s #1 Is this a growth opportunity
[17:24] – Where is that opportunity headed?
[19:55] – Dr. Jon’s #1 Cannabis and hemp are different markets with different risk factors
[24:40] – Having the wrong team
[26:11] – Tell me an example of a risk overlooked
[30:42] – Randy’s #2 Facility Intelligence
[31:23] – Make sure you have a good Proforma
[33:14] – Have dry powder and don’t spend every dime
[34:09] – Proforma Simplified
[35:27] – Understand what the sales plan is
[37:34] – Improve Topline Revenue
[38:08] – Positioning and branding
[41:16] – Jon’s Improve and grow your topline revenue
[42:23] – Jon’s rule of two
[44:26] – Pricing over time
[45:20] – Loans for potential processors
[48:47] – Operational excellence is key to profitability and growth management
[52:38] – Final Words
[54:41] – Walk through on the Rule of Two
Welcome to extraTALKS with Dr. Jon podcast. Dr. Jon is CEO and president of extraktLAB and United Science – an industry leader in hemp, cannabis and the extraction industry. Listen closely as Dr. Jon talks about his experiences, CBD extraction methodology and the ins and outs of owning your own business. Dr. Jon teaches you healthy business practices how to increase your profits and steps to take your CBD company to a whole new level. Let’s dive in.
Randall Thompson 00:34
On hot mic we’re on stop saying hey guys, thank you Welcome to our no holds barred question q&a we get started here. Oh, this one. Oh no, it’s
Dr. Jon 00:46
you know that Randy’s been experimenting with our delta eight gummies and it’s gonna be a really fun show.
Randall Thompson 00:53
It’s an if that were true and I’m not saying that it isn’t but if it if it were true about 20 years from now I will be asleep ah just leaning over saying okay Jon.
Dr. Jon 01:05
We had what at what flavor do you like best the fruit flavors as a like the
Randall Thompson 01:09
ashwagandha flavor yeah
Dr. Jon 01:12
all right. All right. All right. That’s fine. I
Randall Thompson 01:15
like I like to
Dr. Jon 01:16
just just before we get started sorry. Okay, let’s let’s move on. Go ahead, extract Tom.
Randall Thompson 01:21
Here we go. Welcome. Welcome. Welcome.
Dr. Jon 01:23
Hi there are no tables this week. No tables of data. Instead we haven’t we do have a list. It’s the episode of battling lists. Now that here I got my list See, and he’s got his list and I already said he put a nice line his header on line is prettier. And down line is, you know, everybody knows mine’s better.
Randall Thompson 01:40
So and if you as you chat, these guys have my list. So do that. Do they already? Do they already have your list so they can give it to you right away? You can follow along? No problems.
Dr. Jon 01:52
Okay, all right. There we go. So we’re gonna we’re gonna
Randall Thompson 01:55
do this. Let’s go through or no, no, no, we
Dr. Jon 01:57
Randall Thompson 01:58
I gotta say I gotta do a shout out to Amber Dunn. Oh, great. From Pinconning, Michigan. There’s a lot of N’s. Yeah, there’s, um, there’s four N’s in Pinconning that’s in Michigan now. It’s Michigan. Yeah. Hey, Kenny. She won some OUTLAWZ pre rolls. Good for you. Wow. And some CBD dabs for joining the fun on our cotton candy posts. Jared came around looking for me and he said, Hey, do you want some cotton candy? And I’m like, I kind of value my teeth.
Dr. Jon 02:29
They made cotton candy. Didn’t that
Randall Thompson 02:31
you guys? Did you guys make cotton candy? Somebody made cotton candy. Oh, okay. No, Jared, I think Yeah. Did they want if they made it in the gym?
Dr. Jon 02:37
No, they put it with CBD in there.
Randall Thompson 02:39
Yeah, yeah, I have no idea. Yeah, that’s right. It’s not white. That way. Mel has like six bags on his desk.
Dr. Jon 02:47
But I know they’re making cotton cbd cotton candy so they’re they’re having a lot
Randall Thompson 02:50
because the team might be making some CBD infused cotton candy and we just need a cotton candy machine candy hemp flowers.
Dr. Jon 02:56
You guys get a quotation on a cotton candy machine. We need one of those around here.
Randall Thompson 03:01
We need we’ve got a big we’ve got a big popcorn machine.
Dr. Jon 03:04
We keep on threatening to you know,
Randall Thompson 03:06
yeah, you that’s gonna be fun when it’ll be giant, the mixer, which we can put 100 pounds of popcorn in there a little crazy. Okay, so that’s where we’re going? Let us know questions, go ahead and update the questions. And if there’s things that we need to answer directly, we will but the team has that under cover. Yeah. All right. We do have a rolling poll on whose list is better? Well,
Dr. Jon 03:26
my list is better.
Randall Thompson 03:27
No, no. And my list is better. So do you want to do it as a high level of what your topics I will go through them? And then you go through them? And then we’ll talk to you want to go first?
Dr. Jon 03:40
No, that’s a typical sales guy thing to do. You know?
Randall Thompson 03:45
at a high level, my list include Is this a growth opportunity? And what is that growth opportunity?
Dr. Jon 03:51
Okay, first of all, we got to back out and say hey, look, we’re really talking here is about investor. What
Randall Thompson 03:56
the hell are we talking about?
Dr. Jon 03:57
Yeah, we are talking about it. You know,
Randall Thompson 03:59
I’ve heard that question asked, What the hell are you guys talking about?
Dr. Jon 04:05
I think we went up a wormhole. Okay. I can’t do that. Okay, so let’s set this up. Okay. So, um, look, if you’re a processor or investor or a farmer or whatever, this it doesn’t even matter where you are no marketplace. No, you need to understand, you know, something about the industry or the investor or perspective. Okay. So we’re talking to investors, but we’re also talking to farmers. We’re also talking processors, we’re talking to people who are startup he packagers, anybody
Randall Thompson 04:36
really, but this is standard business. 101. Really, really? Because this is what investors are looking for in you. What are they looking for in your business plan? What are they looking for in your pro forma? What are they looking for? And how do you set up a business that will succeed? Right? That’s what that’s what we’re about. We want to help you build profitable revenue. That’s what we’ve said from day.
Dr. Jon 04:55
Yeah, that’s what the whole purpose of this is everything we’re doing so I know. I guess it doesn’t really matter. To me if you’re an investor or if you’re if you’re just maybe you have some maybe you’re doing some investment in the public markets, maybe you’re thinking about a larger investment in a smaller or you’re looking at crowdfunding something, there’s all kinds of different ways to get involved in the market, there’s always the risk versus reward aspect of this. So the higher the risk, usually more risky it is, but the higher potential for reward ABS Okay, so there so these
Randall Thompson 05:23
are the lists my list at least this is for, it’s targeted to investors, and you are an investor of time and money and energy in your business. Right?
Dr. Jon 05:32
If you’re creating a business plan, you know, you should be looking, you should be talking about these things. So like, so. Okay, so let’s Okay, so I think we’re set
Randall Thompson 05:40
the real keys. So this is the top five things investors need to know for CBD processing. That’s kind of the title working title of what we’ve got here. So what is the growth opportunity here? What are the risks? How do I maximize operating profits? How do I improve my top line revenue? And and what is the start to scale strategy? Where do I do I start small, we start art, where do I go and what is what do I do to scale? How do I take yourself to scale?
Dr. Jon 06:04
That’s my that is that is a great list. It’s a good Okay,
Randall Thompson 06:08
I know. Here’s what I and I say that in all humility.
Dr. Jon 06:12
Okay. Let me see your cannabis and hemp are different markets with different risk factors. Number one thing to know Oh, true, okay. Because you’re, so even the numbers that you’re going to be talking about to your investors are definitely, you know, predicated on which markets You’re so Okay, so let’s think about that one has more of a local, you know, strategy from top to the bottom, you know, state strategy and others as as global. Okay, good. Um, number two, what is the compliant niche, okay, so, niche niche, and when I when I say that I do mean the word compliant is very important, because obviously, you need to be thinking about the FDA, you need to be thinking about state regulations, you need to be thinking about consumer requirements, all this stuff. So when I say and Nish is really we are known initially. Number three, watch the overhead and where the money gets spent. Okay, if you’re an investor, you’re investing, there are certain things you need to do in this particular market, especially in this particular market to understand where your money is going. And wow. And watching overhead. Number four, consider my own rule. The Rule of Two the Rule
Randall Thompson 07:17
Dr. Jon 07:19
I will say for I will save it for you, but the Rule of Two is dr. john seek Yes, yes. Advanced Secrets of the Universe. Give it out here for free. rule to rule of do Okay, number five, thermal, okay. Operational Excellence is key to profitability and growth management.
Randall Thompson 07:37
Okay. I actually believe that he doesn’t just believe it, he does it. It is the part of warp and woof of who he
Dr. Jon 07:44
is and who this company culture. So I had to get I had to get it in operational. Excellent actually believe it. So I’m
Randall Thompson 07:50
so done. You don’t have a table for that one.
Dr. Jon 07:53
No, you have to go back and we did an operational excellence. We do
Randall Thompson 07:58
our tables in Yeah, we had tables and absolutely, so there are tables, but they’re just hid behind. Okay, so this is our list. It’s a great list. And I think they’re very synergistic. Good and complimentary. Let’s talk about your first one. And then I’ll talk about my complimentary one, your first. This is a Is this a growth? opportunity? Good, good, good. And I’m getting more and more real time data on my phone. So if you hear it buzzing, I apologize. Okay. Is this a growth opportunity? Well, hell,
Dr. Jon 08:23
Randall Thompson 08:24
Yeah, it is. Oh, my gosh, okay. Next.
Dr. Jon 08:27
You know, I think a lot of people are saying, Okay, look, there’s there’s processors who are like, oh, they’re all they’re like, Oh, this is getting saturated. There’s farmers out there saying, Oh, this is getting saturated. Okay. In the meantime, the the market itself is expanding. It’s getting bigger and bigger and bigger, like fast. Yeah. And it’s fast. And it’s like popcorn into gemco. Yeah, exactly. So there’s a there definitely, definitely is a growth opportunity, but
Randall Thompson 08:51
they’re not. And just so you know, so let’s quantify that just a little bit. Right now, we’re there are different markets thing that we are either, you know, three and a half billion dollar market or a $6 billion market. And that will determine whether some people are just calling him or just or they’re combining him or us or global. Exactly. So yeah. So
Dr. Jon 09:12
what they’re talking
Randall Thompson 09:12
using the range me side of things there, they are going out looking at this, and they’re saying that it’s about a 3.5 $3.6 billion industry right now. Okay, everything else you see is somewhere between five and six as a global opportunity right now that’s growing anywhere from 23.6. So 24 billion or 220 7 billion in the next five, four years. Yeah, by the end of 2025. That’s what they’re saying. Right? That’s giant gross. Hello.
Dr. Jon 09:40
Randall Thompson 09:41
huge. That’s a 500% increase right in the next five four years.
Dr. Jon 09:44
Ya know, my distinction on that is a cannabis versus happiness and the the larger numbers they’re pulling up to a quarter of a trillion dollars for example, with with that’s a hemp global hemp to estimate the the global cannabis markets are much smaller, mostly because they are, you know, very isolated. They’re regulated state by state in the case the United States or in Canada, throughout Canada, but you know, in terms of imports, exports limited due to, you know, schedule long relations ever banking is, is having a big, big part to play there in terms of the limitations. So,
Randall Thompson 10:21
you know, the big growth in marijuana, it’s going to it You’re right, it’s isolated and local where it’s going to just expand is the second that big pharma comes in really takes over some of that medical marijuana? Got it, but it’s that’s going to be highly regulated. But I mean, that’s common. I mean, we know what’s coming. Yeah, but how soon and the FDA is pushing that out? Have you ever heard of the FDA pharmaceutical company complex? ninja twitch? That would make that made me twitch? Just saying it. Alright. Yeah. So that’s, that’s the opportunity. The opportunity is giant and it’s up to you as a farmer as a processor as a packager, whatever, it’s up to you to make sure you convey that opportunity to your investor whether that’s a family office where the digital whether that’s the bank, they need to hear that growth opportunity they need to hear your confidence in the group right and you need to convey that and have the backup for it we have third party sources right and that’s and that’s what we’ve got.
Dr. Jon 11:18
Yeah. So just a cursory you go into Google just type it in you know growth rates and you can pull information off of there if you want to buy one of the reports we’ve bought these market reports before they’re okay there they have you know, like number one, player number two number three player whatever if you were in the consumer market um, you know, it’s changing radically quickly so I might almost use like a you know, if you’re in like cannabis or in hemp I would go to even in the public markets you kind of look at those for for just comparisons Yeah, versus watching them watch all the markets and I think that that’s good as they’re going up and down I’m talking so if you look at the index you can see what kind of what the markets doing overall just by looking indexes
Randall Thompson 12:02
and that’s good and most of the things that we’re talking about are really you know, Main Street conversation direct investing into you as a business and ongoing direct business concern and then as as the other thing the investors wants to look for as they’re investing in you is what’s your exit strategy? Are you just going to cash flow forever as proving that or are you going to do a roll up and buy other people or are you going to allow yourself to be bought out what is your exit
Dr. Jon 12:27
stretch? Yeah, that’s a good that’s a good thing to think about at the bank have the beginning with the end in mind right?
Randall Thompson 12:31
always always always and don’t you don’t have to manage to it but just explore those options with an investor so they know what their exits right because and that could be just keeping holding, managing handing down as a legacy right? And you know, where is the OP where where’s the opportunity headed? Yeah, is the other piece of that so we we talked about, you know, cannabis and hemp, hemp is growing monumentally because of geezer?
Dr. Jon 12:55
Yeah, pretty much geezers like me.
Randall Thompson 12:56
Yeah, you know, and I’m going to be 60 in like three weeks I’m gonna be 60 years old. Wow. September 15. If you want to send cards mother’s condolences but that is no I don’t color my hair and no, I’m not wearing makeup. I do drink a lot. I do drink coffee. Okay, there you go. Lots of And apparently, antioxidant and digital comes
Dr. Jon 13:21
with Yeah, don’t say
Randall Thompson 13:24
anything, anything to by the way? How are you feeling if it’s awesome so far? So we better get going okay. We better keep going. So where the other thing though is where is the opportunity headed? And in in the industry, you want to see where is the sustainability side of things going from an investor you know, how are you handling power? How are you handling recycling? How are you handling vironment? What is what is co2 do to that equation versus ethanol? cleaner your
Dr. Jon 13:51
products? I mean, people want to know about that, right? That’s exactly right,
Randall Thompson 13:54
that we are becoming a health conscious world. And so knowing that conveying that to an investor is huge. And the investor wants to know that we had a big conversation yesterday and you know, not only is how a growing fast growing market true mark is Yeah, it’s right on the horizon. Yeah, I
Dr. Jon 14:10
had heard that Canada had legalized like magic mushrooms for dying. If that’s
Randall Thompson 14:14
that’s kind of a first fly like a reindeer baby. So yeah, that’s where they come from the tundra. Yeah, we’re
Dr. Jon 14:21
gonna extract those.
Randall Thompson 14:22
Yes, that’s why not that’s where flying reindeer came from. Just so you know.
Dr. Jon 14:25
Really? Yeah. For mushrooms? Yeah. Did you mean they ate the
Randall Thompson 14:30
top with the white Poconos? Yes. Okay. Well, you when you eat a little bit that most of you thought they were like
Dr. Jon 14:35
yeah, I guess. Okay,
Randall Thompson 14:36
so anyway, that’s that’s the opportunity to convey that okay.
Dr. Jon 14:39
And you want to add you know, I would kind of say that the you know, kind of the equivalent to your one there is cannabis and hemp are different markets with different risk factors um, you know, camp has a wider reach than cannabis does that and we kind of touched on that it’s they’re all growing at a compound annual growth rate. That’s that’s quite large. Okay. And I would say that stupid large stupid Large I guess for him, it’s growing on, on that, you know 25 to 50% dependent numbers and company growth rate, which is a big deal. So, you know, your investors are gonna want to hear about, first of all how big the market is. So your potential available market is really large and you’re, you really need to take that potential available market and bring it down to an addressable market. So when you do that, you’re going to create your business plan you’re gonna say that’s called total available market tam tam handle the total available market product available market Pam. So you’re going to take this big market, you’re gonna tell them okay, hey, look, this this pie here is growing at 26% compound annual growth rate. And by the way, here’s my product available market with that, and that’s also growing at this percent. And so that’s the type thing that you want to think of in your risk, the risk factors that you’re going to be talking about to your investor or the risk factors that your investor is going to want to know about you is the specific risks are totally different actually tween the cannabis and how they just are no question and even when you cycle down to the strains of product genetics that you’re growing even on the hips, right? are you growing for CV? are
Randall Thompson 16:00
you growing for CG are you going for CBC are going for CBN? What are you growing for? Right? What strain is that? Where is that head? Because there’s a lot of people growing CG there’s a wearable growing or CC Yeah, right now and heard now the markets are telling us that the CIB rose Is that right? And people are paying it But no, no, there’s gonna be a big increase in price for CBD biomass. Right. Yeah. And I think there will be those people who buy into the rumor. Yeah, that but there’s still too much winterized. Crude out there read winterized crude, it’s going to offset that decrease. And it’s about 70 75%. of last year’s growth. Yeah. And see, but they’re not converting some of that to CG. There’s a lot of CBG grow out that Yeah,
Dr. Jon 16:40
there are different stages of let me say you have little infant farmers, basically, who are just farming, they’re figuring it out. And you know, they maybe grow 20 acres and that or an acre or even an acre, but they but it’s not successful. You know, it takes you a few years really dial it. Yeah.
Randall Thompson 16:56
And that’s what I tell people, it takes at least two years to dial in your fertilization, lighting, you know, getting it getting under, even if you have good genetics, it just takes that long to get the soil. Ready. Yeah. And that’s good. So Excellent. So know your mark, I love that.
Dr. Jon 17:09
Yeah. And I think that you have a risk factor what what it is, and you know that that’s where I think you really need to go in. And you’re you’re that’s number two, by the way. Yes. What are the risks you have to the more you tell your investor or the more you tell your investor about what the risks are? Yeah, and here’s how we’re contributing
Randall Thompson 17:27
the donor for Don’t hold back, say, Here’s why you should not invest your money with party really, you say it that way. And they’re, they’re gonna lean in and listen, right? They do. It’s, it’s, it’s counterintuitive, but it works, especially after you have convinced them The Confident love what you’re doing, and the opportunity, and the biggest risk to me is is conveying bad information. Yeah.
Dr. Jon 17:47
or trying to gloss over a risk factor that you feel is is not, you know, is not very favorable? Yes. No, that’s when you should be talking about because that’s when they’re gonna be asking about.
Randall Thompson 17:57
So are you dealing with it? What are you doing to address that risk, but
Dr. Jon 18:00
Right, right. So and I
Randall Thompson 18:01
knew that because they think you’re they really believe you’re smarter when you do that. That’s
Dr. Jon 18:04
true. I mean, it does project that hey, look, where we have this risk, we know about our here’s our plan to address that risk, right?
Randall Thompson 18:10
So here’s the plan to eliminate so as an investor, you need to know what those risks are. Exactly. And understand that market and most of you do. And the other thing is it like I’m giving you information here, we’ve got some source things but be a berean go out, you know, trust but verify.
Dr. Jon 18:25
Yeah, trust but verify. Go
Randall Thompson 18:26
out and do your own research. You know, say hey, said that Mark was gonna 20 billion by 2025. Holy cow. Yeah, let’s go check this out. And then you know, you know, Google eyes it. The other big risk is having the wrong team. Oh, my God.
Dr. Jon 18:39
Yeah. If you have, like people who have done startups within large corporations, you cannot start a company with that type of person. Oh, it’s hard.
Randall Thompson 18:47
It is impale possible shift to go from a corporate an entrepreneurial man, it is hard, because when you’re in corporate, you have unlimited costs. Yeah, really. That’s it. That’s the biggest reason. And there are some people who can make that shift very well, because they’re frugal, and they squeak when they want. Well, they, they
Dr. Jon 19:05
they want to Yeah, they have they Well, we have a team to do this. We have a team to this, you have a team to this and and we’re sitting in meetings all day doing nothing, okay, whatever. I mean, really, honestly, everybody’s heard about our bootstrapping bloodletting, a way to to
Randall Thompson 19:19
start the only
Dr. Jon 19:20
way to do it, it is the only way to do startups. But you know, it’s gonna really be really difficult to attract an investor to that type of thing. So you got to make sure that you’re talking about all those risks.
Randall Thompson 19:29
Yeah, who is on your bench? Right? So who is your Who is your finance person? It shouldn’t always be you. Who is your operational person who is the processing operational? Who’s handling the people and one person can wear multiple hats until you get enough revenue to hand off a hat? Right?
Dr. Jon 19:45
I mean, that’s what we do. That’s what a startup is. If it’s just you, you’re wearing all the hats, right? And then there are thing times when you hand off hat Tell me tell me one. Like one one example of say, someone, maybe someone you’ve talked to just looking at their business plan was it was like a like a risk factor that they overlook? Oh my gosh, I mean, like a big one.
Randall Thompson 20:04
There’s, there’s so many, one. Okay. And I’ll just use myself as an example because that’s because I’ve been stupid. A second we’re we’re questioning whether the Ben is stupid is really an accurate statement. I’m not sure that’s true. All right. So what I’m saying is, if you think you’re making money because money is coming in, you’re wrong. That is the number one rule is just because money’s coming in doesn’t mean you’re making money. top line revenue does not mean profit, correct? Because you’ve got tons of costs, got hidden costs, you’ve got to really know what that is going to manage that which actually meant maximizing those operating profits. You know, paying out different things. What are your cost of goods? What are your costs, materials, what are the all of that and I remember when I was in my 20s, which was when a long time ago, I was bringing in money I was coming I learned I was losing like 10 cents for every dollar that came in. So the more
Dr. Jon 21:01
money that was already in Haman, your family payment all that though,
Randall Thompson 21:04
nothing to do with me. I just was not operationally excellent. I see.
Dr. Jon 21:09
Yeah, we’re managing those costs.
Randall Thompson 21:11
But yeah, because you just need to make sure you know, you don’t do it by rumor. Make sure you know your business and maximize that. But having that that is the key thing is making sure you understand what your costs are. Yeah. And that you’re actually managing to mark right profit.
Dr. Jon 21:26
So number one, as an investor, I think it’s a Okay, so risk factors are you have to know all those things, you have to look at the team if to say, Okay, here’s here’s what I think is neat risks, here are unique risks, here are the general market risks, you need to check them off one after another and say, okay, they’re okay with that they’re okay with that they have their business plan doesn’t deal with that, yeah, I can start to shore that up with board seat, for example. So I can have governance in this, the market risk I’m willing to take from that, that has nothing to do with the really people who are operating in it. Um, maybe I don’t like their what their specific product available market strategy. So I might go ahead and say, Hey, why don’t you invest this instead? So that’s the type of from an investor standpoint, you know, just identifying what those risks are, you can go and get all the risk factors you want, just by combing the public data and 10 kits, they’re, they’re in there. And you know, they’re they’re extensive, most all of them are very specific to the business, but there’s a lot of general ones. So anyways, absolutely. One place that investor can go and look and learn about the different
Randall Thompson 22:24
use our tools. We’ve got the calculator. Yeah, for operational. Absolutely. And we’ve got there’s a great blog post for startups. Yeah. Oh, great. Great. Yep. wrote
Dr. Jon 22:34
that. That was awesome. So I would say that Yeah, on the calculator side, like
yeah, they go to the calculator.
Dr. Jon 22:42
can’t wait. How are you feeling by the way now?
Randall Thompson 22:44
She like your angel. Yeah.
Dr. Jon 22:48
Okay, yeah. So let’s uh, let’s
Randall Thompson 22:50
move on since we’re words we’re we’re continuing to go back to the team just real briefly. Make sure you hire people that know you trust and that our hard work I just get that done. We apparently what’s when we approve of nepotism?
Dr. Jon 23:04
Oh, apparently Yeah. Apparently. All right.
Randall Thompson 23:08
Thank you. And and it works. I’m you you can trust carefully select good partners. The other thing is invest in good salespeople, marketing and branding don’t commoditize those are other risk factors is if you’re not investing in sales.
Dr. Jon 23:23
Yeah, that’s true. I built a great mousetrap. Yeah, and then how do I sell it? Right, exactly.
Randall Thompson 23:27
Don’t get it done. Okay, so the next thing is operating profits. We’ve already touched on this a facility intelligence I we’ve had different conversations already about the facility you know, how do you manage you know, or power consumption for size? How do you know don’t have football field? Right and yards?
Dr. Jon 23:45
Right, right. crawl, walk run. Exactly. Yeah. So
Randall Thompson 23:47
you know, maximize those manufacturing efficiency, make sure you have a good MEMS, you know, troll your inventories whip.
Dr. Jon 23:54
Yeah. Other things that I would be if I were to invest in a particular operation if they’re operating and manufacturing wise, I’d want to know that they first of all, I’d want to make sure that they had a strong audit function on their financial that’s the first thing I want so if you guys don’t have you know, accountant, if you can’t produce a performer that looks like a good performer, your investors can pretty much require that they’re also going to want to know what is the governance on that money. So I’m going to give you you know, a million dollars to start up Okay, I’m gonna want to know I’m gonna want to know where what you’re gonna spend it on. Yep, that’s the number one question investors asked. Right? I mean, pretty much always spent the money on executor and they probably are going to disagree with everything you say. Okay. Even if it’s just by because of principle. Yeah, well, they want to make sure they want to defend everything they exactly spend the money. Exactly. So there’s they’re going to be giving you buying signs, you don’t spend it there. Don’t spend it here, whatever. So um, yeah, you it’s no place for passive money. One of my notes here. So from an investor standpoint, if you’re investing in in retail, or you’re investing in branding, manufacturing, farming, medicinal education, or Ansible, there’s a lot of different places you can invest You need to make sure that you own your money this because it’s growing so fast, there’s a lot of people, you know, tend to tend to start, you know, pushing the admin too heavily upfront, and it really can take a profits and just completely destroy them. So that no question. And so where are they spending the money in? What’s your sgma plan? So I, you know, if I had a business plan, as best I put front of me, first place I’d look for is their SGA plan, I’d look at that. And I look at their balance. And I’d ask them, How are they insured? And if they didn’t know what I was talking about, I would that’s pretty
Randall Thompson 25:30
and GMA general and administrative is just and I’d
Dr. Jon 25:35
also ask, how are they audit who’s who’s gonna,
Randall Thompson 25:37
who’s managing the money, the other thing is want to make sure that you show that you got dry powder, you’re not spending every dime, dry powder you because there are things that happen that come up, where you’re going to need some operating capital you’re gonna need to carry whether that’s in a line of credit or not, that is absolutely critical to do. I love that. I think that’s good. I like the idea of that’s not a place for passive.
Dr. Jon 26:01
Yeah, I think that like this is there’s a lot of unique risks. And so, you know, if you’re an investor, you know, just if you’re gonna write a check, you’re probably the people that you’re investing in need more from just your check. Yep.
Randall Thompson 26:14
And in that doesn’t mean you have to take a role in the company. No, but take an advisory role. Yes, absolutely. Because getting that benchmark is there. Oh, I wanted to also say on a pro forma, just as a pro forma is just your spreadsheet, okay, so are looking at, it’s just getting what are your top line revenues, minus your cost of goods or cost of services, that’ll give you your gross profit, right? Then you take all of your operating expenses, and you take it out of that, and that’ll give you your operating profit, right? So that’s just a very simple proform. It’s just know what comes in what’s left at the end. And then at the end, that’s when you start taking out amortization, depreciation out interest,
Dr. Jon 26:49
all that good stuff keeps coming. Yeah, it never is. Very end, it’s like, wow,
Randall Thompson 26:56
like, I mean, I’m so so you know, this is a great opportunity, you know, lead with your risks, and then maximize the operate your operating profit, always and be in charge, be in control and follow on good trust advisors. The next item on from the investor standpoint, audit your money audit, your money
Dr. Jon 27:14
may demand an sgma plan, where’s your operational excellence plan? In that you get a plan? And who’s initiated a weekly report? Don’t wait 30 days, because that doesn’t turn the ship. You know, if I’m an investor, I’m gonna want to make sure that I understand what their what their sales plans, that’s where really where I’m going to focus on Oh, yeah, you know, I because I maybe because I don’t have, because I know the back end of it. So well, there may be some people who come at it from an operational standpoint, when they want to look at that, from an operational standpoint, I know that we do a lot for our customers to eliminate and reduce time to market risk by you know, giving full solutions. So that’s something we do so maybe that maybe that’s not something that I would normally look at as bester. But I’m going to really be honing in on what is your product? market? What niche products in what’s your compliancy plan? And what’s your you know, give me your Give me your operational excellence? Man? Where’s it? I want to see it? Yeah, if you don’t have one, you’re not managing your balance sheet.
Randall Thompson 28:06
I couldn’t agree more always the, you know, growing revenue, and don’t look at just today. Don’t look at today. Don’t look at the next 30 days. Don’t look at this quarter. I mean, you want to do that. And you need that. Keep them Yes. And it’s going to do for your time frame Exactly. Go out, you know, three, four or five years, just know that every investor understands that anything you say past three years is a lie.
Dr. Jon 28:28
That’s Unfortunately, that’s not true. That is true that I that I show you that is
Randall Thompson 28:32
fortunately not unfortunately, that was good. You told me what was
Dr. Jon 28:36
it nice to have you I hit it right on the money? I mean, I hit it right on Oh, that’s awesome. You know, when when you get in your clients, you starting to run business plans, okay. And you start you start pitches, okay, you’ll be doing pitches over a period of decades, right? So you can always go back and say, how would you know if that pitch and there’s certain assumptions in there. So with with the duck? Yeah, the pitch stuff funding test, because I couldn’t manage all the risk factors. Sometimes it’s more difficult if you have, like more public or if the public entity or if having different assumptions come in different. So
Randall Thompson 29:09
it’ll Christian Good, good, good. Anyway, okay. My next item was improved top line revenue. Okay. Okay. And then best way to do that is get good salespeople. But how do you position to improve that or the minutes by solving problems? Yes. What’s the problem is the problem that market needs more me to product on? Yeah,
Dr. Jon 29:27
that is not the problem. That is the problem. There’s too many you need two products,
Randall Thompson 29:30
that’s accurate. So So find a niche where people are looking for an answer, and they have money ready to give to you to solve that problem. Right. That’s what you want.
Dr. Jon 29:38
Yeah, I think they’re okay that you’re looking at it from the problems standpoint. And as an investor, I’m looking for zing in the marketplace. I mean, I think they’re both they’re both differentiated. Yeah, same thing, different side, right. You can have like, you can have the oldest product and we’re all being marketed different ways to complete ball up. Yeah,
Randall Thompson 29:56
we all know that positioning, positioning and so I would be focused Different than breathe right rationing means branding and positioning both I mean they got to go in they are together Yeah, they are hand in hand but positioning and brand are quite different positioning is which market Am I going to Who am I talking to them I predominantly selling all to supplement main track right as a processor, am I selling CBG grow two processors right? Am I totaling that so that I can sell my display to people who are using it in the market where we’re Where are you solving and go where the money is? Yeah, I mean, there’s, there’s a lot of business out there that you can do that isn’t chasing the same dollar everyone else has
Dr. Jon 30:37
chase it right. So on that note, I mean, points of entry in terms of best arm if you’re an investor, and you’re looking for a point of entry, there’s obviously the public markets, and those are easily accessible. I, you know, there’s OTC Markets, there are actual public markets and, you know, I would you know, and there’s also these indexes, okay, so But besides that, if you’re going into private business and doing you know, placement to private business, you have you can access at the farming level, you can access at manufacturing, branding, retail, medicinal education, ancillary. I mean, those are all the different options to enter. And, you know, you can basically place place investments there, but those, you know, as those are more riskier.
Randall Thompson 31:16
Yeah. And, and again, going back to improving that top line revenue, and being able to scale you can take a portion of your 20 acre parcel and take, you know, take five acres and make that a CG grow, right, yeah, cuz now you’re diversifying and it’s a bigger market growing market, you still have your stalwart as a dispensary, or retail look at, you know, building your own brand, right, white label, bringing other brands bring in things, look at topicals gummies. Look at all of those things, right? experience, you there’s a lot of other books out there, where you can put up your box, if you’re a dispensary of see products, or whatever you’re doing, there’s a lot of mourner grocery stores, gas stations, spas who want product, and you can jump out to them. So you’ve just expanded your store another opportunity of people who want it, it gives more access to your product, right?
Dr. Jon 32:06
So I’m going to just kind of complement this with Okay, improve and grow your top line focus on that top line revenue from from an investor’s perspective, your, your your people that you’re thinking about investing, and they’re going to get some sort of pro forma projection a sales pitch I okay, we’re gonna do we’re gonna hit $7 million in two weeks, would you believe it? $7 million in two years, okay, whatever. Okay. Well, to me that, first of all, I know that just just to get the money for inventory, and balance sheet cash on hand to support that growth, you’re going to have to have service done just absolutely. I mean, that’s pretty just general that
Randall Thompson 32:41
you’ve got to do that. And then there’s that multiple of saying, What is your pipeline? So we talked a little bit about building up that height ready to go, and it’s usually you know, 248 times 10 times what need in the pipe know that that’s a start, right? So
Dr. Jon 32:54
I’m going to be looking at that, you know, that sales projection, and I’m going to be applying my Rule of Two as that as an investor, I think it’s a really good thing, because it’s almost like, Okay, if you if you’re invest and invest, he is saying, Okay, I’m going to 70 million years, I think it’s probably more like 30 million more. And I think that’s generally I think that that’s the case. And you know, I hit my business mind, because I apply that rule to,
Randall Thompson 33:17
I mean, divide by two and then multiply by right, yeah, exactly, by the time it takes
Dr. Jon 33:22
right about it in that that applies to your top line revenue. As your mark, you have all of these products that you’re building been doing a product based forecast month, by month for four years, that’s what I recommend you do, because it really forces you to think about all aspects of you. I think that
Randall Thompson 33:37
that’s it very smart. And but don’t fool yourself truthful with yourself, and whatever that plan is that you believe you’re going to hit. And if that’s $2 million, if you know, at the end of this year, you’re going to hit 2 million divided by two and just plan for a million double. And then say it’s going to take you two years to get Right, right. That’s what that’s that’s the rule. And that is perfect. And you know what every investor will respect that and love. What, what I like to do is I just say, hey, look, here’s my I like to do scenarios. So scenario one, scenario two, I
Dr. Jon 34:04
apply the rule of two. Here’s what one possibility is, here’s the other possibility. So it gives you a range of everybody’s asking for a number. Okay, I never give a number. I always give a range of numbers. No media. Yeah, exactly. And we have assumptions that will drive this
Randall Thompson 34:18
easy to build that pro forma that Yeah, and you know, I’ve done that I’ve had tutor tab spreadsheet I’ve done that have had Bob blow me and I can’t I know right? And the loser, what can I say? Oh, and one other quick thing as we as you’re doing that, make sure you’re pricing properly. Oh, yeah. Oh, my God, don’t race to the bottom. This is not a commodity business. If you’re only chasing the business that everybody else is going at the same dollar. That’s commodity that’s why you want to differentiate one. One thing that I would look for as a master in a business plan is what have they what is their assumptions for pricing? And so that that actually should be readily available? Like following up? They should be like, Oh, yeah, you can turn to page 37. And there it is right there. I
Dr. Jon 34:59
already thought that Okay, that that makes a big difference. You different Yeah. You have to you have to understand and you have to at least project Okay, I know there’s more people this market margins are great. I know what average margins are in other like markets, I’m gonna apply that average margin and I’m gonna say okay, that’s kind of my bottom and I’m gonna I’m gonna model it over the next four years as a as a that’s why declining price. But yeah, and and then what is your What is your operational excellence and plan really to address that?
Randall Thompson 35:27
Right? Absolutely. And even if you’re going out, and I have heard rumors, I haven’t had this, so let me know if you’ve heard this, but the SBA is now giving loans to potential processors as food type is I don’t really know. I’m hearing that. So and I heard the USDA was I know that they the USDA, you can go get I think 400 grant, yeah, up to 400. Grant. Yeah, right. We do we have we have papers on and we Okay, so ask us the team, if you if you need that they can board that onto all right. But But if you’ve heard something different on the SBA, let us know. Yes. But we’re seeing that. And in the SBA, when you do your pro forma, they need you to back that up with verbiage of what are your formulation? What are your What are your assumptions, right, and what is that price point definition?
Dr. Jon 36:11
What are you you know, what, we should get the skinny on that we should we should apply what you say, Oh, we should get the skinny on that though, right? You should apply and see what see what we can get info see if we can get rejected. That’s gonna be too hard. Oh, those guys get rid of them. But it is it is opening up and because the investors are now seeing this, there is money to be Yeah, well, that is another thing that’s gonna, you know, as an investor, you know, I’m not gonna want my you know, my invest to really you know, get USDA loans and hit go get SBA loans, because I want to get it, you know, I want to make equity position your company. And if you’re able to get bank money at that, at those lower rates, then I’m just lowering my heart now,
Randall Thompson 36:53
unless, of course, and what I’ve seen is some investors are coming alongside processors, and they’re doing what you would call customize a bridge loan bridge, right bridge investment, so they maintained their terms, their position that they go help them get the SBA loan or the USDA alone and use that as operational growth or capital, additional capital expenditures, because there is not an investor out there that I have heard that will give you what you’re asking doesn’t happen because there’s too much fat built in and you’re thinking too big. You didn’t apply the rule of two. And that goes back to an investor wants you to crawl walk run. Yeah, they do. They want that they don’t want you to start with the Cadillac. They want you start out with a scooter.
Dr. Jon 37:32
Right. Yeah, I mean, I think I think the
Randall Thompson 37:35
show me you can make money.
Dr. Jon 37:36
Yeah, then I’ll invest more. Yeah, that’s tough. It’s like the chicken in the egg. It is. Yeah, it is. But
Randall Thompson 37:41
you can do it. If you put in a lot of hard work. And don’t get me wrong. We’re giving you all of these things. But the reality is, this is a lot of hard, hard work. Put in the time put in the effort, believe in it and make it happen.
Dr. Jon 37:52
It will if you just if you just ignore all the negative, just focus on negative take take one Delta-8 gummy a day. Okay, then you’re not gonna get anything done. Sorry. Don’t ever do that sleep time.
Randall Thompson 38:04
All right, that’s good. Okay, so I’ve covered most of my list and again,
Dr. Jon 38:08
start to scale strategy. And, you know, that would kind of really work well as my operational excellence is profitable, key to profitability and growth managed. So let’s hit that one, go. Okay. So um, my number five was operational excellence is key to profitability and growth management. Growth can put you out of business. Brand success can put you right out of business faster than you get
Randall Thompson 38:27
Dr. Jon 38:29
Okay, if you if you have a a million dollar brand, that’s going to a $20 million brand, you need 20 million banks to sustain that 20 or 19 million, you know, as a rule,
Randall Thompson 38:38
you need a lot of dry powder. Use your growth Yeah, exactly.
Dr. Jon 38:42
Because why is that? Where’s it you’re trying to figure out why I’m not spending it all? Where’s it going to, I can’t figure out where it’s going, Well, just check out your balance sheet. Okay, because it’s all there, it’s all you got cash is going into inventory. And by the way, that, you know, that’s that’s really where an operational excellence plan will help mitigate that by just you know, making, it’s gonna it’s going to help with the following. And I’m going to look at the company that’s claiming big role really huge girls I’m going to be looking at Okay, how much cash they know the balance sheet, how much working capital they need, and what is their plan to manager and tour because if I give them a fight, if say they I need they need 5 million because they’re gonna grow by five day and I’m gonna want to know Okay, what are you do manage that inventory in real time? I’m, what are you doing? And how are you keeping it at a minimum because anybody can just like, throw a bunch of money at it and you’re just pump up, pump up, pump up? inventory, that’s no good, because that’s where all your money is going. It’s got little cash things there. And a lot of times in the consumer products, good category, those things don’t last forever, either. No. So you have to have you have to so that’s what an operational excellence plan that so girls can put you out of business needed next operational excellence plan in your business plan. I’m going to be looking for it in addition to what is your quality plan, because this is a regulated market? Yeah. Okay. You have to have a plan, not just niche. Okay. Uh, yeah, I would I would want to see how You are addressing safety architectural and your product plant I want to know also,
Randall Thompson 40:04
in addition to obviously, because that goes back to risk, yes, how are you managing all of that right
Dr. Jon 40:09
I want to know about Yeah, and including quality and then product I know what you don’t want returns you don’t want want to deliver quality product so that that would be basically from an op number five. As an investor I’m listening for the following us we’re going to manage the balance sheet for this particular purpose inventory turns or I’m going to be managed on shore no additions, I’m going to manage for those things I’m going to be looking at those balance sheet levers because if you don’t do that, I just know that that’s where all the cash is going to go automatic
Randall Thompson 40:35
and in typical fashion over the last 30 years and working with the small business market, a lot of people make the mistake thinking that they’re just going to grow forever and and that’s where you grow go out of business because you cannot grow and get strong at the same time because growth requires capital investment constant constantly. So in your pro forma I was built in a pause so you want to grow and then take quarter just to work out the whip get strength figure out where the money quality where that is, and take out fat
Dr. Jon 41:07
Yeah, you gotta examine your operation try to figure out where it is
Randall Thompson 41:11
getting stronger. You can’t get too strong and grow. So if you’re always running a marathon, you’re not good. That’s not healthy. Yeah, that’s true. You’ve got to stop and rest.
Dr. Jon 41:20
Do your training. Absolutely. average speed work never saw Hey, we did it. Alright,
Randall Thompson 41:24
I hope this was helpful for you. This was good. We went through our top lists and I think it’d be hard pressed to say whose list was better because it was absolutely complimentary
Dr. Jon 41:34
they were they were they were not absolutely complimentary. I have to say.
Randall Thompson 41:38
Of course. It was. Yeah,
Dr. Jon 41:42
I was. Oh, yeah. was what we can do is what we’ll do is we can this is a downloadable.
Randall Thompson 41:50
Yes. Yep. Okay, mine’s a downloadable we’ll get his inserted into those two. So we have that downloadable also. So we’re not playing favorites. Um, yeah,
Dr. Jon 41:57
we won’t Yeah, cuz I see. Most the time I was ready.
Randall Thompson 42:04
So today, we talked about you know, the five things investors need to know and is really what you need to know to speak to investors also both sides of that we talked about, you know, this is works for farmers for processing, CBD farmers, cannabis farmers process works for everything. These are great CBD business opportunities out there. And every CBD manufacturer out there for product and things need to have help. Make sure that that’s gone. Sorry, somebody’s flashing a question to us. And we’ll get there but you want this happens for processing merchant retail and processing the seat, watch the CBD market be intelligent. With this, and the cannabis business plan, Gil,
Dr. Jon 42:43
go get it Yeah,
Randall Thompson 42:44
go make that stuff happen. And you know, we’re going to be doing more of these business things. And so each one of these elements, we’ve done some of them in greater detail. But we will continue to do more of these in great detail for you. So let us know which ones are the most interesting for you. We do you know, so if you’re investing in him, let’s let’s go. Let’s help you out. Yeah, now there is a question, somebody wanted to walk through the Rule of Two again, okay, just quickly that we just did this at a high level, okay?
Dr. Jon 43:13
What it means is, it’s going to take you twice as long as you think it’s gonna take to get who is given rubber. And it’s going to cost you twice as much as you think.
Randall Thompson 43:20
And the other Rule of Two is that you’re only going to get halfway to where you think you’re going to go. It’s just a way of saying so divide that by two, and it’s going to cost you twice as much to get there. Right. So increase your costs by to decrease your revenue by you know, a factor of two and increase the time you think it’s going to take you by to your head and you’ll have to iterate on that. Yeah, just just everything just divide everything by half and make a difference. Right? I
Dr. Jon 43:43
mean, you know, your revenue and half your time, double it right.
Randall Thompson 43:46
multifloral to multiply, divide your revenue, target by two, multiply your expenses by two, multiply the time you think it’s going to take you by two. That’s right.
James Hillstead 43:55
Yes. Okay. That would
Randall Thompson 43:56
be that would be like me with the soundboard. And then I could put a table there. And he would believe me, there would be a table. Thank you for being here. You guys are awesome. We love the questions. We love the interaction. We are here. The team is here for as long as you want to ask questions. They’re there answering questions for you. Congratulations again to amber done. kincannon. Incoming Michigan Good job. It’s good stuff coming here. I
Dr. Jon 44:17
wish I was looking at pre roll. Yeah. Yeah. That’s all legal. All right.
Randall Thompson 44:23
That’s, that’s good. Thank you for being here and part of our whole conversation. We love the interaction. And we so appreciate you subscribe on our YouTube channel. Our kick calculator calculator library is always available to you in this operational calculator is there Yeah. And comparison calculators yield calculators everything firstname.lastname@example.org x tra KTLA b.com forward slash calculators. Join our conversation on all of our social channels and your favorite social channel. We’re there LinkedIn, Facebook to
Dr. Jon 44:54
connect with us on LinkedIn. Subscribe on YouTube. We’d love to have you on
Randall Thompson 44:59
on our YouTube channel. Yeah, and I mentioned that earlier. Also we have all of our all of our podcasts and these are our video recordings of our podcasts right? So they are all available at extract lab comm forward slash set dash list. That’s where it is forward slash set dash list extract lab. So thanks, have a great day. Take care. Good to see you. Hot mic.
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