From a single grow light in his Bay Area garage to running a vertically integrated cannabis business in the highly competitive Michigan market, Willie McKenzie has been on a bumpy ride.
Going on his eleventh consecutive season as an outdoor grower, the CEO of Left Coast Holdings initially faced daunting challenges when trying to move from the legacy to the regulated market: “In California, I had four medical farms, I couldn’t license them,” he recounts. “But I did start to go through the process and looking at the things I was going to have to do, I felt like, ‘How could I possibly do this?’
“Luckily when I came to Michigan,” he says, “we got connected with some good attorneys and I hired people to do the paperwork – a lot of paperwork.”
In Michigan, the lower cost of living allowed Willie to get up and running relatively inexpensively, before he went out and raised money, creating a vertically integrated business – which comes with its own set of challenges.
“In cannabis there are a lot more options than people think. Everyone has this old school idea that they need to be vertically integrated for tax purposes. But vertical integration is super challenging: You have to have a ton of money and a really robust, experienced team to not only operate one business but multiple businesses and then make them play together harmoniously.”
That’s no easy feat for a cannabis business anywhere, but in a mature, price-compressed market like Michigan, it’s an especially heavy lift.
Looking at the success Willie has had – as a cultivator, manufacturer and retailer – I wanted to sit down with him and hear his thoughts about how cannabis operators can navigate maturing markets.
Here’s what we discussed:
- Build a professional team with industry expertise
Given the number of specialized skills required to run a cannabis business – which becomes exponentially higher when you’re vertically integrated – there’s no way one person can do it alone. But developing that team has its own set of challenges, especially in an industry like cannabis that has long been in the shadows.
“The industry today requires a level of sophistication, so when you’re building a team, it is crucial that you find people who not only know the industry, and the plant and the consumer, but also the professional side of things.”
It’s not enough to find someone passionate about cannabis – it has to come with the necessary hard skills: management, operations, finance, etc.
“You wind up with businesses that get in trouble because they’re lacking in that professionalism,” Willie says. “For us, the biggest thing has been finding professionals who have real world experience in cultivation or manufacturing or retail, who understand and are interested in the cannabis industry. If you bring in a professional from outside, a retail operator from fashion or something like that, if they don’t understand the product, they don’t understand the consumer, they’re not going to be successful because those skills don’t always translate.”
Where has Willie found those invaluable hires? “LinkedIn. Being active on LinkedIn, having a public face for your business and letting people know what you’re about, your core values, your ethos, that attracts good talent.”
- Combat price compression by getting involved in policy
One of the major challenges of operating in a state like Michigan is the combination of high regulation and low enforcement, allowing the market to be flooded with back-door, untested product. According to Willie, “Michigan has the lowest adult-use retail pricing in the United States.”
On the one hand, we can focus on consumer education – teaching customers about the value of high-quality product – and targeting those who are not buying solely on price.
But on the other hand, there are also ways for operators to try to address the root causes of price compression, in particular the illicit market.
“Be more involved in policy,” Willie says. “We can’t just sit back and complain.”
“The consumers in the state of Michigan voted to have a regulated adult use cannabis market, that means that they want tested products where they can confidently go into a store and know that they’re buying something that was grown on a licensed farm that has been tested, and that’s exactly what they should get. And they’re not getting that right now.”
- Join a Mastermind group
Masterminds are a part of almost every industry: a group of peers comes together to share information and help each other out. But for cannabis, that wasn’t the case: “The industry has been siloed for so long,” Willie says. “As operators, we’re making multi-million-dollar decisions on a regular basis, and we’re ultimately making them in a vacuum. If you’re not making them by yourself, you’re maybe making it with a business partner, but you’re not bouncing these ideas off of other experienced operators who have been through this.”
The need to network is all the more critical as more markets start to mature. “If you’re in an emerging market and you’re not talking to operators in other states, that’s a mistake, because these people have been through what you are about to go through. Yes, every state is a little bit different, but the cycles are the same.”
“The biggest hack,” Willie says, “is getting involved, networking with other operators, not seeing people as competitors, but potential collaborators. A rising tide does lift all boats and if we get together, we can make the industry better and we can make our businesses better.”
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