Three risks that feel like one
Any business with a season knows this shape. A strong stretch carries three separate risks on three different schedules
- Whether you can sell it
- Whether you can float the gap between paying for inventory and collecting on it
- What you’ll owe on the revenue (which shows up much later and doesn’t care that the cash already moved).
In October those feel like one thing, because in October they’re all just optimism.
The third one is where cannabis stops being a general seasonal problem. Your capital is already tied up more than a comparable retailer’s, and 280E means a meaningful share of what feels like margin won’t be there when the tax picture resolves. The cash that clears in December is not the cash you keep.
The buy you’re making now isn’t a purchase
It’s a forecast you’re committing cash to, months before you find out whether it was right.
And you’re building it on last year’s holiday numbers, which are the most flattering data you own. Everyone does this, in every industry. It’s worth naming because a projection built on your best three weeks will systematically point toward buying more. That isn’t a discipline problem. It’s what happens when your only reference point is a peak.
Where over-buying actually hurts
Not on the shelf.
Unsold holiday inventory doesn’t show up as a loss, which is exactly why it’s dangerous. It sits in the asset column looking productive the whole time it’s costing you.
This isn’t just a cannabis problem. It’s an inventory problem, and cannabis just makes it more expensive, because the cash was harder to get in the first place and there’s less of it coming back than the top line suggests.
A client called me in February once, opening with the best month in the company’s history. December had been extraordinary. About a minute later came the real reason for the call, which was that they weren’t sure they could make the next payroll. Nothing had gone wrong. The season performed. The product just sat into January, the cash stayed locked up in it, and what finally moved did so at a discount. They paid full cost for margin they never captured, using money they turned out to need in February.
The question worth answering before you order
If the season goes exactly as planned, what does your cash position look like in February? And if it comes in at eighty percent of plan, what does it look like then?
Most operators I ask have a confident answer to the first and none at all to the second. That second number is the one that tells you how much room you actually have.
Green Wednesday is a real opportunity, and operators who under-buy leave money on the table too. This is just an argument for knowing which of the three risks your order is loaded on, so that whatever December does, February isn’t a surprise.
If you want to walk through what your holiday buy does to your cash position before you place it, that’s exactly the work I do with cannabis businesses every day. You can schedule a call here.
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