Cannabis Business Problems & How to Avoid Them

Cannabis Business Problems & How to Avoid Them

80% of startups fail within 18 months. This percentage is even higher for cannabis, especially when considering how cannabis business problems spark failure.

Legalization is still maturing. This, in addition to the disparities from state to state and federal prohibition of cannabis, makes it increasingly challenging to maintain compliance with regulating forces.

As with all highly regulated industries, dreams of success in this ‘budding’ industry can go up in smoke with one wrong move. With reputations, licenses to operate, and livelihoods at risk, we know the most common cannabis business problems and how to solve them. 

This is precisely what we aim to cover in this article.

Limited Cannabis Banking Opportunities

Even with the sale of cannabis-infused products expected to hit $3 billion in sales this year, providing banking services to cannabusiness operators can be risky. This is one of the most common cannabis business problems, causing businesses to operate on a cash-basis.

Despite more banks offering financial services to cannabis businesses than ever before, many canna-companies still have trouble securing assistance from financial institutions. Federal cannabis prohibition makes working with cannabis-related businesses a liability, and even with the industry progressing, some banks are hesitant to work with these businesses.

Contrary to myths regarding banking for the cannabis industry, bank and credit unions are allowed to bank cannabis. According to FinCEN’s BSA Expectations Regarding Marijuana-Related Businesses, institutions must conduct some customer due diligence that usually includes the following:

  • Contact the right state authorities to determine whether the cannabusiness is appropriately licensed and registered.
  • Analyze the license application and all related documentation from the business to obtain a state license to operate in its cannabis niche.
  • Ask state licensing and enforcement authorities for information regarding the business and all related parties.
  • Learn about the normal and expected activities for the business, such as the kinds of products it will sell and the customers it will serve.
  • Continue monitoring publicly available sources for adverse information relating to the business and all related parties.
  • Continue monitoring for suspicious activities.
  • Refresh information for periodically continuous due diligence.

Bypassing Limited Banking Opportunities

As a business owner, you already have a lengthy list of responsibilities. But it’s crucial to forge solid relationships with financial institutions and investors after producing your financial strategy, business reporting, and other essential documentation.

First, you’ll need the documentation to show your business is legitimate. Once you have your documentation in order, it’s time to find the right financial institution. Many cannabis business owners lose banking access at one point or another. However, plenty of banking solutions exist.

All of our clients have banking, but a lot of them are through credit unions. The credit unions typically charge around 2%. However, some other fee structures exist.

Traditional banking at a big bank means you’re making sure you don’t have “420” or “cannabis” in your company name. This is a big red flag, and while these institutions are not looking to call you out, they’ll likely shut you down if they find out you’re in cannabis.

Many of our clients have a separate, non-cannabis entity, and that entity gets banking. In this case, the non-cannabis entity pays many of the expenses on behalf of the cannabis one. In essence, this comes down to the accounting to ensure that everything is being accounted for properly. Hence, solutions exist to these common cannabis business problems.

Expired or Irrelevant Licenses

Each state has its own set of regulations for licensing. These rules vary among medical and recreational cannabis businesses.

On municipal and state levels, cannabusiness operators must have all of their documentation in order. Some states require business licenses AND retail licenses. You might also need dispensary or cultivation licenses. Regardless of which licensing applies to your business, the regulating forces of the cannabis industry demand specific documents in conjunction with your operations.

Unfortunately, it’s all too common for business owners to make cannabis compliance mistakes. Here’s what many fail to do:

  • Learn which licenses they need
  • Have all application and association fees paid
  • Maintain the right licenses

Without the right documentation, compliance is impossible. This in mind, if your business operates without adhering to the compliance standards in place, any success you’ve made in this industry is at risk.

Avoiding Expired or Irrelevant Licenses

To ensure complete county, state, and federal tax compliance, you – or someone you work with – will need to stay informed on all current regulations and documentation. This means checking and monitoring your licensing needs, keeping all documentation up to date, and make sure all application and associate fees are paid.

If you have someone handling this aspect of your business, you’ll keep your business audit-ready in case regulatory forces decide it’s time for an inspection. In turn, you’re always prepared for a worst-case-scenario situation before it happens.

Failing to Report Inventory

In 2019, Denver’s Department of Public Health & Environment conducted 25 dispensary inspection reports. According to some preliminary documents filed on the department’s website, 20 dispensaries included a minimum of one “hold and quarantine flag.” This is a failure rate of 80%, and it was the result of industry professionals neglecting their inventory management duties.

Inventory management, especially seed-to-sale tracking, is crucial for cannabis compliance. In the State of California, failing to report cannabis inventory can result in a compliance infraction. This is the same regulatory practice found in other states, as well.

The Bureau of Cannabis Control demands notification of any inventory discrepancies. However, without the proper inventory monitoring processes in place, it’s easy to violate compliance.

Effectively Monitoring Your Cannabis Inventory

Cannabusiness operators must regularly submit compliance inventory reports. This documentation needs to be free of inaccuracies to avoid costly infractions.

To steer clear of these violations, you should first incorporate these cannabis inventory management tips to create a set of inventory management SOPs. If you’re still not satisfied with your business’s effectiveness at handling inventory management, analyze your SOP’s and determine any essential amendments to improve them.

Operating Plan Violations

Many state regulations – and even some local regulations – demand cannabis business operators submit operating plans. Typically, these documents are rather in-depth, encompassing all aspects of your plan to conduct business.

From the start of your endeavor, you’re expected to have a plan in place to keep your business aligned with its goals and compliance demands. However, ambitious entrepreneurs looking to break out into the cannabis industry don’t always know they need an operating plan in place. 

Other times, a cannabusiness operator has an approved operating plan in place but decides to make amendments after approval without informing the right regulating entities. The problem here is that even if your changes are to improve regulatory compliance, you’ll need to seek permission.

Avoiding Operating Plan Violations

Depending on your business’s needs, you’ll either need to create or alter your operating plan. Then, if your operating plan needs amending, you can eventually make the changes once you seek approval from regulating forces.

Rather than making changes on a whim, plan them. Determine what you need to do before altering your operating plan, and make these changes only after you get permission.

SOLVE YOUR CANNABIS BUSINESS PROBLEMS WITH NORTHSTAR

Are you looking for solutions to problems unique to the cannabis industry? For recommendations regarding financial services, licensing, inventory management, operating plans, and more, contact us today!

Cannabis Inventory Management Tips to Stay Compliant

Cannabis Inventory Management Tips to Stay Compliant

Whether you’re stocking hundreds or thousands of cannabis products, cannabis inventory management is essential for success in the cannabis sector. Operating in this industry means you need to know where your inventory is, how much you have available, and when you’ll need to restock.

According to Wasp Barcode Technologies, 43 percent of small businesses in the United States either are not tracking their inventory, or track it with a manual system. While a manual system could work for some businesses, the cannabis sector’s strict regulations demand operators to eradicate any potential for human error.

Cannabusinesses must track their products on an individual basis to remain compliant. Supply chain issues also raise the need for cannabis inventory management.

In this article, we discuss several actionable tips and strategies to simplify processes, automate inventory management, and take precautionary measures that promote successful inventory management in the cannabis sector.

1. Use FIFO (First In, First Out) for Inventory Accounting

The FIFO inventory management principle is the industry standard in food production safety. However, this principle will also ensure you sell cannabis products in the order they’re received. 

Cannabis products must be sold long before they expire. Keeping expired stock on the shelves could compromise the safety of your products, and this can result in dissatisfied customers and a compliance infraction.

With this method in place, cannabis business operators avoid stocking or selling stale or expired products. Here are the five steps for using FIFO:

  1. Find products that have the earliest use-by, expiration, or best before dates.
  2. Discard products damaged or past their expiration dates.
  3. Stock your oldest (but still good) items at the front of your shelves.
  4. Put your newer stock behind the older stock, with the most recent dates at the back of your shelves.
  5. Sell the oldest items from the front of your shelves first.

These steps will ensure you sell your products before they expire by encouraging you to prioritize selling the products expiring soonest.

2. Use an Inventory Management Software

Inventory compliance in cannabis is crucial, and when you have Point of Sale (POS) and inventory management software in place, you’re handling inventory management like a professional.

Between the projections, reconciliations, and regular inventory audits a cannabis POS system facilitates, these systems are essential for every cannabis business operator that handles inventory. However, the right inventory management software will integrate with the government’s reporting system and make automated compliance reporting simple.

An inventory management system also reduces human error. The data-related features such as automated product equivalency, purchase limit calculations, product recall management, and batch tracking encourage data-backed decisions that increase your efficiency and help you avoid compliance infractions.

3. Analyze Data You Gather from Your Customers

Improve upon your inventory management by analyzing the data your customers generate. As you manage your inventory and gather data, you can make your business more effective and respond to your customers’ demands.

With the right data, you’ll understand what your customers want, how much you should order, and what margins will encourage your business’s growth. By effectively using this data to streamline your inventory management processes, you’re also positioning your business to make the most of any opportunities you uncover during your operations.

Overstocking is a problem. However, you also need to store enough inventory to provide your customers with products, regardless of whether you’re experiencing a peak in sales.

Your software should generate inventory and sales reports to ensure you know how much product you should have on-hand at any given time. This results in your business running as efficiently as possible.

4. Standardize Your Process for In-house Inventory Audits

While your software will provide accurate reporting for compliance, you’ll still need to standardize your in-house inventory audit process. This information will help your business recover lost sales, make better ordering decisions, and catch internal thefts and frauds with ease.

Inventory-related compliance infractions can result in a full state audit. By establishing your SOPs for in-house inventory audits and performing a full audit of all inventory weekly, you’ll increase your chance of dodging a state audit.

Some cannabusiness operators use cycle counting to audit their entire inventory each month. This is easier than counting all inventory at once, and it’s just as effective. To complete accurate inventory counts by cycle counting, you’ll count portions of your inventory at scheduled intervals throughout the month until you’ve analyzed your entire stock.

Daily inventory reports are also ideal. While it’s challenging to maintain inventory audits, conducting a minimum of an audit per week is an excellent way to reduce fraud and theft. Just make sure the person counting your inventory is not also handling your cash.

5. Prevent Employee Theft

While you’ll need to show your business is secure for your application, it’s also important to consider how much product you’re handling each month. Simply put, it’s easy for products to go ‘missing’ when there’s so much temptation for dishonesty.

According to the Marijuana Retail Report, “up to 90% of losses reported by dispensaries are due to employee theft.” This is why incorporating strict protocols to secure your inventory is so crucial.

These are some of the best options available to keep cannabis inventory secure:

  1. Conduct thorough background checks during the hiring process.
  2. Create limited access areas for inventory stock.
  3. Require employee identification to get into and out of these limited access areas.
  4. Keep a record of all staff coming in and out of inventory areas to prevent fraud.
  5. Use alarms, video surveillance, and lighting to discourage theft.
  6. Hire security to watch for inconsistencies in staff and customer behavior.

6. Properly and Securely Store Cannabis

Successfully managing cannabis inventory involves organization. This is why some cannabis business operators hire an inventory manager responsible for inventory maintenance.

Your inventory storage space should not be full of clutter. Instead, it should be well-organized and ready to pass an inspection at any time.

Store your products appropriately to ensure they last. This can mean air-tight containers for extracts and flower, refrigeration for perishable edibles, and temperature-controlled climates to keep all products as fresh as possible.

The inventory storage space should also be secure. Use your state’s regulations to guide you as you secure your inventory. While this will keep your business compliant, you’ll also effectively protect your inventory from unexpected discrepancies.

LEARN MORE ABOUT CANNABIS INVENTORY MANAGEMENT AND COMPLIANCE

Are you concerned that your inventory SOPs aren’t contributing to your business’s effectiveness? For recommendations regarding inventory management, software, and compliance, contact us today!

How Expensive Is Expired Inventory in the Cannabis Industry?

How Expensive Is Expired Inventory in the Cannabis Industry?

No one thought it was possible when cannabis was first legalized, but there is a growing problem in the cannabis industry: expired inventory.

Cannabis is, ultimately, a green and leafy plant. It conforms to all the rules of plant life, including the fact that it can go bad. Once you remove a cannabis bud from the stalk, it dies just like any picked flower. It begins to dry out, wither, and eventually rot if not cured correctly. Even processed cannabis products go bad over time, just more slowly. Cured bud becomes too dry and crumbles into dust. Refined concentrates slowly break down chemically until the quality is degraded.

 

The Growth of Expired Cannabis

 

Unfortunately, some states have been a little too effective at creating an inventory before demand has a chance to catch up. Even Canopy Growth, the world’s largest cannabis company, is shutting down over half it’s greenhouses. Partly to grow outdoors, now that this is legal, but also because they are producing more buds than anyone knows what to do with. And the excess is expiring in storage.

This is a problem for dozens of cannabis grow-ops across the country. When demand doesn’t meet the cannabis plant’s incredible ability to produce, you wind up with expired extra. now let’s talk about what that expired cannabis inventory is really costing you, and why to trim your production to meet local demand.

 

Greenhouse Resources

 

  • Planter
  • Fertilizer
  • Water
  • Lights
  • Climate Control

 

The first cost of expired inventory needs to be assessed right at the beginning: the resources you use to grow. How much do you spend on lights, climate control, nutrients, soil, and of course the green house space itself? That all adds up. Together, your growth costs can be calculated as a lump sum. Now divide that sum by the total number of ounces of bud you harvested. That’s your cost per ounce of cannabis to grow.

Now multiply your growing cost-per-ounce by the number of ounces that were expired and had to be thrown out. That’s the amount in grow-costs (or the Grow-ROI loss) incurred by expired inventory.

 

Product Processing Costs

 

If you process your own bud, as many grow-ops do, then expired finished products that go unsold also cost you every step along the way. Just like your greenhouse growing costs for unsold cannabis, you’ll be losing a similar percentage of the investment you put into processing the cannabis products.

Whether you are curing bud to last longer in a jar or you’re refining concentrates into butters and shatters, the resources you use to produce expired products are part of that expiration cost.

 

Materials

 

Every cured batch of cannabis uses up a few key supplies. Chemicals used to cure the leaf or concentrate the dab must be restocked, even if you don’t sell what they were used to produce. Dishes and implements, disposable gloves and safety gear, and the supplies used to clean up afterward are all part of the cost.

 

Man Hours

 

Don’t forget the value of your employee work hours as well. From the growers who tended and harvested to your teams working carefully to cure and concentrate, no doubt a few hours went into every product that goes unsold. Pay those wages without direct ROI from revenue.

 

Wasted Packaging Materials

 

For brands that package their own products, as many do, packaging costs should also be considered. There are many precise regulations on how cannabis products must be packaged and labeled. Seal, child-proof, label as cannabis, and include finer details. This means engineered custom packaging every time.

Most brands package all of their created products, whether or not a sale is guaranteed. Of course you do, how else would your products get into customer hands? But each package put on cannabis that expires is technically wasted material. It must ultimately be thrown out rather than reaching customer hands.

 

Storage and Transportation

 

Another consideration is the cost of storage and transportation. When larger volumes of cannabis expire in storage, this can equal a significant cost in what you spent to keep the products. Commercial storage space, especially space that is zoned or will accept cannabis as the contents, is not always cheap or easy to find. Likewise with services or drivers who will comfortably transport your cannabis between facilities or out to local dispensaries.

One of the worst things about expired inventory is that it takes up the maximum amount of storage cost for its volume. After all, it sits in your storeroom or warehouse for the longest possible time before you throw it away.

 

Disposal Expenses

 

How Expensive Is Expired Inventory in the Cannabis Industry?

Men using a digital tablet in storage room.

 

Finally, there’s disposal to consider. Cannabis is classified as a controlled substance, even where recreational use is legal. This means that you can’t just chuck your expired product into the nearest dumpster and call it a day. Dispose of cannabis like a medication, which means contracting with a medical disposal service.

Each disposal is a pickup order and many services charge by weight as well as number of pickups. The more cannabis you must dispose of, the more medical disposal costs you incur.

 

Plan Ahead Carefully to Avoid Cannabis Inventory Waste

 

The cannabis industry is in a constant state of flux. Every state is changing differently as the laws evolve to support or challenge the system. You never know when the playing field is going to change again, the costs that change will incur, or even if that change is for better or worse. For example, part of the reason Canopy Growth is closing greenhouses is because outdoor cultivation has been legalized, and is more affordable in the long-term. Good in the long-term, but costly to adapt this year.

The good news is that savvy grow-op owners can plan for the future like any other retail supplier. Look at the numbers and watch not just where dispensaries are opening, but how many people are buying. Don’t expand too fast, and only increase your inventory size when there is a demand to meet your growing supply.

 

Sound Financial Advice for Cannabis Business Owners

 

Here at Northstar Financial Consulting, we know it can be challenging for Cannabis entrepreneurs, business owners, and industry leaders to get the kind of sound financial advice you need. Financial professionals and institutes often shy away from this brand-new and legally complex industry. That is exactly why we’re here to help.

Whether you need CFO services or someone to help you look over the trends and plan for next quarter’s inventory, we’re here to help.

What Is a Cannabis Brand’s Financial Liability for Customer’s Losses?

What Is a Cannabis Brand’s Financial Liability for Customer’s Losses?

For every business, there is a liability. It should come as no surprise that the number of liability claims against the cannabis industry are on the rise. After all, the industry is growing and any business industry is a target for liability claims. The more business there is, the more financial liability claims there will be.

Claims against that perfectly good marijuana products:

  1. Made customers make bad decisions
  2. Made customers feel poorly
  3. Wasn’t what the customer expected

They handle cases on a case-by-case basis. But the real liability is a financial liability. What happens if your customers (and/or business partners) suffer because of your cannabis business’ mistake or oversight?

Today, we’re here to talk about what qualifies as a liable situation for your cannabis business and what your financial liability may be. The most important thing to remember is that precedent is mostly unset in these cases.

 

Cannabis Industry Financial Liability Conditions

 

In business, many things can be claimed against liability, including the slipperiness of your floors. But we’ll be focusing specifically on liability related to the cannabis product and customer losses. Here are your top concerns that we’ll cover one at a time in this article:

  • Poor Quality Product
  • Damaged Packaging
  • Mislabeling
  • Failure to Warn
  • Unclear Dosage Instructions

 

Poor Quality Product

 

The single biggest concern for any brand of organic products is product quality. Those who grow, cure, and process your cannabis products are highly responsible for the ultimate experience of the customers, and for providing the expected effects the customer is counting on. A poor-quality product ranges from cannabis that tastes bad (not liable) to cannabis that is harsh to smoke/vape (liable).

If you are a dispensary selling products of others, liable cases are more likely to be based on the customer’s discomfort. However, if you are the grower or processor, you may also be financially liable for the financial losses of your business customers like dispensaries that may have sold your poor quality product.

 

Damaged Packaging

 

Damaged packaging, on the other hand, is a very serious problem. Cannabis packaging is extremely regulated. It must be sealed, child-proof, and clearly labeled. Cannabinoid compounds improperly packaged might harm a customer. If you sell improperly packaged cannabis products, or products with damaged packaging, you can absolutely be held liable by customers.

 

Mislabeling

 

Beyond the obvious. Mislabeling has become one of the leading causes of cannabis industry liability claims. Labeling of cannabis products is both one of the greatest sources of frivolous claims and the greatest source of economic claims, which we’ll cover in more detail down the line. Labeling is not only highly regulated by each legalized state, it is also used to determine whether customers are safely and accurately informed on how to take their cannabis products.

 

TCH-Free Contains THC

 

  • The single most dangerous mislabeling liability is the TCH-Free label for CBD products. Legally and financially, there is a huge difference between products that have trace amounts of THC and products that are completely free of THC. Why? Because we’re talking about customer credibility and job security.
  • Many of the customers who buy THC-free products work for strict or federal employers and could lose their jobs if they drug-tested for THC. They could lose clients, credibility, security clearance, and possibly put themselves at risk of their own lawsuits. If a customer experiences economic losses due to mislabeling of your product, you can and likely will be held liable.
  • There is not enough precedent to identify the total potential cost of this liability case.

Leads to Medical Complications

 

  • The next consideration is whether mislabeling leads to medical complications. If a label is designed so that customers misunderstand and take too large a dose, or even purchase the wrong type of cannabis product, your brand could be held liable. Charge medical complications and long-term medical consequences to your insurance.

Leads to Legal Complications

 

  • Finally, there are claims based on legal costs to customers. This is where most of the spurious mislabeling claims come into play, though some are legitimate and will be held up in court. If someone does something dangerous while on cannabis, they or their family may file a claim stating that the person was ill-informed.

 

Failure to Warn

 

What is a Cannabis Brand's Financial Liability for Customer's Losses?

 

Failure to warn often, but not always, falls into the mislabeling category. This means that claiming you failed to alert them to the product’s dangers before they purchased and used it. Your obligation to warn varies depending on your state and county laws. However, the basics start at using the approved cannabis warning symbol large and clear on the label.

You will then likely be required to include a few written warnings on the packaging so that customers are aware they can potentially experience psychotropic effects and should not operate large machinery.

 

Unclear Safe Dosage Instructions

 

Even if you follow the labeling laws to a T, customers who take too much may claim that you are liable for being unclear about safe dosage. Edibles are the biggest risk in this category, as customers often don’t realize how long it takes for medical snacks to take effect, Then, often, they eat too much while waiting for the first signs. If you don’t label dosage portions clearly, and a customer gets sick from taking too much, it’s possible they file a case.

 

Are You Financial Liability for Customer Economic Losses

 

Now let’s talk about financial liability. Most libel cases settle before or after court. However, the level of responsibility and the amounts that may be asked are not yet strongly established. Each state will also approach liability differently, based on their own laws and precedent for loss liability.

Currently, the liability discussion in the cannabis industry has turned toward insurance. Unsurprisingly, cannabis businesses are struggling to find insurance that actually fully covers their business and products from liability claims. Many standard insurance providers have a pre-written caveat that excludes coverage of all Schedule 1 or “psychotropic” substances, which includes cannabis.

 

Learn More About the Cannabis Brand’s Financial Liability

 

If you need financial guidance to find the right insurance coverage, defend against a financial liability claim, or help to prevent the possibility of a future claim, contact us today!

A Quick Professional Guide to Buying Commercial Property

A Quick Professional Guide to Buying Commercial Property

Here at Northstar Financial, we know that buying commercial property for your business or investment portfolio is all about knowing what you want and building a smart sequence of steps to get there. There are so many different types of commercial property ranging from pocket-sized retail to large manufacturing plants that your priorities and confidence are what make the biggest difference in a successful deal.  For cannabis businesses, you’re likely looking for either a spacious growing area or a modest shop space in town. Both usually fall into the mid-range of local pricing.

Whether this is your first major commercial purchase, you are purchasing on behalf of someone else, or you are branching out from a previous routine of investments, it helps to have a road-map. Today, we’re here to outline a quick buying guide for commercial property. Join us for a step-by-step outline of the right way to investigate, prepare, and purchase commercial property.

Buying and Renovating Commercial Property

 

  • Refine Your Priorities
  • Define Your Price Range
  • Compare All Suitable Properties
  • Secure Your Financing
  • Build Your Buying Team
  • Conduct Negotiations
  • Close the Deal
  • Renovate Your New Space

Refine Your Commercial Property Priorities

 

When planning to buy property, your first step should always be to refine your priorities. What are you looking to accomplish with this purchase? What size and features and qualities should the property possess to be a candidate worthy of consideration?

The best way to tackle this step is with three separate lists:

  1. Needs
  2. Wants
  3. Deal-Breakers

In one list, write everything that a property must absolutely have for you to consider it. This includes size, amenities, location, parking, and anything industry-specific that would be required to make the purchase worthwhile.

In the second list, write everything it would be nice to have, but you won’t insist on it. This might include a nice outdoor space, newly renovated infrastructure, an indoor gym or cafe, or other types of business in the nearby vicinity.

In the final list, write down everything that would cause you to walk away from a deal, no matter how many needs and wants it might also have. This list might include poor plumbing, paid parking, a cracked foundation, or certain types of non-compatible neighbors.

 

Define Your Price Range

 

Next, define how much you can afford to put into the purchase. Remember to break this number down. You may have a lump-sum in mind for your total investment budget, but property purchases always involve a mass of costs in addition to the down-payment and loan. These include inspections, title checks, realtor fees, closing fees, utilities, property tax, renovations, and more.

Use this math to calculate the true cost based on the “Sticker Price” listing cost when calculating how much you can really afford or are willing to invest.

 

Make a List to Compare All Properties Available That Meet Your Needs

 

Now that you have a definition of your needs in a building and the listing price that measures up to your budget, it’s time to collect candidates. Work with your agent to find and explore local opportunities that meet your needs. Put together a list of every property in your search radius that might meet your needs both effectively and financially.

Don’t forget to include buildings that can be renovated to suit your needs. Some locations are diamonds in the rough with considerable office renovation benefits. Their imperfections are opportunities to buy at a lower price and transform the space into your dream-facility instead of buying something finished and workable.

With this list, you can compare properties side-by-side based on price, commercial value, attractiveness, and amenities that might sway your decision one way or another.

 

Secure Your Financing

 

Before you take a serious next step, make sure your financing is 100% in order and ready to bid. Talk to your bank and get the loan processed and pre-approved. Target that pre-approved loan with the amount you’re prepared to put down and the maximum loan amount you’d be willing to take out. This gives you room to breathe so that you can reach to your upper-limit for a great place or scale down if the best option is lower cost than your maximum budget.

 

Build Your Buying Team

 

Now that you’re preparing to make a final decision and buy, it’s time to put together your team. In addition to your agent/broker, you will likely also want to line up your accountant, title-checking service, and your inspectors. For certain properties, it’s a great idea to also bring along your favorite renovation contractor to provide a helpful rough estimate of costs for any updates, improvements, and renovations you may want to do if you buy.

 

Run the Numbers on Each Property Candidate

 

The next step is to get serious about each of your property candidates. Work with your team to run the realistic numbers on what it would cost to purchase, update, renovate, and maintain each property on your list. This will reveal the true details of each purchase option beyond the surface listing price and assumed property tax.

Put together a dossier on each property so you can compare them side-by-side on closing costs, upgrade costs, maintenance costs, and comparative value based on your buying priorities.

 

Conduct Negotiations

 

A Quick Professional Guide to Buying Commercial Property

 

When you’re ready to make a bid on one or more properties, contact the sellers and open negotiations. In this phase, you will most need the assistance of your real estate agent/broker and your lawyer to check and double-check each term proposed. Every negotiation is different, and every seller/property combination will provide a unique negotiation experience.

Sometimes, a seller will point out legitimate extra qualities to the building you hadn’t noticed, and sometimes you will need to bring them down based on discovered maintenance concerns. Be aggressive but fair, willing to give and take. Especially if the seller offers to throw in extras like vehicles, furniture and equipment, ongoing sweetheart deal contracts, and more. Assess the value of everything brought up in negotiations and consider each property you negotiate on based on how the negotiations shake out.

 

Close the Deal

 

Finally, when you reach the best possible cost-for-value on a property, it’s time to close the deal. Closing is a lot more complicated than just shaking hands, but you can rely on your real estate agent/broker to guide you smoothly through the title transfer, closing costs, and final contract signing because they have done it dozens to hundreds of times before.

 

Renovate Your New Space

 

When the papers are signed and the new property is completely yours, it’s time to renovate. Almost any commercial building will have a few things you will want to update or change. Many businesses have an interior style based on brand and company culture or the experience you want to create. Every commercial real estate purchase is different, but your renovation contractor can make your vision of a property’s potential into reality and enjoy the considerable benefits of office renovation. Create your perfect office space, hospitality venue, or industrial work environment with the full freedom of a property owner. No need to worry about putting it all back at the end of the lease. You have the deed and this property is yours to transform to best suit your sense of style and the needs of your business.

 

Learn More About Buying Commercial Property

 

Buying a commercial property is a far more involved and carefully weighed process than buying a home because there are so many more factors to consider. Whether this is your first commercial property purchase or you’re looking to hone your skills after rocky previous experiences, the right financial decisions will help smooth the process. Contact us to explore your financial and legal options for buying commercial property in your state.