6 Budgeting Tips for Cannabis Businesses Planning PR in 2018
Don’t plan for stagnation; plan for success and budget accordingly
If you’ve got a cannabis business, chances are you are working feverishly towards a January 2018 deadline. Whether you’re waiting to start using your license to do business in California, Massachusetts or Maine, begin manufacturing and distributing a new line of products, or to accelerate your business with the roll out of a new technology, you’ve been working hard on a plan and the time to execute it is right now! Many new cannabis businesses focus almost exclusively on perfecting their products or services, and they neglect to explore how to appropriately market to customers.
The beginning of 2018 is going to create a rush of competition, all clamoring for new customers – your customers. Don’t let your competition get the upper hand and limit your market share. Make sure you’re budgeting appropriately for marketing and public relations and there won’t be any surprises, nor regrets.
If you need to build a brand and sell it through the supply chain, you need marketing to establish an identity and give it some legs. If your product requires any morsel of explanation – what it does (better), how it was made, who it’s intended for, where you can get it – then you need PR to establish and maintain the narrative.
Cannabis is a young emerging market with many limitations to consider that most other industries no longer have to worry about. On the one hand, it’s treated a lot like alcohol and tobacco, “taboo” markets that place restrictions on advertising content and targeting. It’s also a pharmaceutical market with extraordinary success stories, but without federal approval so there’s inherent risk. There are also significant limits on banking and insurance for any business that touches the plant making it difficult to do the most basic thing – get paid!
The recent California wildfires caused cannabis farms to go up in flames. Unlike other crops in commercial agriculture, none of those farmers were allowed to insure their crops due to marijuana’s classification as a Schedule 1 narcotic by the federal government. Those crops were meant to supply the growing demand for cannabis in California, which will skyrocket January 1st when it’s legalized for recreational use. All of these limitations fuel stories and education; the people who comply with the law, share their stories, and educate others will emerge as market leaders.
Here are 6 Tips for establishing a Marketing and PR budget for your cannabis business:
- Assess your market. Take a closer look at your competitive landscape, not just right now, but what you expect it will look like next year. Because cannabis laws vary state by state, it’s important to understand what’s happening both in your geographic region as well as in your market category.
- What problem are you solving?
- What are your short- and long-term business goals?
- Who is your intended audience?
- Who is your competition and how are you better?
If you can answer these questions, you are ready to put a PR program in place.
- Apply the formula. The general rule of thumb is to allocate approximately 10% of your gross receipts to marketing and PR. Determine how much you want to grow in 2018 and increase the budget accordingly. For example, if you’ve made $500,000 in sales your first year, with a goal to reach $2M the following year (a 300% increase), plan to allocate approximately $200,000 for the year to marketing. Your marketing budget can be sliced and diced in a number of ways throughout the year, including, among others:
- Public Relations/Editorial
- Trade Shows/Conferences
- Content (website, blog, social media, materials)
In this example, you’re looking at an average monthly spend of just over $15,000. Allocate your PR and marketing needs based on your activity schedule. If you’re launching a new product in April, look for trade shows and events happening around that time and allocate more budget to the months leading up to, during and immediately following that event.
What if you don’t have any revenue yet? Most new startups are pre-revenue, but most also have sales goals, so project conservatively and use those numbers as your target. Start small if your budget is tight, but leave room to grow. At the Story Lab we offer modular services for companies who need some extra arms and legs to handle one-off activities like ghost writing, speaker placement or event planning. This model is designed specifically for companies that have marketing needs (as all companies do) but aren’t ready for a lot of strategy or able to afford a 360⁰ program. For companies that have funding or are producing revenue, a full-service retainer program is the way to go to consistently fend off competitors, develop your customer base, and elevate your position in the market through a series of well-planned and ongoing activities.
- Account for “add-on” expenses. If you want to stay top of mind, plan to attend at least one industry event per quarter. Get out there and be seen and heard. Start with local events that don’t require a lot of travel expenses, but also budget to attend one of the trade shows that bring you a larger audience. Your competitors will be there, so you should be as well. Advertising costs can add up, so be sure to budget for print and online media placements, as well as event sponsorships. These sponsorships are a great way to participate in trade shows and often include a booth, a speaking opportunity or both. If you are seeking investment, plan to budget for investor presentations and events that bring together young companies and accredited investors.
- Evaluate membership fees. As a cannabis business, you live each day under the specter of an unfriendly federal government. If you want to be seen as a legitimate company that is conducting business in an ethical way, you should consider joining the National Association of Cannabis Businesses (NACB), a self-regulating organization that exists to protect cannabis businesses through the establishment of industry-wide standards. Membership to the NACB will not only help you navigate the complex sea of state and federal regulations, it gives you a voice in the maturing of the industry and as a bonus, an extra bump in your marketing and PR arsenal.
- Outsource marketing execution to an agency or handle in-house. Now that you have an idea of what your goals are and what your budget is, leave it to the pros to figure out how to spend it. If you hire a full-time marketing person, make sure to account for both salary as well as the extra expenses outlined above. Whether you hire an agency or an in-house marketing manager, make sure they are marketing professionals. To paraphrase the concern shared by the head of marketing for one of the largest cannabis brands, hire a “PR guy doing weed” not a “weed guy doing PR.” There’s a BIG difference.
If this is your first time hiring a PR or marketing agency, here’s what you can expect: The right PR and marketing partner will take a look at your business goals and come up with the best and most effective ways to encourage your audiences to do what you want them to do. They are entrenched in the market and its media, and are best positioned to tell your story because they are constantly talking to the media covering your space. You also benefit from the industry connections that marketing and PR professionals bring with them. The Story Lab team has facilitated many partnerships over the years by connecting clients with one another, or to other industry players that we’ve met through our constant interactions in the market. We’ve also placed multiple clients in a single feature article. Regardless of the size or sales of your company, to get the full benefit of an agency, consider a retainer relationship and budget at least $5,000 per month. Remember, agencies only stock one product: time. The more you can budget, the better the results, as the more time an agency can spend working on your business, outcomes increase exponentially.
- Beware of the Barter. A lot of cannabis startups believe they can barter for marketing services instead of spending scarce capital. We get it, its scary to spend money to invest in big ticket expenditures, particularly if it pushes you into unfamiliar waters. If you can find a way to get what you need for free, it’s an attractive idea and a lot of times it works very well. But as the saying goes, to make money you have to spend money. This is your business, and it deserves better than what you can get for free.
The opportunity is ripe to grow in 2018; remaining stagnant is not a successful business outcome. At the end of the day, you don’t want to be caught in a sales slump without any budget for a marketing boost just as you don’t want a competitor to swoop in and steal your customers. When you find the right partner and put the right program in place, you will never question how your marketing and PR dollars were spent. To learn more about how your business can benefit from marketing and PR, contact The Cannabis Story Lab at email@example.com.