Budgets can get a bad rap—they’re often compared to diets from which you are destined to deviate; however, businesses that fail to budget ultimately fail themselves. Budgets are living documents that define the relationships between your customers, your employees and your business, and they provide context for how your business operates. Budgets not only connect these groups, they also place values on these relationships.

The first step in building a budget is to collect the information you will need to build your budget. This should include:

• how many customers (if any) you have served;
• the number of patients registered for your state’s program, and the monthly change in that number;
• your service area’s population (county/metropolitan area, etc.);
• the number of dispensaries that service that area;
• products you sell, the retail price for those products and how much they cost you;
• a list of accounts from your accounting software;
• the amount spent last fiscal year per vendor (if available); and
• competitive pay rates in your area.

A budget that includes this information becomes an opportunity to incorporate forecasting and identify tools available to you to not just survive, but to thrive. There is a way to build a budget that will serve as a roadmap to your dispensary’s success, and it has four components:

1. Revenue Model: Visibility to revenues, margins and growth.

2. Staffing Model: Who is necessary for your business to deliver on this?

3. Operating Budget: What resources are needed to make it actionable?

4. Projected Profit & Loss Statement: What does it all mean for your business?

1. Revenue Model:

What do you sell, to how many people, at what price and at what growth rate?

Understand the level of demand for cannabis products to determine what you will spend on people, materials and services. Spending, which is the bulk of a traditional budget, is highly dependent on other factors being accurate. If “content is king,” context is the kingdom, and your customer volume is that context.

Initial customers: Your baseline of volume. Consider that the total addressable market is likely to be 2 percent to 3 percent of your local population.

Increase in volume per month: The growth in your volume. In general, consider how many new customers you can expect less any customers you won’t retain. For perspective, look at the monthly increase in registrants for your state’s program. (Note: If your retention rate is lower than 80 percent, there is an opportunity for organic growth through tools such as loyalty programs, pricing, customer service and product selection.)

Spend per customer per month: How much does a typical customer spend per month in your dispensary? While $180 to $220 is a good benchmark, it will vary based on local demographics.

Sale price and cost per product: This is the space to segment your product lines: flower, oil, extracts, edibles, etc. What are typical market prices in your area? Also, make baseline calculations for your gross profit margins (retail sale price minus the cost).

Calculate monthly projected revenue using the formula: customers x monthly spend.

2. Staffing Model:

Who maintains your business and services your customers?

Reviewing your revenue model, consider how many customers you will have each month, how long each transaction will take, how many shifts will be needed and how many employees each shift will require. Research competitive pay rates for your market so you can retain your top employees.

Next, build an employee list organized by department and role that includes each employees’ monthly gross wage.

If your market allows for processing and packaging of bulk product at the dispensary, separate employees participating in these activities from employees who aren’t, as there may be tax advantages. Consult with your accounting and legal resources on what is, and is not, allowable as a deduction.

3. Operating Budget:

What infrastructure is required, and what tools will make operations more efficient?

This is a more traditional budget view, and an opportunity to be creative in where you put money to work in growing your business.

Volume-based/Consumables: This is the space to include everything that goes with each transaction, including labels, other printed customer materials, child-resistant bags, other packaging, etc. Examine the per-unit costs for each of these items and multiply by your projected monthly volume.Tip: If you are packaging flower at the time of purchase, multiply the projected number of monthly prepackaged flower sales by the per-unit packaging cost.

Building, upkeep and utilities: These are often fixed or overhead costs associated with having and maintaining your brick-and-mortar storefront.

Operations: What goes into making the day-to-day happen? Security monitoring, seed-to-sale and point-of-sale (POS) software, paper, ink and even sticky notes.

Corporate and professional services: This section includes everything else to make the company run. If you have multiple dispensary locations, this section would be universal to all of them. This is also where you can consider the return on your investment for certain line items, like: Is it less expensive to outsource your accounting and legal services? How are your customers finding you? Should you invest in websites such as Leafly and Weedmaps, or printed brochures at certifying physician offices? Where can you invest in your employees? Educational opportunities such as industry conferences and continuing education can pay big dividends down the road.

Payroll budget: The sum of your monthly wages, payroll tax (roughly 9.5 percent) and cost to provide benefits.

Capital expense budget: Any construction, equipment or big-ticket/one-time purchases typically go here. The most common are: build-out costs, furniture, security cameras and computer hardware. Plan to replace about 20 percent of your computer hardware in any given year, given that they depreciate on a five-year schedule.

Before moving on from this section, review all your expenses and vendors used in previous years. If they were not one-time purchases, ensure they are accounted for in your operating budget.

4. Projected Profit & Loss (PP&L) Statement:

What is the bottom line?

This is a summary page suitable for investors and executive management. It also serves as an overall barometer for your company’s health. Tally all expenses from the operating budget to calculate the Run Rate of the business.

Your Burn Rate equals your projected revenues minus that expense total (Run Rate). It will provide you with a good indication of any cash requirements to float your business until you reach a cash flow-positive status.

By adjusting variables in the revenue model, staffing model and operating budget, you can quickly understand how this impacts your bottom line and the overall success of your business. Include your key managers in this process to enroll everyone in the plan. Motivate your employees by sharing monthly statistics like sales relative to forecast, and expenses relative to operating budget. The more transparency to this level of information, the more invested employees will be in the dispensary’s success.

Colin Kelley is a member of the board of governors for LeafLine Labs.

I opened my first medical marijuana dispensary, Berkeley Patients Group (BPG), in 1999. Right from the start, my charismatic co-founder Jim McClelland pushed one clear goal: to provide members with the best cannabis. It helped that Jim was a cultivator, producing particularly delicious and dependable cultivars of Romulan and Bubbleberry from his Oakland warehouse.

This simple mission drove our team to create a menu full of potent and pure flowers and to seek out the finest hashes and ingestible forms of cannabis for our patient members. It was in a race to the top, but we never scrimped on quality. We stringently avoided any rush to commercialize the cannabis market or to homogenize the products.

The goal was also to help people enjoy life, with cannabis acting as both social and physical lubricants. In fact, all dispensaries back then had active event calendars, filled with activities to attract vibrant memberships. Dispensaries also provided direct assistance to patients. California law back then even mandated that dispensaries act as “caregivers,” providing for the “health, safety and housing” of their members.

When Jim passed away a year into the project, the importance of dispensaries really hit home for me. They were far more than retail shops; the social club aspect was equally important, providing an outlet for people who were critically and terminally ill to enjoy themselves. Dispensaries acted as sorely missing homes-away-from-homes for people, when they needed it most.

I left BPG after 10 years, and took over leadership of Magnolia Wellness, a newer dispensary in Oakland, Calif., in 2014. This scrappy city, with its diverse population and thriving social scene, suited my desire to prove that dispensaries were far more than simply retail outlets. After all, Magnolia’s founder, Dave Spradlin, had modeled the dispensary on BPG, which made it an easy transition for me. Today, Magnolia has a social calendar filled with exciting events, a menu of exceptional products and a vape lounge where clients can hang out and consume cannabis. And, it’s renowned for social responsibility and cutting-edge politics, often leading local regulatory changes that improve dispensary rules.

It’s not easy running a socially responsible, politically active, fiscally sound dispensary; on the contrary, it’s nearly impossible. Few will reach this goal, especially without guidance from industry experts willing to share knowledge and to coach and mentor entrepreneurial, like-minded people. With that in mind, I offer this list of my top operational challenges, and solutions that make them easier to manage.

1. Inventory Management

Challenge: Creating a stand-out menu

Solution: Doing competitive analysis is key; you have to know what other dispensaries have on offer and at what price. Use this intelligence to create a menu that has a mix of standard products, like Kiva Confections Blueberries, and items that are exclusive and available only at your shop. Making strong connections with suppliers is key, as you will have to convince them that your dispensary is the best place to feature their products.

Challenge: Keeping stock consistent

Solution: Watch sales closely and know what products move consistently. Clients will expect these to be available every time they shop, and they will be disappointed if you don’t have them in stock. They may even go somewhere else next time. Make sure to order more of these items than needed each week, so shelves don’t go bare. Keep good relations with distributors, so you can get special orders if you unexpectedly run short.

Challenge: Buying wholesale cannabis

Solution: Dispensaries buy cannabis on net terms, on consignment and cash on delivery. Maintain good relationships with wholesalers, so your inventory manager/purchasing agent can stock a large range of products without having to go out-of-pocket for everything at time of purchase. You will have a larger inventory and access to more unique products by maintaining a variety of payment terms with vendors.

2. Staffing the Dispensary

Challenge: Finding excellent employees

Solution: Start with clear job descriptions, detailing the knowledge, skills and abilities each position requires, and post these listings in places that people with these skills will see them. Do ranked phone interviews, and select only clearly experienced people for in-person interviews. Ask tough questions at the in-person interview, so you can get a feel for each candidate’s personality. When you find the right person, give them a written job offer outlining pay, benefits and performance expectations.

Challenge: Training staff

Solution: Provide each new employee with a staff manual that clearly explains all company rules and expectations of job performance. Create department-specific training programs, so that each staff member knows exactly how to do their job. Identify staff mentors to work with new employees during a 60-day to 90-day probationary period. Unskilled, unprofessional people make other employees uncomfortable and will reduce overall productivity—so be discerning, and terminate those who either can’t do the job or are not a good fit during probation.

Challenge: Retaining the best people

Solution: Once you find great people, work hard to keep them. Talented, satisfied workers are the key to driving sales and maintaining excellent customer service. Pay and benefits are a big part of this, so make sure to offer competitive wages with raises, regular bonuses and good benefits. The best employees will stick around if you offer health insurance, paid vacations, sick pay and, eventually, a retirement plan. You will also need to create a vibrant workplace, or the best pay and benefits won’t matter. Use your team’s talents to the maximum. Create space for innovation, help implement great ideas generated by staff, and demonstrate again and again that each individual person on the team is essential to the whole.

3. Marketing the Facility

Challenge: Standing out from the crowd

Solution: Know the competition, and always strive to be better. Take time to research and create a marketing and brand management plan, and spend your budget strategically. Design a beautiful logo, develop a style guide and create a physical space that will blow people’s minds. Hire the best possible inventory management team to seek out and secure amazing cannabis products. After all, your clients expect the best, and each brand on the shelf is a potential marketing partner. Geo-target your marketing efforts to attract locals, and draw them in with a mix of connoisseur products, loss leaders and great deals. Differentiate yourself from the crowd by looking better, being more efficient and having the best cannabis, always.

Challenge: Finding places to advertise

Solution: Dispensaries violate the terms of use on every social media site, so this is ultimately an undependable way to market your company. Many of us have felt the pain of losing our Facebook, Instagram and YouTube pages without notice—made especially painful to those with large and dedicated followings. With that in mind, use your social media to drive traffic to your website, and make sure it’s dynamic and interesting so people visit it again and again. Make sure your real-time menu is there, with use an online express ordering cart. Dispensaries also can’t advertise on social media, so local print media is the best place for this, and billboards are a fun way to promote dispensaries, if allowed in your municipality. Make sure you collect your client’s emails, as blasts and newsletters are a great way to drive traffic.

Challenge: Getting earned media

Solution: Television, print and online media are all interested in the marijuana market, and you can become the go-to expert. Host events and invite the media, give interviews on 4/20 and Black Friday and proactively reach out to comment on important topics. Media outlets are all looking for an interesting setting for their story, and your dispensary can be it (pending your local/state regulations, especially in medical markets). You have to be visible to get coverage, though, so get out there and start making waves.

Brand voice is the magic thread that pulls together a company’s content, ads, promotions, packaging and more into a singular experience with which customers can relate and engage. A brand’s tone creates recognition and a place from which to communicate. It’s what sets a solid brand apart from the competition. Brands with a loyal following and wide customer base often have a well-developed voice driving that engagement.

Finding one’s voice in the social media era can be a challenge. It requires a brand to engage more deeply with its customers than was expected or possible before Facebook. Marketing communication has historically been a one-way experience: A brand sends a message, the audience receives it, and it ends there. Thanks to technology and countless communication platforms, brands are now expected to not only talk, but to listen to feedback, comment on issues, create content and engage as a real person would.

The demand for a human experience is why a brand voice is so critical to marketing success. Without a position or perspective that is predetermined and consistent, a brand has no place from which to communicate meaningfully with the audience. Without a consistent position, marketing appears random and reveals a company that isn’t ready for primetime.

These four tips will help you start to build a brand voice that is relatable, meaningful and effective.

1. Define and Communicate Your Values

In working with my clients in the early days of social media (2005 to 2007), I realized we needed to find a way to make their brands relatable and their communication consistent to meet the high demand for engagement on social platforms. That forced much experimentation with content and tone. It was not easy to find consistent ways to solicit reactions. Funny quips and “Questions of the Day” were effective for only a few months. When the novelty wore off, it was back to the drawing board.

I was perplexed by how to create a consistent way to communicate with an audience that could be replicated over the course of years, not just weeks or months. I decided to examine the elements of lasting relationships: What made people like and trust one another?

I researched what psychologists, marketers and sociologists said was the foundation of successful relationships, both intimate and professional. I found they are all, to some degree, based on people sharing similar values. We see it in politics, religion and sports: We are drawn to those who share our interests, beliefs, likes and dislikes. It creates a trust and familiarity because there is agreement in our worldviews.

This same approach works wonders with customers. Brands have values, and those values—from diversity in hiring to sustainable growing practices—can be powerful tools in developing loyal relationships with customers. Whatever your values, they should be front-and-center in your brand voice. People are willing to invest in a company to which they feel connected.

Despite its challenges, social media is the most effective way to communicate your values. For instance, a medical dispensary could post a blog sharing the company’s story, why it’s a medical dispensary and what its main goals are for serving the community. This blog post can be re-purposed into quote cards and shared on Instagram and Twitter. Retweeting or sharing articles that align with these goals or starting conversations in medical patient communities about how to better help them are all great ways to talk values with your audience.

It is important that all employees are trained on the company’s values. Empower them to live up to those values and share them with customers. At every point of contact with customers, a brand should find ways to share who it is and what it intends to accomplish.

2. Be Authentic

When it comes to finding your brand voice, the most common advice is “be authentic.” It’s vague advice that can be difficult to decipher: How does a brand actually be authentic when it isn’t a real person? Being authentic means that you are being true to the brand’s values and goals in how you promote and advertise your products and services. I often see brands make the mistake of trying to conform who they are to who they think their audience wants them to be.

For example, if you’re trying to promote a calming product, don’t run an advertising campaign showing people performing high-energy activities. Instead, cater to experiences, environments and color schemes that are more soothing and relaxing. A confusing message in your ads can create confusion about the product and what can be expected of the brand. When brand authenticity is overlooked or poorly developed, it creates an inconsistent, and thereby confusing, voice that does not best represent the brand. This, in turn, creates distrust and disinterest from the audience.

3. Be Human(ish)

We all know that a brand is a concept and not an actual human; therefore, to create a human feeling of engagement from a set of concepts is challenging.

Basing a brand voice on company values and focusing on authenticity is a good start toward developing a human-like feeling. Values provide context for perspectives the brand shares and a guideline on how and what the brand communicates.

In feeling human, a brand must find the right ways to express empathy, compassion, excitement and joy. Not all situations will be the right fit for a brand’s voice. For instance, a product that is made for athletes might choose to show compassion for big-headline sports injuries, lost games and the like. However, that same brand showing empathy for a dress store going out of business is off base and makes the brand feel inauthentic, robotic and unable to determine how to appropriately engage in the world around it.

Using the correct emotional expression, from the perspective of a brand’s authentic values, is a winning combination in a brand voice. It ensures that all communication coming from the brand is aligned with its central messaging and directed to the appropriate target audience.

To discover your brand’s true values, ask yourself questions such as: ‘Why did we start this company?’ and ‘how do we want our customers to talk about our company?’

4. Question Yourself

It requires real digging to discover a brand’s true values. Follow this list of questions to get started:

Why did we start this company? The motivation or passion that drove you to start your company can be a major factor in your value set. Are you trying to disrupt, create a new vertical or save the world? This is all meaningful to your audience.

What do we value about our product/services? This shows that you can stand behind what you do and tells your audience why they should as well.

How do we choose who we want to work with (employees and vendors)? What makes someone a good fit for your company? The answer will reveal your underlying company culture, another point of trust building when you communicate it to your customers. It also helps to attract the right employees.

What is different about how we make or sell our products/services? A great way to stand out from your competition is to share what makes you special and worth choosing over others.

How do we want our customers to talk about our company? Your answer sums it all up. This is the goal in all of your communication, to have won the hearts and minds of your customers.

Firing an employee is an uncomfortable situation. Most would agree that it is a difficult and unpleasant task. While large companies typically have a human resources department that manages the employee termination process, many small dispensaries do not have that luxury. Therefore, terminating employees becomes the manager’s responsibility.

There are legal and business best practices that dispensary managers should follow to ensure that the termination process is respectful and compassionate. Following such practices will also help avoid a wrongful termination suit, damage to your dispensary brand, staff disruption, lowered productivity and poor morale. To start:

1. Identify behaviors that are unacceptable and disruptive to your day-to-day operations. These behaviors include:

• frequent tardiness;
• consistently missing work or shifts without adequate or timely notice;
• disregarding the dispensary’s confidentiality policy;
• violating workplace safety rules;
• misrepresenting qualifications or experience during interviews, on an application or other documents;
• stealing or misusing company resources, theft of product, intellectual property, supplies and cash;
• destroying dispensary property;
• making threats or acting in a way to create physical harm to others; and
• participating in sexual harassment or creating a hostile work environment.

These are worrisome and potentially dangerous behaviors that warrant employee termination. You would be well within your legal rights terminating an employee for any one of these reasons, as these behaviors violate many workplace laws. Not identifying and addressing them immediately could put your business and staff in jeopardy.

What if the Person Doesn’t Fit Into My Dispensary Culture?

How do you know when to terminate an average worker who can’t engage with your dispensary’s values? This situation can occur often with new hires: They have the skills to do the job, but their personalities don’t mesh with the other staff.

2. Ask yourself the following questions to help determine if it is time to let an employee go.

• Are you spending much of your time correcting their mistakes or actions?
• Has the employee shown an inability to change behaviors?
• Are other employees overworked because the employee in question continues to miss performance targets?
• Has the behavior continued despite corrective actions?
• Does the employee fail to contribute to team efforts?

If you are spending more time with a problem employee rather than encouraging your top performers, it might be time to consider initiating termination. But, before doing anything crazy:

3. Remember that, legally, the dispensary manager can only address an employee’s work performance or workplace conduct that negatively affects the business.

4. Don’t refer to personal or cultural differences. There must be no discrimination.

5. Don’t initiate the termination if a thorough and careful review of all facts has not been conducted. If you begin the termination process without reviewing the facts, you could be walking into a wrongful termination suit. A review might include examining all or some of the following:

• evidence based on “he said/she said”;
• previously established and documented record of satisfactory performance;
• absences/tardiness associated with taking leave under the Family Leave Medical Act (FMLA) and subjective reasons not substantiated by written documentation; and
• if the dispensary doesn’t have an Employee Handbook, or cannot assure itself that the employee has read, understands and has been provided a copy of dispensary procedures.

What Actions Are Necessary BEFORE the Termination Process is Initiated?

Before starting the termination process, the dispensary manager should ensure, at minimum, the following:

6. The dispensary’s written job offer and/or employee agreement has clear language stating you are an at-will employer and you have the right to terminate an employee at any time.

7. The dispensary has a consistent, standard, written termination policy that states the potential reasons for employee dismissal.

8. The employee handbook clearly articulates your dispensary’s expectations regarding workplace behavior. Be certain there is clear and consistent information in the book about employment practices and policies, office hours, workplace conduct, anti-discrimination, bullying and harassment policies.

9. A review of the on-boarding process for new hires to ensure:

• The job description, role, responsibilities, tasks and expectations are aligned.
• The employee has a good understanding of how to work as part of a team.
• New employees are introduced and integrated into the existing staff.
• Company goals are articulated, and each employee understands how they contribute to them.
• Managers and supervisors foster an inclusive work culture.
• Employees have provided written acknowledgment they have received and understand the company policies in the employee handbook.
• Employees know what resources are available to help them be successful.

10. The employee has been spoken to. If the employee is missing performance targets or not contributing to the team as expected, the manager is entitled to ask why the employee is performing poorly. Invite the employee to tell you if they perceive a problem, and if so, what they think might be done about it. At this meeting, it is critical for the manager to clearly articulate what is expected and what can happen if the employee continues to under-perform. Because employee turnover is costly and has negative impacts to the dispensary’s business, termination should always be considered as the final action in a series of progressive disciplinary efforts.

11. There is documentation backing the decision. Performance issues and all attempts to correct the employee’s behavior need to be recorded with dates of corrective actions. Have regular performance reviews with all employees and keep notes to avoid the appearance of discrimination or unfair treatment of one employee.

12. The employee has been provided at least one Employee Warning Letter demonstrating performance issues. The employee should be provided with enough time to rectify their poor performance. An Employee Warning Letter is a formal document also known as a letter of reprimand. A warning letter is commonly used in conjunction with a Performance Improvement Plan (PIP).

13. Consult your state’s Labor Office (refer to the U.S. Department of Labor website) to determine relevant employment laws in the state(s) your dispensaries operate.

What Are Best Practices for Firing an Employee?

Before the official termination meeting, there are preparations the dispensary manager might take to make the process go smoothly. However, don’t assume the termination process will go as planned. A termination is a stressful event. Follow these steps to ensure the meeting stays on track.

14. Remove emotion from the decision-making process and prepare for the meeting. Have a plan. Prepare documents in advance and have them ready at the time of the meeting.

15. Revoke the employee’s computer access during, or right before, the dismissal meeting. This is to ensure an angry employee doesn’t delete valuable information or make unauthorized copies of files.

16. Inform the dispensary security officer of the day and time of the meeting. He should be ready to escort the terminated employee from the meeting room to pick up their personal items and then escort them from the building. While this may seem impersonal, it is the best way to avoid confrontations and theft.

17. Hold the meeting in a private place. Never fire an employee in front of their coworkers. Treat the employee with as much dignity and respect as possible. Also, do not fire someone by text or voicemail.

18. Always conduct the dismissal meeting with at least one witness present. By having a witness, the manager can avoid any accusations by the employee that they were mistreated or misrepresented.

19. Follow the rule of “the fewer words, the better.” Tell the truth. Don’t use phrases like “business is slow” or “you didn’t work out.” List the behaviors or issues that led to the termination decision. Since the termination is a result of a progressive process, the employee should not be surprised because their performance or behavior has been previously discussed as well as the possible consequences.

20. Don’t use language that might imply a different outcome. The primary message to convey is:

• The decision has been made to terminate the employee, and nothing more can be done.
• The employee’s performance or behavior has not met the dispensary’s standards. It is not necessary to go into greater detail because the reasons have been listed in previous warnings.
• Give the person the Employee Termination Letter. (A standard form can be found on the Society for Human Resource Management website: shrm.org). The employee doesn’t need to sign this form, but a copy should be kept by the dispensary. Tell the employee how their final pay will be handled.
• Let them know they will be escorted to their desk and then from the building as part of the dispensary’s termination policy.
• Ask the employee to hand over any keys or access cards.

What Happens Afterward?

21. Secure all documents. All documentation related to employees should be kept in secure personnel files, and access to the records should be strictly limited.

22. Don’t provide too many details. Any information about the employee or the reason for the termination should never be discussed or shared. An exception where it might be necessary to share information is when there has been sexual harassment, physical threats or an incident(s) that involved several other employees.

23. Communicate with the staff. The information to be shared should be brief and limited to a statement from management such as, “In keeping with our company’s policies and the culture we strive to maintain, Ms. X is no longer an employee of ABC Dispensary, effective (date).” No other details should be provided. Staff gossip should be discouraged.

In summary, the termination process should be rational, performed in steps, documented and compassionate. Dispensaries will not be liable for wrongful termination if they avoid hazy employment practices and inconsistent documentation.

Note: This column is not to be considered as legal or financial advice nor does it address all HR regulatory actions that may impact your business.