Poaching employees is common in most industries, and the cannabis industry is no exception. There is a shortage of skilled labor across many sectors, unemployment rates are low, and the economy is strong, which means demand for experienced staff is up. This type of environment increases employees’ confidence levels and promotes more risk-taking regarding job moves. In September alone, the Bureau of Labor Statistics reported that more than 3.5 million Americans quit their jobs.

What makes this problem worse in the cannabis industry is that experienced workers are difficult to find and hire. As the availability of skilled employees continues to decrease, it may become increasingly difficult to retain the best employees. What can the dispensary owner do to combat these threats?

1. Treat employee retention as a business imperative

Employee turnover is expensive and disruptive to your business, especially if you lose employees who you have trained and grown in the business. According to an article in The Huffington Post, Deloitte, a multinational professional services network, says turnover can cost up to two times the employee’s annual salary. Dispensary owners can be faced with the costs of recruiting, time spent in hiring, onboarding, training, and waiting for an employee to become proficient—generally between three and six months. Unwanted turnover affects dispensary performance, results in lost productivity, and can lead to low morale and low employee engagement, which can cause additional turnover and stress to your business.

2. Pay above-market salaries and reward superior performance

Gone are the days when dispensaries could pay minimum wage and retain employees. There is too much demand for experienced workers in the industry and thus salaries must be competitive.

A frequently cited reason for leaving a company is pay. While other factors certainly influence an employee’s decision to leave your dispensary, don’t let salary be an issue. Be creative in how you pay your best workers. You might provide financial incentives such as bonuses, stock options, paid time off, and other monetary rewards that are meaningful to your employees. Provide some small perks like free donuts on Fridays or company-paid childcare when overtime is required. These perks are significant ways to let employees know that you care about them, and they may be more likely to stick around because of them.

3. Coach your employees

Coaching is an important two-way communication process that allows both you and your employees to provide input about the work environment. By coaching rather than managing, you are encouraging your dispensary employees to think more like an owner and to solve problems rather than expecting “management” to have all the answers. Rather than the “command and control” style, most HR experts agree that this coaching style is a more effective management method, both in terms of employee performance and retention.

4. Recognize budtenders and dispensary staff as your critical first line of customer service and repeat sales

With increased competition, dispensaries’ attention to customers is what sets them apart from other stores. A customer’s first impression is often managed by the employee who guides them through the purchase process. This is a critical point toward reaching your business goals. The difference between great and average customer service usually is correlated with how engaged and educated front-line staff are. According to an article on Inc.com, “Employee experience and engagement does have a direct impact on your company’s products and services and ultimately your customer experience and business performance. … Highly engaged employees were five times less likely to quit than employees who were not engaged.” You can increase your employees’ engagement by ensuring they’re satisfied with their jobs, enjoy their work, and believe that their job is important to the company’s overall success.

5. Offer benefits that are meaningful

Most dispensaries understand that it’s important to offer a competitive benefits package that fits their employees’ needs. Providing health insurance, life insurance and a retirement savings plan can be important in retaining employees—as long as your employees actually value these benefits. However, one size doesn’t fit all. You may find that some employees prefer paid time off rather than a retirement plan or health insurance, for example. The decision to offer employee benefits should be based on your dispensary’s staff size, your current and future business plan, the competition for talent in your market and the environment you want to nurture.

Other benefits, such as flex time or paid vacation, go a long way to show employees you’re willing to accommodate their work/life balance and can be a deciding factor to stay with your dispensary. Working families tend to stay with dispensaries that offer flexible or part-time scheduling, for example. Other benefits that attract and retain employees could be education and tuition reimbursement, travel and participation in industry trade shows, off-site day care or pet-friendly accommodations. Ask what your employees need and want in determining a flexible benefits package that is best for your employees and your business. (For more information about offering benefits, refer to the March/April 2018 issue of Cannabis Dispensary.)

6. Conduct regular ‘stay conversations’

Most of the time, asking employees why they are leaving the company will not provide an owner with information that can be used to improve retention. Even if people list their complaints, they will likely be too general. You won’t learn or know what your top people need to be successful or what causes them to stay with your dispensary or where they feel frustrated or stuck in their jobs. You have to ask before they decide to leave, when you still have time to make necessary adjustments.

Meet one on one, in a quiet, unstructured manner with your best performers, at least twice a year (and separate from the annual performance review). Ask what is frustrating about their job, what is rewarding, and what might make them more successful. You might ask them if the reason they first came to work in your dispensary is the reason they have stayed. Ask questions such as: Why did you come to work for our dispensary? Why have you stayed? Try finding out what they would like to be doing but aren’t getting to do. What would they change or improve? Let your employees know you are asking these questions because you value their input and you really want to know what is on their minds, and what ideas they have. Then use that information to improve your employee retention strategy and take actions that will make a difference.

7. Provide learning and growth opportunities

Ensure your employees know what is expected of them and how they can grow with your dispensary. Understand the career desires of your key employees, and do whatever you can, within the boundaries of your business reality, to help them achieve them. Provide opportunities for increased responsibilities. While small dispensaries may not offer the positions into which the employees may want to be promoted, it is possible to provide employees with increased responsibilities, more ownership in the business or additional educational and growth experiences. In larger dispensaries, make the promotion process transparent, so employees can visualize the steps they can take to achieve upward mobility within your company. When you promote employees, you’re sending a message to everyone: These are the kinds of achievements, type of conduct and commitment that are valued and rewarded by our company.

8. Consistently recognize outstanding employee behavior

It is important to remember the rule: “Praise in public, correct in private.” Recognition incentives include actions, such as a simple “thank you,” praising employees or announcing an employee accomplishment at a company meeting. Supervisors can offer employee recognition in their day-to-day interaction with employees. A personal note of praise from an employee’s manager is very meaningful. Appreciation incentives also can come in the form of company parties and celebrations, company-paid family events or group lunches. Another way to reward employees is with service awards, which acknowledge solid performers who have stayed with the company and are committed to the dispensary’s goals.

A note of caution: You will want to avoid offering the same award every time because those incentives eventually become entitlements and lose their power.

9. Don’t keep unproductive or negative employees on the payroll

There are instances when you should fire employees. When an employee disregards your dispensary’s code of conduct after repeated warnings, it’s time to cut ties. An employee who steals product, time or money from the dispensary is grounds for immediate dismissal. A worker who is consistently late, can’t be trusted to complete tasks or negatively impacts overall productivity shouldn’t be tolerated, either. This type of turnover is good for your dispensary.

Employees who are unhappy at work can influence other employees and productivity. According to a 2019 survey conducted by the Society for Human Resource Management, “When they’re part of a strong workplace culture, employees feel inspired to go to work, seeking out new opportunities to succeed in the workplace. A toxic culture, on the other hand, leaves them uninspired and unwilling to push themselves at work. Employees may even choose to skip work altogether, in an attempt to avoid toxicity. About one in four working Americans dread going into work, while one in five call in sick when they don’t feel like going to work.”

When employees are happy, they perform better work and influence others positively, as well. If you’ve offered an employee remedies or different work, but he or she is still unhappy, you should encourage the employee to quit or consider terminating the worker.

Most of your employees know who on the team is productive and who isn’t, who does the minimum amount of work or who doesn’t work well with other team members. Keeping an unproductive member can result in overall lower productivity and morale and create a toxic environment. Usually, when an employee with low performance leaves the organization, there is an increase in team morale and engagement.

While these tips aren’t the only strategies to retain your valued employees, taking these actions will certainly help you create the type of work environment that will make employees want to stay with your business as it grows.

Maria Denzin owns MJ HR Strategic Solutions, a human-resources consulting firm based in Palm Springs, Calif. She specializes in talent strategy and development for the cannabis industry. Reach out to her with your questions at mariabdenzin@gmail.com.

Given the rapidly expanding state of the cannabis industry and my status as a long-time industry insider, I’ve spent most of the past 10 years looking for like-minded business partners and the funding to capitalize on visionary goals.

This has meant kissing a lot of frogs along the way, and there was a hard-learned lesson there: Don’t kiss frogs. It’s careful planning, thorough searching and a long courtship that fulfills dreams.

Simply put, the cannabis industry is not a place where only the brave can succeed. It’s big business, where the bar for knowledge, skills and abilities is set very high. Given the breadth of experience needed, no one person can succeed alone. The complexities of compliance and banking, combined with the variances in early markets like Oregon and Washington, which seem to be either saturated with cannabis or facing shortages, are pushing the industry out of reach for many people.

Cost is another huge problem. It is expensive to compete for permits and to build out compliant facilities, and cannabis companies pay high taxes and fees that wipe away profits. Granted, any new business anticipates that it will take two or three years to become profitable, but for the cannabis industry, it’s likely to take even longer than this. In fact, many of the small California cannabis businesses have been trying to wait out limited access to banking, while hoping for a reversal of IRS 280E tax rules for upwards of five years now. With these burdens in place, most operators lack access to merchant services accounts, don’t have access to traditional funding, and are not allowed to take regular business tax deductions. It’s an untenable situation for any small business trying to break even. Heck, this environment is tough for large, well-funded companies, too.

My conclusion after five years of brand building, partnering and funding searches is this: Until the market stabilizes, many small cannabis businesses will need to join larger verticals to survive. And, there’s only one way to find the right match for this, and that’s by first establishing a foundation based on shared values.

1. Know your corporate values

I know a lot about this topic. My dispensary, Magnolia Wellness, has a mission: to help every individual be their best selves. We believe that both the use of cannabis itself and the experience of visiting the dispensary are transformational, and this idea is complemented by a full calendar of classes, events and direct services like massage therapy.

Now, our small business wants to join with a larger, vertically integrated company, which has the skills to help build and scale the brand. (Even better if they have other holdings complementary to ours, like cultivation and manufacturing.) So, finding the right partner includes looking for people who understand that values-based decisions lead to strong, long-term performers that attract and retain dedicated, long-term clients.

2. Know your company’s value

It’s tough to determine a cannabis company’s worth, especially following so soon after the widespread downturn in Canadian valuations. But, you can’t go to market without a clear understanding of how much your company is worth. This means creating a clear basis for growth over three to five years, using provable internal and external metrics to base projections and draw conclusions. Investors rightfully are wary right now, and, because of this, retail shops are raising funds at 1x to 1.5x sales, rather than the heady 2x sales valuations being touted a year ago. Spend a lot of time studying the competition and looking at other people’s deals. Investigate who is selling and for what price, and look closely at deals that actually close. Yours will have to meet or beat others on the market to succeed.

3. Decide what you want

Now that you’ve figured out the values you won’t sacrifice to make a deal and determined the worth of your company, you have a decision to make. Are you staying or going? The answer to this lays out a web of choices. If you want to continue working with the company, consider looking for a partner to help fund and manage it with you. Or, find an investor willing to contribute funds, who will support the company under your leadership. Consider folding up into a larger company, selling your entire business to them. You then become an employee there in the same role or maybe a better one.

If you want to leave, think of it a bit like a corporate adoption. Whom do you trust to take your company from toddler to teen? What happens next still will affect your reputation and personal brand, so don’t just hand it off to anyone. You want to be sure your company will thrive in new hands, especially if part of your profits from the deal includes stock in the company that acquires it.

4. Find your funder

You’ve made some tough choices and are ready to find your funder. There are plenty of places to look, but get ready to find lots of competition already there. So, be armed with a well-thought-out business plan and proforma, and hit the field ready to pitch. The first place to look is obvious: Start at one of the dozens of well-attended cannabis business conferences. Investors are there, looking to meet entrepreneurs with interesting projects. While there, keep an eye out for brokers specialized in cannabis deals. Sign with them, and they’ll help find your buyer, pitch the deal and see it through to close, all for a cut of the final sale price. Network and ask for referrals. Find out who’s buying, looking for partnerships, or wanting to invest in industry businesses. Post on your LinkedIn page, as investors and lenders are there looking to meet people. Scour news sources, and watch who’s making deals; contact them with your deal if it looks to fit their portfolio. And, don’t forget hedge funds and other private funds. Investors are out there now looking for the right project.

5. Take time to get to know each other

It takes a lot of work to get this far, but this isn’t the time to stop working or to rush. Mutual due diligence is the next step, and it’s going to be difficult. Your funder is going to want to understand every detail about the company, including regulatory information, financial data and human resources. They are looking for any liabilities—past, current or potential—and are digging deep to verify the balance sheet and profit-and-loss statements. All the dirty laundry gets hung out to dry during due diligence, and you really get to know each other while it’s happening. Plus, due diligence works both ways. Your team needs to know everything about the funder, too—including whether the investor really has the money to pay the asking price and the skills to close the deal. Many funders don’t, so watch out for people who are stringing the deal along, hoping their own funding comes through before you require funding for your deal.

If you make it through due diligence and everything checks out, it’s time to close the deal. You’ll want a lawyer and an accountant to help because there are an enormous number of potential liabilities to prepare for and avoid. Don’t try to close a cannabis business deal alone, as mistakes now can cost money and time, and small errors can cause problems that linger for years into the future. Turn this part over to the experts on both sides, for sure. And then, congratulations! You’ve closed your deal and are ready to celebrate.

Debby Goldsberry is the executive director of Magnolia Wellness and author of “Idiot’s Guides: Starting and Running a Marijuana Business.” She has more than 25 years of experience in medical cannabis.

Why do so many cannabis start-ups that seem to have everything going for them—loyal customers, enviable market share, deep-pocketed investors—flame out? Ask the founders of Dockside Cannabis, and you might hear a cautionary tale about “scaling.”

They would know. Several years ago, Aaron Varney, Maria Moses and Oscar Velasco-Schmitz undertook an ambitious plan to scale their small Seattle-based cannabis dispensary business but thought better of the idea and decided to reverse course.

“We had a moment where we thought, ‘It might be time to take this to the next level and go big,’” Varney tells Cannabis Dispensary. “At the end of the day, we realized that’s actually not what we’re about. Our commitment is not to get big for financial gain or to scale for the sake of scaling.”

One could understand the impulse to want to grow the business. Dockside has been a mainstay of Seattle’s cannabis scene since 2011, when Varney and his co-founders opened their first store, a medical co-op called Dockside Co-Op. The company operates four locations today in a crowded Seattle market that now has more than 50 cannabis dispensaries, and it consistently ranks atop best-of lists. How did the company do this?

Prioritizing Customer Experience Over Customer Transactions

In a highly competitive market where consumers have no shortage of buying options, Dockside has differentiated itself not on price nor product variation, but on customer experience. Varney, Moses and Velasco-Schmitz reasoned that while consumers could go anywhere for their cannabis, they would come to Dockside for the experience—and maybe pay a premium for that.

Borrowing a page from Apple’s retail playbook, Dockside made a deliberate strategic decision early: Sales staff would not focus single-mindedly on selling stuff—on aggressive cross-selling and upselling—but instead strive to build meaningful relationships with customers over time and make their lives better. Dockside would be an educator, community builder and ambassador for the plant, not a bottom-line-driven sales organization. Budtenders would enrich lives, not push product. So, Dockside set about to over-deliver on every dimension of customer care, pairing a vast, thoughtful menu of options with knowledgeable and approachable budtenders in big, bright, open spaces (as Velasco-Schmitz put it, “just to be a good retailer”).

The strategy produced incalculable brand equity for Dockside. Naturally, the founders began to wonder what was next. “If we were going to go big, we needed to partner with investors,” Varney says, noting many options including an offer for a reverse takeover to list on the Canadian Securities Exchange. “That meant making some sacrifices.”

But the possibility of losing control of day-to-day operations and even the cultural direction of the organization was just too much to stomach. To the founders, corporatizing Dockside represented a bureaucratic threat to their entrepreneurial souls and the very core of what they created. So, they pulled back.

“The word ‘corporate’ was being used, and not in a positive way,” Varney says. “It was like, ‘Great, we’re getting more corporate. Here come the policies, here come the less-personal touches.’”

In fairness, this attitude speaks nothing of the founders’ business-management acumen. In fact, one could say Dockside’s plan for “scaling up” followed a classic business-school model for growth and even moved at an overly cautious pace.

First, they decided to bring in more functional experts (HR, advertising and supply chain pros, even a general counsel with cannabis sector experience) to take the enterprise to the next level. In one strategically savvy move, Dockside hired its first-ever CEO from outside the cannabis industry. In the dispensary business, the retail experience underlies everything from customer retention to workplace culture to brand identity, so Dockside opted to hire someone who understood retail: Charlie Cain, who had spent the previous four years as the vice president of retail operations and concept and franchising for Seattle-based Starbucks.

What followed next for Dockside were predictable machinations in the life of a young company attempting to scale: new management structures and corporate policies to accommodate increased head count; and new financial maneuvers in preparation for one day going public on a major stock exchange. But Varney and his partners were growing increasingly concerned the path to scaling would put them in an untenable financial situation and undercut the ability to negotiate with investors. He wasn’t ready to bring in a whole new set of decision-makers and take a step back. “You get money or control, but you don’t get both,” he says.

Velasco-Schmitz, too, began to question where Dockside was heading. “I had a very good conversation with my father-in-law, and he said, ‘Do you need to do this now?,’” referring to trying to scale Dockside. Velasco-Schmitz had more questions: “What is the purpose of Dockside? What is the growth potential? And as founders, what is the driving force behind the actions and deeds we undertake on a day-to-day basis?”

Committing to Slow and Steady Growth

“I don’t think the market was ready for it, and I don’t think we were ultimately ready for it, either,” Varney says of Dockside’s initial growth plans. “At that point, there was a need for the three of us to really reengage fully back into the business, and that was a shot in the arm for Dockside.”

The founders realized that scaling fast required near-perfect organizational conditions—just the right systems, capital and people in place to withstand the breakneck speed of growth. Otherwise, the company would spiral out of control.

“There’s always somebody sitting off in the shadows who’s looking to take advantage of a … nascent, fast-growing industry,” says Joshua Ashby, cannabis practice co-chair at the Seattle law firm Lane Powell, who has experience dealing with startups. While an IPO was never a serious consideration for Dockside, “there have been instances where people have tried to lure successful cannabis companies into that IPO, get-rich-really-fast path," Ashby says. IPOs are the right path for some cannabis companies but not all.

In deciding to stand pat, Dockside was effectively accepting slower and more stable growth rates. There was no way the company would now see tech-startup-like “hypergrowth”—the term first coined by Alexander V. Izosimov in the in 2008 to connote situations where businesses expand rapidly, company valuations soar and compound annual growth rates hit 40% and higher.

But Dockside was just fine with that. The leadership team would rededicate themselves to the four existing stores and their mission of community-building and advocacy.

So, will there ever be a fifth? Time will tell, Velasco-Schmitz says. Whether that expansion will mean stores in more states or more products, growth will be on “our terms,” he says.

Still Seeing Plenty of Room to Grow

“We’re getting a lot of knocks on the door,” Varney says. “We don’t feel like we’ve quite made it out of the forest with just having a smooth-running retail organization; nonetheless, there are calls like, ‘Do you want to open something in West Virginia?’ or, ‘Do you want to open something in Michigan or California?’”

In terms of size, Dockside is still a relatively small player. According to Arcview Market Research and BDS Analytics, the largest publicly held U.S. cannabis retail chain by market capitalization is Curaleaf Holdings Inc., with 44 stores in seven states. Have a Heart, one of Dockside’s major competitors in Seattle, will soon have 14 locations across three states (six in Washington, six in California, and two in Iowa).

In other words, Dockside still has plenty of room to grow. The market is only getting bigger. Arcview Market Research and BDS forecast cannabis sales to increase at a compound annual growth rate of 20% through 2024, reaching $30 billion. Today, just four states (Oklahoma, California, Colorado and Oregon) make up 80% of the total active retail licenses as of the fourth-quarter 2019, according to BDS. It’s a clear indicator that the cannabis industry is still a relatively immature consumer retail channel, BDS reports.

With just four stores, Dockside can carefully think through every design decision, Velasco-Schmitz says, making each count. For one recent store opening, Dockside hired a local architecture firm, Graham Baba Architects, to create a space that would enable more natural conversations between budtenders and customers. The designers started by cutting out a large skylight in the roof, giving the store an open, airy feel. They opted for brightness throughout—light-stained maple and white oak for the walls and tables and minimalist wood cabinets. They also designed the sales counter to be indistinct from the rest of store to encourage budtenders to engage freely in conversation.

“You can take a number of different philosophies to retail,” Velasco-Schmitz says. “You can get ’em in, get ’em out quickly and have it be a positive, economical experience. Cheap ganja is highly popular after all. Or it can be a bit more curated of [an] experience. You take time. ... [With] that model, you’re really building a long-lasting relationship with your marketplace.”

Paul Barbagallo is a Boston-based writer and a former senior editor for Bloomberg News and beat reporter for Bloomberg BNA.