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Green Geeks: POS Technology Solutions (Part I)

The emerging cannabis industry is surprisingly technologically sophisticated. Take what I call the last mile: point of sale (POS).

I recently interviewed John Yang at California-based Treez, a POS solution focused on the cannabis industry. In fact, the free ranging conversation went so long, over two interviews, that I’ve decided to do a two-part blog series. In this first blog, I paint the picture (including taxation) and introduce Treez. In the second installment we’ll get down to the keystroke level.

“We are an enterprise-grade product with reliability and stability.” Said NAME. “In fact, you can run Treez as it’s meant to be in the cloud…we are a cloud-based solution first. But you can run it on-prem toowhich is important if you can’t be down for even a few minutes or a day. We serve dispensaries that have 100+ customers in the lobby at a time so any downtime is unacceptable.”

Let’s Talk Taxes!

Some readers know that SMB Nation’s hometown of Bainbridge Island is where Avalara started (about to IPO and known for creating online sales tax and compliance solutions). Thinking about taxes and compliance is second nature to me. When NAME took a left turn with our cannabis conversation to discuss Treez tax and compliance solutions, I told myself this conversation just got much better.

“In our business development efforts, we lead with the tax calculations for the State of California. Many of our competitors don’t have this functionality. We do taxes correctly and help dispensaries from being overtaxed. This includes that we take care of the excise tax calculations.” Shared NAME. “California is taxing 35% to 40%…different tax layers (city, county, excise, sales) that compound on top of each other. Think of it as a tax on top of a tax on top of a tax.” Seems like tough math to track.

cannabistaxationstuff 002

Figure 1: Treez tracks cannabis taxes. Harder than it looks folks.

We next discussed the Excise Tax Report. “it’s about….how much to pay….a lot of complexity…very important with compliance…we do the break out of the taxation – our competitors don’t have the granular level of detail.” Stated NAME.

I asked about how it works in Washington state, sensing that this young industry behaves differently in each state (#TrueThat). NAME shared that the State of Washington is a post-tax model like $40 for a ten pack of gluten free Indica peanut butter cups. The taxation is baked into a round number price that a customer would pay. If there is a mathematical mistake, the dispensary would have to “eat it” with respect to making the taxes paid whole.

In Part II of this blog series on Treez, I’ll speak toward the hands-on, keystroke-based POS solution and its use cases. Hint: Customer experience is the development paradigm.

VerticalWatch: Health Care IT 2.0 for MSPs

Hang on fast for a fat opportunity you might have overlooked. It concerns a new approach to health care and pain relief with just a bit of pleasure sprinkled in. I’m discussing the medical and recreational cannabis industries. I discovered this opportunity via research over the course of 2016/2017 in the Seattle area.

High School Jokes Aside…
Once you get the White Elephant out of the room (high school and college jokes), you’ll quakily discover

that the cannabis wallpaper 420 9industry is deadly serious. In my research, it resembles the local pharmacy dispensary business. You have similar legal compliance and supply chain issues.

And most view cannabis as a cure for ailments. Ergo I’m leading with the health care paradigm, not the black market drug dealing nonsense that has often defined cannabis.

 

Facts

  • 5-states (including California) recreational legal plus Washington D.C.
  • 22-states medical legal
  •  California is recreational legal as of January 1, 2018.
  • Massachusetts will become recreational legal in July, 2018

Risks
If you, the entrepreneurial MSP, considers yourself a risk taker, the cannabis vertical is for you! Right now the future is not an assured outcome. At the Federal-level, cannabis is still a Schedule 1 Controlled Substance under Federal law. Furthermore the Trump administration under Attorney General Jeff Sessions has rescinded the Cole Memo issued by the Obama administration as of early 2018. You can learn more about the Cole memo here but essentially it states that the Federal government was to stand down on active enforcement at the Federal-level of laws prohibiting cannabis. That effectively allowed the states above to legalize the sales and distribution of cannabis for both medical and recreational purposes. By undoing the Cole Memo, there are legitimate concerns that Federal enforcement against cannabis will happen.

Another industry risk is banking. Currently cannabis-related industry players can’t participate in the banking system at the federal level. There are a couple loopholes such as state chartered credit unions but it’s clearly a business model impediment to not have a full service banking relationship.

MSP Opportunity
Some SMB Nation community members are ideologically opposed to cannabis use and have little interest in this industry. Others are following the money. Say what you must but the cash rich cannabis industry is an ideal vertical market if you like interesting technology work and want to get paid (well). I’ll be defining the MSP opportunity over the next couple of months but the purpose of this blog was a HEADS UP!

Next Generation Health Care Vertical for MSPs

Here’s the good news. Those MSPs who rode the Electronic Medical Records (EMR) boom in the 2009 time frame (as part of the 2009-era Health Information Technology for Economic and Clinical Health Act) and more recently the Health Insurance Portability and Accountability Act (HIPAA) wave, will love this story. It’s about my time at the three-day CannaCon conference in Seattle this past week. And I’ve concluded it’s the next great thing in health care IT.

Figure 1: CannaCon had over 200-booths and a couple thousand attendees.

I learned a lot. There were only a handful of technology vendors as the show was still oriented towards, for lack of a better word, agriculture. Here’s my take from an SMB Nation point of view.

I’m All In!
Early SMB Nation member, Kirkland, WA-based Stratocent http://www.stratocent.com/ CEO Jim Bachaud, who credits an early SMB Nation conference as his entrée into the wild and whacky world of the SMB MSP business, is looking forward again. He was the only MSP at Cannacon.


Figure 2: Jim Bachaud (left) with a co-worker in the Stratocent booth.

“Cannacon is my first professional conference ever as an exhibitor. I created the booth, marketing materials and handouts for this show and other shows moving forward. Fortunately, our booth is where all of the businesses walk by to get to the academic lectures.” Bachaud shared. ”I spent the last year retooling my business for scalability. We are there- I could take on 100 clients a week with my new business model. Now it’s time to get leads and start rolling in business.”

Our conversation continued. “I don’t have any customers in the cannabis vertical yet – that’s why I’m here. More importantly, all of these attendees are businesses and businesses use computers. That’s basically all you need to know. So at that point, not only are these businesses, but they have money! They have a lot of money! My favorite verticals are businesses that don’t know how to make computers work and have lots of money. They know they need to have their computers work – that’s like a gold mine.” Bachaud commented.

Then I asked who’s walking by your booth? “I’ve learned a lot over the past three days. I came here knowing almost nothing. There are a lot of growers; and there are different grades of growers (Tier 1, 2, 3 based on acreage). You have processors, dispensaries, extractors – all the different elements of the cannabis industry. And, again, all those people use computers.” Bachaud said.

Double-clicking down into his booth messaging – I spoke with Bachaud about his security camera and monitor on display. “One of our suppliers is a national company called OnAisle8 and they are a channel-only wholesaler of electrical gear. These particular cameras (partial seen in the photo to the left of Bachaud in his booth) have analytics, alarms, dry contacts and can store data on the powered tilt zoom camera. Having passersby’s see themselves “on camera” via our 55-inch 4k TV is a conversation starter to get people on my yoga mat flooring.”

“I’m not aware of other MSPs who are in this new line of work. I’ve been posting up in a couple MSP groups. Once you get past the high school jokes, it’s apparent that people aren’t aware of the cannabis opportunity. Bottom line is that I’m coming into this as a business. I’m all in.” Bachaud concluded.

Supply Chain via Dynamics
A Microsoft Dynamics partner who has gone big in the cannabis business vertical is D365 Cannabis http://d365cannabis.com/ out of Las Vegas, NV. I interviewed Michael Kiehn, Sales Director seen in Figure 3. Think of it as Dynamics/Navision solution modified for the cannabis business.

Figure 3: Kiehn (right) and his colleague Marta (left) speaking with a client.

“We handle everything from grow software, production, extraction and quality control to dispensary point-of-sale (POS) software. Toss in CRM and our solution is a finance system at its core. It’s an all-in-one cannabis solution, what the industry sometimes calls seed-to-sale. However, seed-to-sale typically refers to compliance but we are more than that – we are a business solution.” Kiehn shared.

“We have been a Dynamics partner for several years and about 18-months ago we decided to focus solely on cannabis. We’re now in ten states and across Canada. We are an MSP and we’ve got consultants that specialize in everything from finance to cultivation plus we have phone support. Our clients include dispensaries plus what we call “back of house” food chain players. We offer two plans: a monthly recurring revenue model or purchase licenses upfront.” Kiehn said.

Last question. Are you in Alaska? “Not yet but we’re getting a lot of interest from Alaska.” Kiehn concluded.

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