Selling your Cannabis Business in Oregon
In any market, whether it’s real estate, stocks or business, buyers all share a common goal - to see a return on investment (ROI) within a reasonable timeframe. When purchasing a cannabis business, the timeframe to see ROI is typically set at around 3 years or less.
Before purchasing, buyers go through a thorough due diligence phase where they carefully analyze the business's financials. This involves reviewing income statements, balance sheets, cash flow statements, and other relevant documents to understand the business's financial health, potential risks, and growth opportunities.
Buyers approach this process cautiously to avoid any complications or hidden issues that could jeopardize their investment. If any uncertainties arise, buyers may negotiate a severely lower purchase price to protect their investment and increase their chances of achieving a satisfactory ROI within the desired timeframe.
To sum it up, buyers want to know what they’re getting themselves into if they purchase your cannabis business.
Here is what you can do to help the process:
Ensure that your financial records are regularly updated and maintain clean books.
Keep your METRC system clean and up to date.
Obtain a Tax Compliance Certificate for both the business and individuals holding a 20% or more interest in the business. This is currently required for retail licenses and will be required for all licenses in the future.
Buyers also take into consideration factors like Google reviews when determining the price, especially for retail shops. Therefore, it serves as a reminder to treat your staff, customers, and vendors well as it can impact the perception of your business.
Be ready to provide the following financial documentation:
Previous month's balance sheet
Monthly profit and loss (P&L) statement for 36 months in Excel format (this enables easy customization and rearrangement for potential buyers)
Lease copy and renewal terms
Final tip
Does your P&L statement include things such as auto insurance, owner's salary, or meals? These are known as “add back” items, and it's crucial to identify them and exclude them from your P&L for potential buyers as buyers typically value a business at approximately 3-4 times its net profit.
If you are interested in listing your business or have questions about the selling process, contact us at sales@cannxperts.com.
