You can’t throw a rock without hitting a “content creator” or “influencer.” These are job titles that anyone can give themselves. But a CFO with cannabis experience is rare because the job demands specialized knowledge. Many potential job candidates hesitate to apply for these positions due to lingering stigma. This fear only makes such candidates harder to find — a scarcity that makes them invaluable. Read on!
Specialized Knowledge Is Demanded
There is an ocean-sized gulf between a “specialist” and someone with specialized knowledge. Many companies dress up job titles with the word “specialist.” But a CFO with cannabis experience is someone who has specialized knowledge. They have a keen understanding of the fickle cannabis industry. These candidates also tend to have a baseline knowledge of traditional financial management, coupled with an adept comprehension of the nuanced compliance, tax, and reporting rules specific to the cannabis industry.
Seasoned CFOs would be acutely aware of Section 280E, which prohibits businesses from deducting otherwise established business expenses from gross income associated with the “trafficking” of Schedule I or II substances, as defined by the Controlled Substances Act.
These CFOs would possess sophisticated tax planning strategies, minimizing liabilities and ensuring accurate, compliant tax reports. They would be highly experienced in creating financial strategies customized for the cannabis industry’s rapid growth and market volatility, such as utilizing IRC 471(c) for inventory valuation to offset disallowed deductions from 280E.
As Distru, a software company that provides an enterprise resource planning (ERP) platform for cannabis businesses within the manufacturing and distribution verticals, points out, these practiced cannabis CFOs are able to create and implement internal controls, ensuring data integrity, preventing fraud, and supporting audit readiness.
Cannabis Stigma and Legal Murkiness: A Massive Deterrent
Why don’t more CFOs have this specialized knowledge? That’s like asking why more people don’t work on deep-sea fishing vessels — there’s a significant deterrent. For fishing, it’s a safety risk; for cannabis, it’s a legal risk.
Many would-be cannabis CFOs are wary of entering the industry because of the inherent stigma and the tenuous legal status of the product.
Even though it’s been widely reported that cannabis consumption is overtaking alcohol consumption, cannabis still holds a debilitating stigma. According to Comhar Partners, an executive search and talent management firm, many professionals are hesitant to seek executive positions in the cannabis industry because they fear joining this sector could negatively impact their careers and future job prospects — a fear largely associated with cannabis still being illegal at the federal level.
Comhar even provides the startling statistic that nearly 50% of candidates decline a director-level role in the cannabis industry, citing fears of being unable to obtain a similar position in a non-cannabis industry at a later date.
The product at the heart of the business makes it difficult for businesses to even open a bank account or secure a loan. Why? Again, because cannabis is illegal at the federal level, and banks and other financial institutions are federally regulated. They must comply with laws such as the Controlled Substances Act (CSA) and strict Anti-Money Laundering (AML) regulations, including the Bank Secrecy Act (BSA). Thus, handling money from a cannabis business exposes banks to potential money laundering liability, if the banks aren’t following a FinCEN compliance program.
Further, banks are required to file Suspicious Activity Reports (SARs), also referred to as IRS Form 8300, for any cash transactions totaling over $10,000 in a year. This requirement adds another straw to the camel’s back, as it’s a weighty compliance burden and drives up operational costs.
Additional Value
We’ve covered two of the main reasons why CFOs with cannabis experience are few and far between: they need specialized knowledge, and there is stigma associated with the product. Now, let’s discuss why a CFO with cannabis experience has additional value.
As we mentioned in our previous article, “5 Signs Your Cannabis Finance Team Isn’t Investor-Ready,” a CFO who possesses cannabis experience—including expertise in risk mitigation and regulatory foreknowledge — is vital. For example, this CFO would be well-versed in anticipating regulatory shake-ups. As Ace Talent Curators, a company dedicated to executive search recruiting and talent acquisition, explains, a CFO with cannabis experience will also be proficient at raising funds through multiple channels, a crucial ability in this volatile industry.
These cannabis CFO veterans also have experience streamlining inventory and designing cost-saving procedures, as Distru illustrates. Anytime an operation can become more efficient and save money, its chances of continued growth and solvency increase.
Conclusion
While it’s easy to find people who enjoy consuming cannabis, finding people with cannabis experience who would make worthwhile CFOs is a different matter. Candidates who have the requisite specialized knowledge and aren’t discouraged by the perceived stigma associated with the product are scarce. These candidates only increase in value when you consider their experience in finding additional capital for a business.
