Pricing cannabis seems like a no-brainer until you dig your boots into the ground and realize that it’s really not. Being in a new industry, buyers and sellers tend to rely a lot on guesswork instead of an established flower pricing system, which does not exist at all for both wholesale and retail. Aware that this is a moving target at present, Tony Frischknecht nevertheless believes that there is a way that buyers and sellers can agree on standard flower prices. For this, he proposes to use simple grading systems based on three flower qualities: density, smell, and potency. Listen in and learn how you can apply this principle in your own business.
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Wow! How Much Do You Want For That?
How To Create A Pricing System For Wholesale And Retail Flower
I’m excited because you know when you’re in those situations where you’re talking to somebody and you’re like, “This guy is dealing with some issues. I can solve some problems for him.” I spent about an hour talking with a gentleman that is about to open his first retail store. He’s got several other in plants now that are happening. We started getting off on a conversation that is extremely valuable for you that are starting a retail operation and wholesale operation. I’m sure it’s many of you out there.
If you’re thinking about it, these are some great things that will bring you some value and some huge savings. The wholesale market is tricky. Everybody is getting into, “I want to be in cannabis. Let’s get the ball rolling. Let’s get our business going. Now we’re open.” All of a sudden, we start seeing all the problems happen and it’s overwhelming. A lot of the time, you’re reactionary. I and my business partners were the same way. We were reactionary in a lot of things. One of the beauties of it is I’ve already dealt with a lot of this stuff. Bringing some of this info to you now is even more helpful. It’s funny, I forget about these types of things.
How many of you out there are launching the retail and grill? Probably, dozens of you. I want to discuss the quality of the flower and how to buy and sell. It sounds easy. Supposedly, there’s a market price for this. Now we can discuss and negotiate that. The problem is since it is such a new industry, there’s going to be a lot of guessing that takes place. What I found is creating these different systems, especially purchasing and selling pricing systems is key to this. I know you know this. I’m not saying that you don’t understand this, but the depth of this goes a little bit differently when you’re dealing with flower and with a bunch of different growers. You’re also dealing with a ton of different genetics.
How do I figure out what the right price is for my product? If you’re in the midst of negotiating some pricing with a long-term wholesaler, building a relationship there, you are going to be talking about this together. A lot of the newer places that are coming online are going to start dealing with this, specifically Massachusetts. That’s a big one that they’re finally starting to get everything up and running. Their grows are starting to happen. Stores are starting to open up, but they’re right in the midst of this point of, “We’re going to go. Now, let’s buy our wholesale. Let’s bring it in. Let’s go.” There are some complications that happened right off the bat of when you’re going to purchase and buy.
What I want to bring to you is provide something that both the buyers and the sellers have a system foundation for pricing. As you get to know these people a little better, you will build a better rapport, it will be easier to purchase, but for your first couple of months, maybe even six months, you’re going to be learning this. As I teach you how to create a standardized way to grade your cannabis or your flower, this is going to be a moving object for a little bit. Until you get a dive in, it’ll take you a little bit.
The other thing that this is going to do for you is it’s going to help you eliminate arguments and confusion with your buyers and sellers. It’s going to give you a good solid foundation on why you’re paying for this and what the cost is going to be. It also allows you to reject bad products. One of the number one things when you’re starting a new grow is in most new places, you’re going to be able to sell just about anything you can if it’s a new market because all of a sudden, there’s supply. There wasn’t before. There’s a black market, but to the legal side and the medical market, if you’re in either one of those or a combination of both, once you add this in, then all of a sudden you’re like, “Now I have something I can talk to my seller or buyer about.”
One of the first things I recommend is to start simple. I recommend this on a lot of things, but you can get detailed in this subject specifically. Start simple because the person that you’re going to be working with on the other side of the table is going to have his own ideas on what he thinks should be in this grading system. Keeping it simple. We used to grade flower or cannabis on your A, B, C grade. We also had a shake, which is generally the leftover, a lot of the little leaves and broken up buds. Those are four different prices that you can run with.
I’m going to set an example here for you for price ranges, so you can get the idea. Take that to your home state, and I recommend you determine what the market value is. If you’re in a little bit more of a mature market, you may be able to get the tax basis on per pound weight. This is very helpful because that runs through a state organization, this is what they think it’s going to be. It’s going to vary there because they’re usually a little bit behind, so you always got to remember that. It’s a good idea to base it on something if you can.
There are a lot of guys who are going to go, “I know this is going for $4,000 a pound.” You’re like, “That was six months ago. Prices have changed.” You have to be aware of the prices at all times. Let’s get into it. Grade A for example, $2,000 a pound. Grade B, 25% reduction at $1,500 a pound. Grade C at $1,200 a pound, which is a 40% reduction. What I recommend on shake, they’re generally low, depending on supply. That’s always going to change, but you’re probably looking at a range between $200 to $600 per pound. It’s all going to vary, and understanding the edibles market is always a good one. If you are watching what edibles buyers are paying for shakes, that’s a good place to run a baseline. If we know these guys are getting $300 a pound for a quality shake, that’s what we charged for the shake. Those are the four types.
Let’s go a little deeper. What we’re going to look at now are three different ways to grade your flower. These are the density, the smell and the potency. These will vary again. Most new states should have potency and pesticide testing. You should have something to base this off of. A lot of the times when you’re in retail, if people want to experience a high, they go for high potency and that’s the sales, but not to everyone. You have to remember, all the buyers are going to be different. I’ve been involved in cannabis for many years at this point. Now, I don’t even go off potency because that doesn’t work for me. These are the three simple ones that you can talk about.
You can build this first before you approach your sellers or your buyers and say, “This is what we base our prices on,” so they have an understanding. We’re going to grade it on a scale from 1 to 5. Keep it easy. We’re going to do a sliding scale on look. You’ve got the density of the bud itself. For you growers out there, you understand this a lot. A dense solid flower is going to create more weight. There’s going to be more product available to sell. From dense to the least dense or what I like to call airy. In between there, you’ve got five steps. You’ve got dense, a little less dense, kind of dense, not very dense, and completely airy. Those are the five.Creating a simple grading system eliminates the guesswork when it comes to buying and selling flower. Click To Tweet
Let’s move to smell. The most to least skunky is what I would recommend you look at out there when you’re judging your flower. You’ve got skunky, a little skunky, it’s okay, now it’s starting to smell like hay, and now it really smells like hay. You are going to get to know this smell out there because you’re going to be like, “That doesn’t smell like cannabis at all. That smells like hay.” A lot of that has to do with the curing process. It’s easy to tell that right off the bat. You’ll get better at this as you grow and you see more product. As it comes through, you get better at understanding that, “This is this.”
The potency is an easy one especially if you have a state-mandated testing process. That’s simple. The last one that you need to be aware of is the amount of humidity in the flower. I’m going to say this because I came across this as I was walking through this with you. This would be your fourth one. You want to grade this on how well it’s cured per drawing. Some of these new guys are going to be delivering you a product that is extremely damp. They’re selling you water. You want to be very careful about this because most of you have some safe or locked up area. You could buy this pound of cannabis, put it in the safe, and open it up a couple of times. Over a week or two, you could lose 15% to 20% of the weight, which is huge when you’re paying for that high-end product.
Be careful that you’ve got a good humidity, that it’s not going to run away. You might lose a little bit because it overdries. You need to be looking at the percentage. You’re going to lose 70%-plus just from the curing process right out of the gate. You’ve got to find what works for you in your state. I don’t want to give you a specific number because it’s going to range. People are going to be wanting a little bit damper or cured. When they want to cure it more, they’re going to reduce some of the humidity, and then a ceiling. That’s the fourth one, so just remember that.
You want to grade that on a scale from 1 to 5, damp all the way to the least amount of damp. What I would recommend is going least damp all the way to the most damp. That will give you your scale. This is a great way to start. Whatever you end up deciding, try one of these. If you don’t like them, completely change them. Take one of them. If this gives you an idea on how to base this as you grow your business, that’s what I’m here to share with you. These are the easiest way to start, and then you can develop a more refined scale for you and your wholesale group.
The good thing too with this is before you’re buying your product, you share these ideas with the buyer that you’re going to be buying either some or all of your product with. See if you can agree upon this, because once you have that in place and he comes to your store when it’s crazy busy, and you’ve got customers out the door, and you’ve got no product, all you have to do is like, “I’ve got to get something on the shelf.” What this avoids is paying for an A-grade product when you’ve got C-grade product, and then you’re able to say that to the seller right at the door saying, “I can’t pay that price. I can pay for a C-grade because this is what it falls into.”
If he’s got that base and you call him on that a couple of times, he is going to bring you according to what your grading scale is the next couple of times. You’re going to train him to fit into what your grading scale is. Whatever you decide to create is up to you, but this is a great way to start your wholesale in your store or your retail. It will also help you base your retail prices when you’re selling to the customer because those are going to vary a little bit, but at least it gives you something steady.
I’m always open. If you have any questions about this, please reach out to me at PlantProblem.com. You can ask me any questions there. If you want to go a little deeper in on some of these grading scales or anything else, reach out to me there. I hope I gave you something to work with. That’s my goal here at Plant Problems is to bring you and utilize some awesome information. For you out there starting the business, I wish you the best. It’s time to make your fortune and I’m here to help. Thanks for joining me. I will see you next time.