In 2016 the serial entrepreneur, once an executive
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Crockett needed a financial model that could forecast expenses, revenue, and everything in between for more than 15 states or territories —and five years out—in a largely unstructured market. The model needed to stand up to intense scrutiny by potential investors. And that wasn’t all.
The medical cannabis industry brings risks that startups in few other industries face. State laws vary widely. The product is illegal at the federal level. Almost every factor, from regulation to promotion to public acceptance, is new and changing rapidly. Entrepreneurs consistently ask themselves, “Can we get a bank account?” “What if we put time and capital into pursuing a license and don’t get it?” and “How do we manage our 280E situation?”
The”280E situation” refers to a section of the Internal Revenue Code that prevents businesses from deducting ordinary expenses related to income connected to controlled substances. Crockett found this worrisome; others in the industry had thought their businesses were profitable before getting a substantial tax bill. In fact, many of AGRiMED’s competitors were losing money even with strong revenue and before-tax profits that would be considered a home run in other industries. AGRiMED needed a strategy to avoid this fate.
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