Christian Hageseth | Crain's

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Christian Hageseth

Background:  

ONE Cannabis is a new cannabis business franchise system. After years in the cannabis industry, Christian Hageseth and his team are looking to partner with franchisees who want to open their own dispensaries.

Hageseth is also the CEO and founder of American Cannabis Partners and Green Man Cannabis, which operates two dispensaries and four grow facilities in Colorado. He is also the author of "Big Weed: An Entrepreneur's High-Stakes Adventures in the Budding Legal Marijuana Business."

The Mistake:

I underestimated the learning curve in the marijuana business.

I got into the cannabis industry in 2009, right after the state of Colorado decided to make it an industry instead of a market where it would be grown in bedrooms and sold to neighbors. That’s when I founded Green Man Cannabis.

Since then, I’ve been a partner in five dispensaries and built out a number of grow facilities. We’re still one of the top five cultivators in Colorado. Basically, we got pretty good at running dispensaries compliantly and profitably.

Back in the beginning, I really tried to become an expert in this field in which I had no expertise. I had run retail operations before. The first company I ever ran was an ice cream company in Seattle, Washington, called Marble Top Creamery.

So I had familiarity with retail and customer service, but it didn’t totally transfer over. I think many of us have had similar thoughts: I have had success in this one part of my life, I should be able to transfer that to this new area.

I made so many mistakes. Marijuana operates differently from all other businesses. There’s a concept your readers will likely be familiar with called GAAP, generally accepted accounting principles. GAAP doesn't necessarily apply to the cannabis space because what we do is federally illegal. There is no general accounting principle for what is essentially an illegal activity, and that creates a problem.

Here’s a specific example: We built out two facilities in one calendar year, a dispensary and a grow. I had the operating company take over the building and do all the tenant improvements and then begin to operate. But because it’s all marijuana, we later learned that all those expenses were nondeductible. That cost us about $400,000.

The right way to do it is to start a separate, real estate entity that can pay for all those improvements. The real estate company then leases to the operating company, making the expenses deductible again. That was an expensive lesson to learn.

I’ve made millions of dollars in the marijuana industry, but I’ve also lost millions of dollars in the marijuana industry.

The Lesson:

You’ve got to be as informed as possible, even when not all the information is available.

I’ve been in this business for nine years now. It used to be like the Wild West. There weren’t very many qualified professionals in it.

Now, what I try to do is understand that I am making big decisions and that they might not be what they appear to be on their face. To get around that, I talk to a lot of people before going one way or the other. I talk to a few lawyers; I’ll talk to a couple accountants; I’ll talk to our compliance people and really make sure I’ve seen it from every angle and make sure I’ve informed myself.

And then obviously, we got into ONE Cannabis so we can pass on what we learned to other people who are interested in the industry.

It’s been a steep learning curve, but now I just appreciate that every day because it means that this industry isn’t mature yet.

Christian Hageseth is on Twitter at @C_hageseth.

Photo courtesy of ONE Cannabis.

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