What is cannabis brokerage and how can it help my business?
By Gregory Frye
Brokers or brokerages are commonplace in pretty much every commodity-driven industry. This allows buyers and sellers to focus on what they do best without getting bogged down in the wholesale marketplace.
The same principle applies to the cannabis world and maybe more so. However, a lot of operators in the space either don’t understand how a brokerage could benefit their business, or they have had bad experiences with brokers in the past. This is where brokerages like Tamerlane, the industry’s first quality verified marketplace, come into play, setting the example of how to do it so everyone benefits.
Monica Barry, supply chain director of Tamerlane, and Jhavid Mohseni, CEO and founder of Tamerlane, recently sat down to reveal the ins and outs of how a cannabis brokerage can make a big difference for suppliers and buyers.
CREATING TRUST AND TRANSPARENCY IN THE MARKETPLACE
It’s natural for any marketplace to have ups and downs, which can make things really hard on cannabis suppliers that need to move their product.
Having a brokerage in your corner is the best way to weather that turbulence. As supply chain director with Tamerlane, part of Barry’s job is to develop a trusting relationship with suppliers, guiding them and reassuring them during the highs and lows.
“We’re there to listen, to alleviate their concerns and make sure they have the information they need to support their business structure,” Barry explains. “It’s really about giving them reassurance and transparency about where the market is at and where it’s going in general.”
That trust and transparency, Mohseni adds, is really one of the top value-adds in working with a brokerage. “The broker is the glue or cement that brings buyers and sellers together, managing those relationships and ensuring a smooth transaction,” he says.
“The broker or brokerage adds value to buyers and sellers of cannabis by virtue of our expertise, our network, and creating a high-fidelity transaction through arranging all the moving parts as well as negotiating any bumps that show up throughout the transaction.”
MAXIMUM RESULTS IN THE MARKETPLACE
One of the biggest benefits of working with a quality brokerage is they know everything about the who, what, when, where and why of the marketplace.
“When a supplier works with a brokerage, they get insights into the marketplace, understanding the best way to move their product, and really how to get the most out of it,” Barry says.
For instance, a supplier trying to move product on their own may only have a handful of potential buyers in their network. Meanwhile, a brokerage like Tamerlane has access to 100s potential buyers. The same applies to buyers looking to find the right supplier.
“In a sense it covers both the buyer and supplier for everything they need in the form of procuring the product and moving product, whichever direction they are, and usually if they don’t have a broker, they have to pay someone on their team to do this -- a brokerage eliminates that.” Barry says.
AVOIDING MARKETPLACE PITFALLS
Developing new relationships in business can be hard. Imagine shipping $80,000 worth of cannabis to a new buyer – how do you know they are going to actually pay for it?
This is where brokers can act as trusted advisors to a certain extent, Mohseni explains. “Because we talk to so many people, we definitely have our finger on the pulse – whether it’s good, bad or ugly. Through that networking effect, we know what people are looking for, we know which players you might want to avoid – and all of that allows us to connect the dots to make sure the transaction goes smoothly.”
“Sell, market, source, quality verify, call people, that’s all we do, all day long. That’s our job,” Mohseni says.
LIFE WITHOUT A BROKERAGE
A lot of operators prefer not to work with a broker. Some of the bigger players in the space prefer to hire in-house while others either have had bad experiences or simply haven’t done the math to understand how a brokerage could save them time and money.
Without a broker, Mohseni adds, sellers are going to have inconsistent sales, which leads to inconsistent revenues, which leads to inconsistent cash flow, which leads to money problems. “Time management is also going to take a hit, because you’re trying to do what these brokers do, and that’s all they do. Trying to do it yourself is just going to take you away from your core business, whether it’s growing or manufacturing.”
It’s not uncommon for suppliers to struggle in marketing their product, Barry notes. In a lot of cases, they don’t even have a firm grasp on what their product is worth. “Most suppliers undervalue their product; they’ll sell it to someone who walks in and strikes up a deal when they could have gotten much more if they knew their product’s actual worth.”
The other hurdle suppliers face is establishing themselves within the industry. “It’s challenging for them to move their product because they don’t know anybody,” Barry notes. “A supplier could be dealing with two or three other companies that buy their product, when we could be shopping their product to over 100 companies.”
As for buyers that try to navigate the marketplace without a broker, the risks are also plenty. “Without a broker you might end up paying higher prices, or you’re going to have weak relationships,” Mohseni explains. “Because if you’re not paying fair market price, you’re taking advantage of your supplier – which you will only be able to do for so long. Eventually they’re going to realize they’re being taken advantage of, or you’re going to help them go out of business.”
Gregory Frye is a storyteller, writer, editor and award-winning journalist with a love for meaningful collaboration. Most recently, he was part of the founding team at Green Flower Media, where he spent almost five years as executive online editor.