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Corporate Hygiene: What It Is and Why It Matters

Many business owners will eventually either need to raise money for their company or else choose to sell it altogether.  The cannabis industry is in a consolidation phase right now, and bigger operators are gobbling up smaller ones. Whether you are a big operator seeking to acquire new licenses through acquisitions or a small operator looking to exit, there is one key factor you cannot overlook: corporate hygiene.

“Corporate hygiene” is a concept that encompasses a number of formal business practices and procedures that make a company run more efficiently. Good corporate hygiene makes a company more desirable to investors and cuts back on many of the headaches and risks associated with operating a cannabis business. Many cannabis business operators tend to fall into the trend of being lax and informal. While there is nothing inherently wrong with a lax and informal business culture, it can make resolving disputes and planning for the future much more difficult. By practicing good corporate hygiene, you can set yourself apart and show investors that you and your business should be taken seriously as a promising investment and create a positive future outlook for your brand.

A great place to start is to clean up your financial records. Every business should have clean and accurate financial records that can be produced at a moment’s notice. Work with your financial team and financial professionals to ensure that every penny your business earns and spends is accounted for. Investors will use your financial records to determine how good of an investment your business can be. The more reliable your financial documentation, the more comfortable an investor will be in selecting your business as their next investment.

Another part of good corporate hygiene is observing corporate formalities and creating defined policies and procedures for your company. Many companies maintain standard operating procedures – a step-by-step guide to how your business runs – particularly if you are cultivating. By maintaining and following standard operating procedures, you are showing investors that your company makes intentional day-to-day decisions. By practicing corporate formalities – such as holding an annual meeting with all of your stakeholders and recording your corporate meeting minutes – you can show investors that your company is planning for the future and being actively managed.

For those of you with strong branding, protecting your corporate identity is another step toward good corporate hygiene. This can come in the form of trademark registration and defining your trade secrets. This will show your investors that your company has a unique identity and intangible assets that set you apart from other operators. You can also use your brand to create a strong message that tells consumers what your company stands for and what its mission is.

For those of you with a large staff, it is important to maintain human resource policies and management procedures. Investors will want to see that you are able to manage people and your present and future employees will appreciate knowing that there are certain rules and procedures in place to address personnel issues. Human resource policies can also help you shape your corporate culture and make you a desirable landing space for top-tier talent.

It is never too early nor too late to begin cleaning up your corporate hygiene. Whether you have an exit strategy in mind or just want your business to run more smoothly, good corporate hygiene is an essential aspect of running a business. Feel free to call our office to discuss your specific situation and to see how we can help you succeed.

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Choose the Law Office of Scot Candell & Associates for expert legal guidance in cannabis, criminal, and business law. Since 1997, we’ve been your trusted partners in justice, simplifying the legal process to make your experience worry-free. Serving the San Francisco Bay Area and beyond, we provide the high-quality representation you deserve.