Hi, I'm Darren Kaplan from the CannaCribs horticultural consulting team, and today we're here to share some concepts that we discuss and implement to help commercial cannabis growers operate as efficiently and successfully as possible. The first step in designing a cultivation facility is to understand your financials. You can have a great understanding of the equipment you want to put in your facility, your cultivation methods, the team you want to work with, but if you don't understand your financials, you're setting yourself up for failure. In the end, we're building a business here.

The first step to financial modeling is to create a design concept for your facility. You have to understand the scope of your facility. Are you extracting? Are you growing dry flower? Are you producing vape pens? Everything that you're going to be producing out of your facility goes into understanding your cultivation methodology. Are you growing in living soil? Are you growing in coco and rockwool hydroponically? What is your planting density? What type of equipment are you going to be using? All of that goes into your design concept, and that's all connected to the cost of your facility.

To start, it's best to build a conceptual layout of your facility—basically drawings of all the different areas in your facility: cultivation, post-harvest, support, fertigation, mechanical rooms—and lay them out on paper. AutoCAD is very helpful. From there, understand the number of walls in the facility, the number of doors, the amount of equipment, the number of grow lights in a flower room, for example, and the amount of benching. All of that goes into your conceptual design. Part of the conceptual design is incorporating your cultivation methodology: defining what growing media you're going to use, what planting density you're going to be maintaining in your flower rooms and in your propagation space. Are you using single tier, multi-tier? All of these things go into the concept.

Part of the concept is also the workflow—the flow of materials in and out, of people in and out. All of those things need to be considered in the concept so that you can have an understanding of the flow of the facility and also avoid cross-contamination and maintain phytosanitary conditions.

Next, we go on to the capital expenses. This is basically all of the structural elements, engineering costs, architecture, building costs—the cost of the foundation, the walls, the benches, the lighting—all the cultivation equipment, post-harvest equipment, extraction equipment, everything that goes into building your facility. Those are your CapEx items. In our financial models, we'll create a summary of the CapEx costs so you can understand which costs are allocated to which items and to which category. You can see which areas are relatively costing you the most and the least so you can see if you need to cut costs or if there are areas that you can splurge on.

Now on to the operational expenditures. This is everything required to actually run the facility. We're looking at overhead. We're looking at cost of consumables, staff, labor—all of that goes into your operational expenses. We have an idea of the conceptual design, which helps us understand the amount of lighting, power, irrigation equipment, tanks—things like that that are going into the facility. From that we can calculate the HVAC requirements using your plant counts and your equipment load, and we can also estimate the water usage. From that we can understand some of your overheads: power, water, labor, etc. Based on your design concept and your cultivation system—how complex your system is, how much automation you're including—you can estimate the staff requirement and the salaries for each staff member in each area.

Based on the cultivation system, you can calculate your yields, your output. You can start looking at the different genetics that you might be growing in your facility and estimate yield per cultivar within your cultivation system. All of that will go into your output. Ultimately, what we're trying to understand is cost of production per gram or per pound.

Once you've built your financial model, you'll have an idea of the capital you need to raise, the ROI or your time to profitability, your cash flow forecast, net revenue, EBITDA, and your cost to produce—or your cash cost per gram. All of these metrics are absolutely essential to understand if you are building or operating a cannabis cultivation facility. They're going to set you up for success. And if you need help with financial modeling, this is something we do on a regular basis. We draw upon projects that we've either run personally or that we've designed for other clients, and we can give you an accurate estimation of everything that we just discussed. If you're interested in financial modeling and how we can help you with that, please reach out to us in the comment box below.

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