Accounting is one of the most rewarding industries for those of us that love the challenge of navigating complex accounting and tax issues, implementing systems and controls, and helping our clients manage the financial health of their business, while maximizing cash flow.
Take myself for example. In the 20+ years that I’ve been a CPA, I’ve been a CFO as well as founder for many businesses and startups of all shapes and sizes. The stable income from a full-time job required that I trade off time with my family and doing the things that I love doing (rock climbing, traveling, etc).
So in 2010 I decided to start my own practice thinking I’d have more freedom, and it just ended up posing a whole new set of challenges on top of the ones I had just left.
The Importance of Specializing in a Niche Focus
Finding new clients that were willing to pay my fees was very difficult. I’m a CPA, not a marketer or sales person. Allocating time to business development AND trying to serve clients was a challenge that I wasn’t fully prepared for.
All I really wanted was to be able to do the job that I love, help people, and live a simple life doing the things that I love with my family. It wasn’t until I took a great piece of advice from a marketing program I invested in that things began to turn around.
“Pick the right niche and become an expert in that niche.”
Sounds simple, but it was certainly new to me. To be successful at any professional service business requires two things: 1) finding good clients and 2) providing them world class service.
The secret sauce, that helps 1 and 2 is finding a great niche and becoming an expert as that will 1) bring good clients directly to you, and 2) will allow you to serve them with top tier service as you are an expert in that space.
5 Reasons the Cannabis Niche is Lucrative
Once I picked the right niche in 2014, my business began to grow exponentially. I chose the cannabis niche, and if you are an accounting professional with similar goals, that loves what you do without having to pay the price of working your life away, I recommend that you choose this niche too.
Here are five reasons why cannabis is the best niche for accounting professionals today:
1. Cannabis Accounting Professionals Make More Money
Cannabis is a very complex industry. And while states across the US are legalizing cannabis, the federal government still considers it a Schedule 1 drug.
The IRS cares that cannabis businesses adhere to IRC 280E, and the various other rules that are unique to the type of sub-businesses (farming, extract, food production, dispensary).
This requires that you have very specialized expertise and that you stay on top of the industry as it changes (and it’s changing very quickly). We help clients with many issues, including lack of banking, cash issues, cobbling together and reconciling cannabis software to accounting software, multi-entity, consolidations, and inter-company transactions.
The cannabis industry also requires GAAP financials for your clients to minimize their tax liability (see 471-11). Couple this complexity with an extreme lack of CPAs and accountants in this industry and you have a perfect storm allowing you to charge much higher fees than non-cannabis clients.
In other words, proper accounting is not optional in this industry where even small startups are doing multi million in sales. We bill high fixed fees and our clients expect this as they need our help.
2. Cannabis is the Most Underserved Niche
Because cannabis businesses are still considered illegal, all of the Big 4, and most large accounting firms, are not serving this niche. This means that now is the time to get in on one of the fastest growing industries in the United States.
I estimate 90% of existing cannabis businesses are using bookkeepers that have QuickBooks or Xero training but don’t have the proper training to do the complex GAAP and cost accounting required.
The bookkeepers are doing the best they can, they just need more training. And with thousands of new companies being launched each month, the problem is just getting worse.
3. It’s the Fastest Growing Industry in the World
Cannabis businesses are now legal in over 30 states and each year more states are going legal. This niche is far and away and the fastest growing niche in both the US and the world. There are billions of dollars funding these companies annually and the growth rate is extremely high.
Inexperienced accounting professionals who aren’t advising their clients properly or are treating these businesses like a traditional business are costing their clients lots of money as well as leaving them exposed to potential IRS and state penalties.
4. Streamline and Provide More Specialized Services to Your Clients
When you specialize in working with businesses in a specific industry niche, the work that you do becomes much easier over time as you develop systems that you can use across similar companies. No more reinventing the wheel every time you work with a new client. You can do better work, more efficiently, which saves you time and makes you more money.
It’s also much easier to market your services to one single industry and be seen as an expert. I advise my students to spend one hour a day building their expertise (by year 1 that is 365 hours) and much of that is following the correct blogs, Facebook and LinkedIn groups, as well as joining or even starting local real-world cannabis groups in your community (i.e. Women Grow, Norml group, etc.)
5. The Cannabis Business Niche is Fun & Exciting
This industry is simply the most fun: the people you meet, the CEOS, the events. There are all sorts of new things happening every month, so if you are looking for an industry that is innovating and growing with some of the most dynamic and brilliant minds in the country, then the cannabis space is the right one for you.
Start a Cannabis-Focused Accounting Practice
So if you’d like to explore cannabis accounting, you may want to start getting familiar with the nuances, rules, and complex entities. Follow my advice in reason #4 above and start becoming an expert today.
And if want the icing on top of the secret sauce: become a PARTICIPANT in the cannabis movement. Cannabis is not just a niche, it’s a national movement with many passionate individuals who truly believe in the medical benefits, the job creation, ending the black market, and reducing the opiate crisis. You can become involved in the local non profit or political groups and you will quickly find yourself meeting many cannabis CEOs.
If you’d like to know where to start, you should visit dopecfo.com or speak to someone on our team. We’d love to help you get started!