Extraction Lab Startup Costs – Financial Planning and Modeling for a Cannabis Extraction Facility
Planning an extraction lab can be a daunting task if you don’t have experience working in a cannabis manufacturing environment. There are so many variables and choices to be made, and that can be daunting! Let us help you get started.
If you are carefully budgeting your project or raising capital from investors, you most certainly need to put together a pro forma/business model which requires detailed pre-planning of your extraction operations. You may be asking many of the following questions:
- What amount of capital is needed for equipment?
- What are the operating costs?
- How many staff members are needed and what will you pay them?
- What is the expected production output for the equipment you are purchasing?
- How many and what types of downstream products can be manufactured from this operation?
All of these factors need to be known in order to know how your business unit will function and what you and your investors can expect in terms of production and profitability. Certain choices that you make can affect the bottom line of this business unit so it is important to make informed decisions, and making these decisions often comes down to analyzing the numbers. At Cultivation Sector Consulting, we offer our expertise in the cannabis extraction and manufacturing business niche. We will help you create a financial model so you can be prepared to raise capital with accurate assumptions and a thorough understanding of how the business will operate. We want you to make the best decisions and purchases for your business so that you can be successful for years to come.
In extraction operations, a particular method of extraction is selected because it is best one for producing certain kinds of products, but these methods also differ in their production capabilities and their operating costs. Some of the factors that differentiate these methods are extraction efficiency, capacity, process time, market price of the end product, quality of the extract and need for certain post-extraction processing steps. It is important to know the specifics of these differences between methods/systems in order to create accurate models of their production.
Knowing your method is especially important when raising capital and being able to accurately establish the amount of capital required, the revenue potential, and profits generated from these processes. These are also important factors to know as you operate and manage the business so you can monitor specific KPI’s (Key Performance Indicators) and have a realistic baseline for these values.
Our cannabis extraction expert, Chase Huff, has built financial business models for extraction operations that provide this information for clients with real world assumptions built into the model so that your operation is able to provide the results that investors are expecting. Chase has worked with clients who plan to be vertically integrated, where extraction and manufacturing is just one part of the whole business, and he has also helped integrate the extraction and manufacturing models into larger pro formas built by finance professionals. Having a thorough understanding of cannabis and hemp extraction and manufacturing from a hands on scientific perspective, but also a business and operations perspective, is a factor that sets Chase apart from many other extraction experts in the industry who do not understand the process of raising capital, building a business plan, and the impacts of decisions on the profitability of the business unit. We look forward to helping you plan your extraction operation!
Here are some samples of the documents that will be included in your consulting package if you work with us on financial planning for your extraction facility.