“if you’re not in the business now, you’re about 10 years behind.”
by liz gold
cannabizcpa.pro
if you’re a cpa who is thinking about getting into cannabis, get moving because you have a ton of catching up to do, said john repetti, cpa.
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“what that would require you to do is start getting educated,” he said, adding, “or there’s another way around it. connect with a cpa or a cpa firm that has a long history in the cannabis industry and cut a joint venture deal. deal with them so that you have instant knowledge. if you are going out there on your own and you think you’re going to be an expert on day one, rest assured, you’re sorely mistaken.”
a cpa in new york and florida, repetti has spent more than 25 years in public accounting and more than a decade in the cannabis industry. he has started two companies aimed at helping cannabusinesses navigate the tough, relentlessly changing industry.
currently, he serves as ceo of bestia consulting, a company focused on m-and-a activity and the ceo of rowdy capital partners. rowdy raises capital and operates cbd and cannabis companies. for many years, he was ceo at the regional cpa firm he founded, mgi repetti. today, he continues to sit on the board of gold coast bank and other numerous commercial and non-profit organizations, as well as serve as an advisor to several venture capital firms.
“essentially, bestia is able to consult for organizations in a non-financial capacity,” he said, adding he is primarily focused on cannabis clients. “i help them with their problems with their board of directors as well as take positions in certain companies raising capital and putting money to work with people we think are great.”
repetti describes his bestia clients as “two-headed animals.” on one side is the client who has applied for and received the license or is waiting to receive a license to be either a cultivator or a distributor of cannabis. on the other side, he said, they have investors, who are looking for very good returns on their venture into the cannabis industry.
as a cpa who came into the cannabis industry early – 10 years ago – he says that helps to have automatic exposure.
as the industry continues to change and evolve at a rapid pace, the biggest hindrance, according to repetti, is that marijuana is considered a schedule 1 drug and federally illegal.
“they are still the prohibiting factors that keep companies from being able to be in traditional banking environments,” he said. “it keeps commerce from going across state lines, so, in other words, if you grow cannabis in the state of colorado, it has to stay in the state of colorado. if you move it across, it’s a felony, so that’s been a hindrance.
“and the other hindrance is, how many states have either made it adult-use legal or whether they’re medicinally legal. there are 11 states at this moment in time – it’ll probably be 12 by the end of today – but we’re talking about 11 states that have adult use. we can use our turnkey operation to get those businesses running and in the medicinal states we can do that, as well,” he said.
repetti says the key to a profitable business is to surround yourself with smart people.
“you really need to encircle the entire business with really intelligent people who have a solid business foundation,” he said. “in our particular business, i’ve run nearly a hundred businesses i’ve either bought, sold, ran, owned and so forth. i always tell people i’ve made almost every mistake there is to make. what it takes to run a profitable business is smart people.”
investors putting down money in cannabis ventures are looking for returns and they’re looking for safety, he said.
according to repetti, investors are looking for three signs; the first is a track record. “if you invest with a cannabis company that doesn’t have a track record, it is quite a bit riskier than investing with somebody that does have a track record,” he said.
the second is that they want to see good, solid, double-digit returns every year, year in and year out. the third piece of that is investors always have a horizon of an exit from a business. “it depends on their investment philosophies, but we have to keep an eye on their objective to get out of the business, at some point in time.”
his opinion on how cpas are doing navigating the cannabis space?
it’s like prizefighting.
“some boxers are really good boxers; some boxers aren’t that good,” he said. “some of the firms are doing a phenomenal job in the industry and some of the firms are there because their clients said, ‘you need to do this because we’re doing it.’ cpas cherish their clients – or they should – and they do the best they can to accommodate.”