MJBulls 0004 Things To Know When Raising Cannabis Capital (Part 1) Accounting BridgeWest’s Founder Jim Marty
MJBulls 0004 Jim Marty BridgeWest
Dan Humiston: [00:00:22] From Buminit media. It's the MJBulls podcast a show about raising cannabis capital
Dan Humiston: [00:00:34] On Dan Humiston and on today's show BridgeWest the first exclusive cannabis CPA firm in the world, Founder Jim Marty talks accounting for Raising Cannabis Capital
Dan Humiston: [00:00:54] Hey Jim thanks for joining us today.
Jim Marty: [00:00:56] Glad to do it.
Dan Humiston: [00:00:57] I don't know if you remember but you were one of the first people I ever met in the cannabis industry really.
Jim Marty: [00:01:03] Yeah.
Dan Humiston: [00:01:03] Well you spoke at my first show and the Hard Rock convention center in Las Vegas 2014, the first cannabis World Congress Business Expo at the Hard Rock. You were one of my speakers. And that's when we met.
Dan Humiston: [00:01:17] I'm really excited to talk to you about accounting and raising money in the cannabis space. But before I do let's talk a little bit about your company Bridge West CPA. I didn't realize this. You guys were the first cannabis solely CPA firm in the world.
Jim Marty: [00:01:33] Yeah I think we still are.
Dan Humiston: [00:01:34] I see you have over 200 cannabis companies that you work with.
Jim Marty: [00:01:40] Yeah and more every day.
Dan Humiston: [00:01:44] Briefly tell the story of how we got there.
Jim Marty: [00:01:47] And by 2014 my cannabis practice was bigger than my thirty year old CPA firm that I started in 1980 or about. We had to stop by and then I went my practice in 2015. Another firm in town took over all of our non cannabis and I put all of cannabis business under bridgewest which was acquired by a large CPA firm. January 1st 2017 and that allowed us to really expand nationally that clients all over the country.
Dan Humiston: [00:02:32] I just looked at your Web site and I'm like I mean you have well over 100 people in that firm just focusing on cannabis.
Jim Marty: [00:02:47] Well that is about building our parent company right over to let any of us like nationwide. We're doing a lot of very sophisticated work. Mergers and acquisitions due diligence on the preparation and of course the income tax returns
Dan Humiston: [00:03:12] Really the topic that I want to talk to you about and what most of our listeners are interested to hear today is if cannabis companies raising capital why should they bring on a CPA firm or when should they bring out a CPA firm.
Jim Marty: [00:03:24] A good place to bring in a CPA firm like ours is a letter of intent area or when awarded a license. And really start planning it out. What are you going to be your prices at retail. How much profit is there and then apply tax rates to it knowing that you can take all your deductions and make sure you have an after tax as well as important to an investor is the after tax cash flow. The only reason anybody should invest in cannabis is if they get a return on their investment.
Jim Marty: [00:04:17] Maybe they get a license and they are not operational yet to bring in a CPA firm. After tax cash flows the forecast out three to five years really is very good at understanding the guarantee what it costs to grow and whether you should leave for extracted products and then ultimately what you can sell it for either wholesale or retail and then you bring your expenses. Apply the income tax to them fairly sophisticated calculations because not all of the spending turned out to go and try to forecast out after two years and then line them with the investment the interest or the potential investors and get an idea of what your return will be for investing in a candidate when the raising capital.
Dan Humiston: [00:05:13] I know at various levels whether it's the early rounds like the seed round I suspect the information that's in their financials is probably last detail but it would be as we move into series A's in Series B rounds. Maybe you can talk just a little bit about the different levels of scrutiny that the financials take as they move through the different levels.
Jim Marty: [00:05:34] Sure. Well the level of the capital base the more sophisticated the investor and the more detail that they're going to want to see including potentially an audited financial statements when the company's operations. It really depends on what the investors want. It might be said that it's a lot easier to raise the capital. So many people want to get into this new and exciting, in some way its easier to raise the capital than it is run by the investor with a good return on that investment.
Dan Humiston: [00:06:09] You've talked a lot about companies that actually touch the plant. How about some of the ancillary organizations that don't touch the plant I know a lot of investors are good skidish about investing in anything that touches the plant but are really really bullish on companies that do not touch the plant. What have been your experiences with those type of companies.
Jim Marty: [00:06:27] Yeah well Cannabis is very close tied to a real estate. Marijuana is a very real estate intensive business in real estate. The cultivation you real estate were extracting products manufactured real estate the retail. Another way to go to go in and buy the real estate and become the landlord. That's a great way to make an investment. And the reason I like it among others is the marijuana busines bottoms out you've still got the real estate that you could leave somebody else or sell. .
Dan Humiston: [00:07:02] Would you advise any of your entrepreneurs to include real estate in their deals.
Jim Marty: [00:07:08] You're going to have a real estate one way or the other see that person in person put it into a separate company that become a landlord.
Dan Humiston: [00:07:20] Jim Marty who is the CEO of Bridge West CPA. Can be Reach at JMarty. at Bridge West CPA with an s dotcom.
Jim Marty: [00:07:34] We're very easy to find on the internet either my name jim marty or CPA firm bridgewest.
Dan Humiston: [00:07:40] Probably the most impressive aspect of what they do. I think we touched on this but we really just glossed over it is that you were in every state. That's a huge benefit. Right now we're in a well that's a huge benefit to companies especially as the regulations start to LAX and we start to see companies working in different states it's nice to work with the same firm. Anybody needs some guidance. Jim is the guy to call. We have his information on the MJBulls.com website.
Dan Humiston: [00:08:10] Jim thank you very much for being with us today.
[00:08:26] Thanks for listening to the MJ bulls podcast to learn more about today's guest or to apply to be a guest. Visit our Web site at MJBulls.com if you like our show. Give us a review on iTunes. Today's show was produced by Buminit media I'm Dan Humiston and you've been listening to The MJBulls podcast.
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