Supply/Demand Analysis
Any given price drives some to consume a product or service and others to provide it. While this relationship is often relatively efficient, the cannabis regulatory environment combined with the restirctio interstate commerce cause dramatic differences in addressable markets. This relationship makes it imperative to utilize supply as well as demand analysis to model one’s Total Addressable Market (TAM). A model should allow a user to feed inputs into an operational forecast and act as a spot check to identify potentially erroneous projections.
Sell-Through
Does the model have a detailed monthly schedule of product or service sell-through by channel? The accurate assignment of variable costs depends on a well-articulated schedule.
Direct Costs
Are costs broken out into their raw material components? Is the model stress tested for changes in the prices of these as well as finished formulations during the forecast period? Cannabis companies have exposure to volatile raw materials prices and management price expectations is of particular investment importance.
Revenue Schedule
Does the model show a monthly revenue schedule by product and channel? Do quantities and pricing match the sell-through schedule? It is important that these align as clean data is essential to effective investor presentations.