Tommy: Hi, everyone. In this episode, we are joined by Gary. The CEO of Cova software, one of the most prominent software companies in our industry gives advice to business owners on what they should think about when scaling their business and also. What to think about when expanding to another location? This is a good one. I hope you guys enjoy.
You've been an executive for the who's who in the mobile industry for quite some time, but what are some of the things that you've seen in the mobile industry that the cannabis industry should take on?
Gary: One of the biggest things is hire store managers. From the cellular industry because both stores are highly complex retail and highly complex Retail involves not only the systems you use, but the complexity of the products. And then you have another layer in our industry, which is the compliancy. So what can you say? What can't you say? How much can you sell, you know, without overselling.
Then as a store operator, there's marketing restrictions of what you can and can't do from an advertising and promotional perspective. It's, it's complex. In a new state or a new geography, or even in Canada, if it's a new town, you know, you're going into the first dispensary In Moose Jaw, there is no one with cannabis experience.
So it's not like there's a million kids running around who wanna be bud tenderers that know anything. There's not, there's probably no store managers who've ever had to run a compliance store, submit all the reports on a nightly or weekly, or monthly basis, and then handle volume. You know, think about most retail stores don't do the volume, the number of transactions per day, especially at the dollar amounts that we transact at.
And you know, the average retail store does less than a million dollars a year. The average dispensary does well over two and a half million dollars a year. So in, when you start thinking about it, do I want someone who understands? And this is a giant tip, retailing. We are retailers, everyone thinks, no, we're not.
We're dispensaries. We, well, dispensary is a cannabis store. And all the principles of retailing, they all apply. So having someone. Who can understand a more complex retail structure and high volume and high dollar amount, high ticket sales.
Usually that's, that's not common in retail. So my first tip about what can you take from the mobile industry, bring over. And I think secondarily, you know, and this is a much deeper conversation, but you look at the stage of the market and where is your market? Is it an introduction? You know, just start like they're just issuing licenses, they're just figuring it out.
Or are you moving up growth? And there's a lot of, you know, you can get a marketing textbook that talks about the product lifecycle from introduction, growth, maturity, decline. and you need to manage your business differently at each one of those stages because each one involves varying levels of competition and with competition and supply and demand comes pricing decisions. If I had a second tip, it's don't think you can manage your business the same way at all points in this maturation of the industry and the maturation of the industry is your market. It's not Canada, it's where's BC at? And then you look at the US and it's state by state and every single state is its own country. 'Cause in the US you can't ship cannabis across state lines. So the supply and demand is in that state. So your strategy should tie to where your store is in relation to where the market is.
Tommy: What would your advice be to, to them compared to somebody that's starting a dispensary in an existing state where there's 500 licenses ready, issued in that state?
Gary: Well, the thing that, and, and it's similar for both. You need to determine what your value proposition is. What is it that's gonna make your dispensary unique, different, and valuable to shoppers who want to, who come in? . If you're the only dispensary in 50 miles and you're gonna be the only dispensary for the next year, all they need to know is that you're there and you have weeded and it's fairly priced and you'll do fine. But a year down the road, when those 500 more licenses come, how are you going to distinguish yourself?
And what's really bad is that if you've never thought, and that's why I go back to what are you about? Like I can't tell you how many dispensary owners I've talked to in the last five years that struggle and they're, they didn't struggle day one. They struggled at month 13, month 25. You know, a year, two years down the road, all of a sudden it's like, well, this isn't easy.
This is a dog fight. And I ask, so my first question is, why would I, why would I go to your store? And you'd be shocked. There's, well, because we have good prices. Well, that's, that's the wrong answer. Um, and we'll talk, we can talk more about price, but if they don't really know and they can't verbalize it, how do their employees execute on any kind of strategy or give people a reason to come in the store?
So you wanna start with that. What's your, what's your differentiator? What's your, what's the thing you're gonna deliver? Can you communicate it clearly and easily to all of your employees and say, this is what we're about. Now, if we get a year down the road and you're struggling, let's revisit that. You know, one of the things I've learned is that if you're an absentee owner, things never work out the way you hope.
Because the likelihood you're gonna have managers who know exactly what your vision is and they're gonna execute on that vision. And let's say your vision is satisfaction. I just want people to leave and go, that was a good experience. What is it that made, like in your mind, what was gonna make that a good experience?
And is it always communicated? Is everyone living it down the line? And if you're an absentee owner, I guarantee you they're not. They don't know it. They don't live it. You know, six months down the road, someone gets hired, the owner comes in and says. Do you know what a, b, c cannabis is all about? And they go, just make sure we open on time.
And when people come in, you know, greet 'em and help 'em, and, and the guys' like in shock, like, no, that's not it. There's way more. So that's a, that's a long way of saying, um, you need to know what you're about. And there's like a dozen different North stars that you could be about. It could be about selection, convenience, um, like parking, like honest to God.
Imagine if you're in or an urban like Vancouver, urban Vancouver, and you're the dispensary with a parking lot. So people driving into the city, driving out of the city, driving around on the weekend. We're super easy, plenty of free parking. Well, no one around, no one within five miles has that. That could be your thing.
You know, let's say that your dispensary's in a, in a bad neighborhood, maybe it's safety, the safest buy cannabis. And it's like no one else hung their hat on that. But you've got, you've got the outside on surveillance. You've got a guard. Your thing is you'll walk people to their car. You know, all of a sudden you go, is that that big of a deal?
Well, guess what? No one else does that. And you just happen to address a concern or an objection or a hesitation to go into a dispensary. You solved it so.
Tommy: can you elaborate a little bit on your vision, your idea, your brand, but also tying it back to your community?
Gary: You had a question that you, you said you might ask me, so I, I'm gonna tie this other question into this answer.
Tommy: Mm-Hmm.
Gary: What should a business owner think about before looking to expand to another location? And I think even if it's your first store, you should
Be able to answer this to an investor to yourself. 'cause it's your money. What is the demand and why will I carve out share in that location? So now how do we, how do we answer the question? What is demand? Well, we look at what is my market area? So how many blocks or miles is gonna be my addressable area?
You know, you could be rural and it's huge, or you could be urban and it's small, or you could be in a place where you could do delivery and it's, it's expanded. And then based on the type of delivery, you know, whether it's, you know, the, um, ice cream truck or pizza model. But one way or another, geography comes into a store, a brick and mortar store, geography matters.
So what's my addressable population? Addressable population isn't every human body, your addressable population is, are they of age to buy cannabis? The likelihood that they'll buy cannabis, and then how are they gonna get there, drive or walk. You know, I think you need to understand access and let's talk about likelihood.
So go back to what you're gonna be about. Let's say your medical, your dispensary's, medical medicinal. Well, what if the population is very senior? That's a good thing for medicinal cannabis. So if I was rec, it might not be as attractive as a medical cannabis. As a medical dispensary. At the same time, what if it's like new apartments, first time home buyers or renters?
Um, I wanna know that because am I going to, does my value, does my proposition match the demographics or the people? What if I'm gonna catch people on the road, whether it's people on an interstate going, you know, back and forth across the country or city to city, or I just wanna catch people on their way to the lake, or I wanna catch people on the way home.
So understand what is, what is the addressable market? I need to understand how many bodies or how many bodies are going by my store per day. And then the next thing I'm gonna ask is the com. What's the competition? The competitive landscape. Like, am I the first, or am I, am I gonna be the only. Or is it crowded?
And how crowded is it? Well, if you're not the first, it's not like Ricky Bobby, then you're the last . If you're not the first, I, you're now in a competition and I, I need to know my competitors. So what is it about them that people like? Because guess what, they've carved out some. There's, there's only so much market share.
If there's two competitors, let's say each has 50%, how are you gonna get some of their pie? So I need to understand if there's two competitors, why do people, why do some people go to that one and other people go to that one?
Tommy: Hmm.
Gary: Okay. Am I filling a gap that neither of those two fill, or do I think I can do my thing better than either one of those. They're all about convenience and selection. I was gonna be about convenience and selection. Am I really gonna do it better? Maybe you will. Maybe you won't. Maybe you need to change your strategy. So that's, that's the thing about location is there could be a, you know, a bad location.
Like you're completely buried behind used car lots and no one goes back there and no one can find it.
But let's just say you have a, you have good visibility, good location. You need to think like a strategist. Like how am I gonna win in this?
So what are you gonna do better and different?
Tommy: how should an entrepreneur diagnose where they should spend their time?
Gary: Do you have a strategy? So if you have a strategy, you have a plan or you have a, this is what we're gonna try to do. And whether you're a grower or a manufacturer or a retailer, or even like ancillary, like we are your company and mine, we are trying to figure out what are we gonna do in the next year, let's say, what's our plan?
And then we need to try to execute or build our business around that plan.
So, a you've got a direction you wanna go in, it's gotta be measurable. And now as we start moving through time, are we measuring progress relative to the goals?
And if you're measuring that progress, there's going to be deviations from success. You could be crushing it. And if you're crushing it. What are we doing right and why? And how do we do more of it or keep doing it? That's where I would spend my time. Let's say that we are not reaching our goals, then I need to understand why.
So I think is that entrepreneur, whether you're in any part of the supply chain or I guess anywhere in business, it's are, do you have numbers that you're measuring against? And then when you look at those numbers, do you analyze them and do anything about 'em? And to me, that's where you should spend your time Now, not all of your time exclusively, like I said, you could be an absentee owner and just read numbers and then give edicts about do this and do that.
Um, I'm a big believer. Well, let me go back, let me give another lesson from my career. So in the mobile, in the mobile phone industry, I worked for the big phone companies down in the US which turned into at and t and Verizon. And I had this one company that was a Texas company. And I smile because usually I'm going to talk shit about Texas, but in this case I'm not.
And when they became my boss, one of the, their like mantras was from the CEO on down. Anyone above me who interacted with me wanted to know if I knew my business. That was like the guiding principle. Do you know your business? So my business was San Diego, California. I should know. Really everything there is to know about the cellular phone industry and how we're doing in that industry.
In San Diego, that was my business when I went to my sales team or operations team, or installed, like guys who installed car phones, um, do they know their business? You know, and I'd ask them, how many, how many installs did you do last week? How many do you have on the books for this week? Why don't you think you had more?
Um, how's your staff? Are your people staying with you? Do you have turnover? How much turnover do you have last year? How much turnover do you think you'll have this year? Do you know your business? And I think there's no better advice than that. And you won't know your cannabis business if you're not talking to your customers....
Tommy: I wanna ask you, and I want to dive into this a little bit more. What are some of the common mistakes you see business owners make?
Gary: well, the first, and I bought, brought this up earlier is price. So as we just went through a period in our industry of, um, reduced margins, you know, in, in Canada has one, well, each province has a version of it. Each state in the US based on where they're at in their cycle, has a version of it. But then overall, and I can say this for Canada as well as the us, we have limitations in getting capital that other industries don't.
So when you, when you're in these moments of headwinds that are affecting your cost structure, other industries can get working capital pretty easily to get 'em through the period, and, and we don't. So what I see over and over is like the easiest lever to pull is that one,
Tommy: Hmm.
Gary: it's the worst one. It's the most dangerous one. If you live by price, you'll die by price. And the is to get out of that spiral. Is incredibly difficult because you're gonna try to tell the story of some sort of value to bring your pricing structure back up, and you better be a great salesperson and deliver on whatever this pro the new promise is to get back there.
But unfortunately, in the last two years, we've seen enormous numbers of dispensaries go outta business. And if there's one takeaway that I'd like everyone to take from this is that, you know, when I talk to dispensaries that are closing their doors, and I'd ask them, they always, you know, ask 'em why, what happened?
They say it just got too tough and you know, the margins were too low and we just couldn't operate anymore at those margins. But what they never say is, there's a dispensary across the street and they're not closing. They never look in the mirror and say, what did do wrong? Well, it's always the same thing you did wrong.
You didn't know what you were about, which didn't translate into some sort of reason for people to shop with you. You went down the price, you know, you, you threw all your, your ideas of why this is a great dispensary out the window, and then there was no coming back and the guy across the street didn't do that.
It's tying those same principles, the same exact principles we've been talking about together. Don't give up on your strategy. Figure out how you can deliver it and make your customers happy to keep coming back. Um, I had an example.
And, and this is a converse one to what I just said, but it's equally important. You know, quality is a strategy and people will pay something for it. They might not pay double or triple, but everyone recognizes it might be a worth a little bit more for that word, that quality and, and the quality could be the product or the experience like shopping in that store is worth an extra dollar or $2 or $5 for the way they operate.
The way I feel, the way it all kind of happens every time I interact with them.
Tommy: I shop for quality. That's, that's my for me. When I go into a store and I buy something, it's how knowledgeable is, are the bud tenders and do they give me exactly what the mood that I'm trying to get in? And once those align, I'm, I'm always coming back.
Gary: I am with you. Well, if you, if you set that as part of your deliverable, there's a cost. You need to train your people, you need to work with them. You need to train your buyer. You know, I wrote down, you know, if you sell crap, whether it's weeded or technology, your employees pay a price in dealing with the customers when they're unhappy.
And when the customers are unhappy and they come back and get in the face of your employees, your employees become unhappy.
Tommy: Mm-Hmm.
Gary: And ultimately, nobody wants to be unhappy day after day, every day they go to their job. So what happens? They, they wind up quitting. You know, they'll find another budtender job or store manager or buyer job down the, down the street.
I. Where they have a belief that they could be happier and not have to deal with all those people. And if they leave, you could say, well, I could get more people. I, I can hire people whenever I want. But whenever you hire people, you've gotta train them, ramp 'em up, get 'em productive in your way of doing things and the way your store operates.
But if the core product is bad, the core experience you're delivering is bad, those people are gonna burn out too and leave too. So think about the, not just the short term cost and implementation of your strategy, but what does it mean in the long term? Invest in that long term. So invest in, you know, are we gonna invest in this much quality, this much quality, this much quality?
Or it doesn't even have, it doesn't have to be quality. It could be, like I said, that what if your thing is safety, then make sure that, that you keep delivering on that. That's the expectation customers have of you. Um, if you let 'em down, they'll just go somewhere else. So, you know, when you, when you ask that question, common mistakes do you see people make again, it's, they forgot what they intended to, to do as a store and they stopped delivering on it.
And then they, instead of doing the work to get back to where they need to be and wanna be and should be, they grab the price lever, because I can do that in a second. And will it move the needle? Yeah, it'll move the needle today. But in the long run, it erodes your finances.
Tommy: That's, that's really insightful. Short-term, long term, and sometimes you make a short-term decision, but it detrimental to, to the long-term survival of the business. For me, I always think about if you ask the right questions, you'll spend your resources on the right areas in your business.
So it all starts on asking the right questions. Right. What are some of the questions that you think that, uh, dispensary owners should ask about their business if they haven't already?
Gary: Well, that highest level one, why would anyone come shop here
Tommy: Mm-Hmm.
Gary: if you can't answer it? Guess what? Customers can't answer. They don't know why they should go there either. So ask that. Why?
You know, I always give the example medicine man up, like up where all the marijuana growing was in Denver off I 70. is closest to the Denver airport. And when they started cannabis tourism there, these, um, cannabis buses would pick you up the airport, take you to a grow, take you to some stores, let you get high on the bus.
But I went to the Medicine man, one stop, and I went in the dispensary and they had the, the rope, like the bank ropes, you know, where they go back and forth, like security at the airport. And I thought, God, what a horrible shopping experience. Like I'm walking in a store and you're gonna put me into this, this line.
But what was happening was buses let 30 people off, 30 people get into that line. They help 'em as fast as they can. They also know they're never gonna see these people again. Like. They're gonna get back on a plane and leave. So it's not like we're trying to build a customer for life. We're trying to take care of volume as fast as we can.
Tommy: Yeah.
Gary: And I went, wow, there's, you can have a lot of different flavors of dispensaries. one was speed. Like how can we sell as much as fast as we can? So, where, where do you wanna dial that level of service?
And like you think about McDonald's. McDonald's doesn't deliver a one. They train the people. You know, they're not always like the most happy, courteous, you know, rah rah people. But if you're just a total downer, they're gonna talk to you and then they're gonna get rid of you.
Then you've got Disneyland where you better be at a 10 at all times, and that's our culture. You're delivering a 10 to every visitor. So somewhere in between. Where do you wanna be? I think that's an important thing to think about that you might not have ever. I'm opening a store, you know, everyone's gonna treat everyone well, guess what?
If you don't tell 'em where you expect them to be, if it happens, it's by chance. It's not because you're managing the outcome.
The brand promise. The customer experience is the fabric. It's the foundation. It's, it's pretty much when you're building a building, you noted two things that are probably the most important aspects of running a retail store. What's your brand promise and what does your customer experience look like? 'cause everything is built on top of that.
Tommy: So why did you guys, why did you start Cova? What did you see in the industry that, prompted you to start Cova?
Gary: Well, it's a really simplistic story. You know, I was from Colorado, I lived in, in, um, California for 19 years, and a lot of people I knew were in the cannabis, the legal cannabis industry. And, um, when we thought about starting cova, you know, and, and this was out of a mobile industry, POS, so wireless store, POS and that company had about 84% market share of all, um, wireless stores used their software.
So they figured out the code or they, they cracked the code of how do you do this complex software? And when we were talking about it, I called people I knew, I. And I said, tell me about, um, point of sale software in the cannabis industry. And this was eight years ago, and they all said the same three words.
It all sucks. that in itself was like, well, there's an opportunity. But then when we really dove into why does it suck? You know, I need more, you know, and it wasn't, it, it really wasn't features. It wasn't, it doesn't, do you know this thing at the point of sale or that thing at the point of sale? It was, um, at the highest level reliability.
This, those were the days where everyone crashed on four 20 and it was just unreliable, undependable. I. Um, people in stores had to do reconciliations every night before they sent in their reports to Metric or BioTrack. They weren't integrated, um, realtime syncing reports. And, you know, as you got into it, um, it was frustration with accuracy.
Reliability. And, um, and, and honestly, I just connected the dots. I was like, I know what the secret sauce was for these guys in the wireless space, and I, I never worked for them. So I was business partners with that company, and I knew that their secret was ui ux. It was the user interface user experience, which translated to, is it easy to use, easy to learn if you could do the software.
Easy to use, easy to learn, make it reliable. We can, we can carve out some business here. So that's how it started.
Tommy: So this in cannabis years, ancient, six years ago, seven years ago. That's a long time ago in this industry.
Gary: We passed our, we started at seven years ago, and then we just went, like, had our six month commercial launch at MJ Biz Con six years ago. So come a long way really
Tommy: Tell us, tell us a little bit more about what you guys have in store. What, what is, what are you guys building today and what can listeners expect from Cova in the coming years?
Gary: Well, that's a great question. You know, the first thing I tell investors, and I tell customers and I tell everyone, is we plow all of all of our, you know, profit. Back into the product. So we've done that ever since we started, and it's a constant investment to try to get product superiority. So superiority and usability and in, um, functionality.
So what I see happening is we're seeing more dispensaries in more states or provinces, um, having a, a distribution aspect to their business where they're having a central hub and then moving if the state allows it or the province allows it, move it, um, you know, move it from a centralized buy-in ordering place and warehousing.
So building that functionality so that it's easier. And you know, in the US we have all the traceability. So you're adding a lot of reporting steps to say, yeah, we bought it here at the depot and we're moving it to, you know, to this location or that location. Um, you know, we also have places in the US where you can subdivide the cannabis.
So you buy a pound and then turn it into eighth quarters halves, pre-rolls and all that tracking information needs to go into the new, the new products that have a different weight, but they came from the same batch. So being able to do things like that in bulk. Um, there's other, there's other EL elements that we see, which is like bulk editing, where we just want to change the price of all of our concentrates and we don't want to go product by product. How do we start doing things, whether it's by manufacturer or by category, and do 'em in bulk and give the customers the tools to, to just do those things. Um, so those are efficiency types of improvements. I'm trying to think of like, there's nothing big that isn't confident.
Like there's nothing I wish I could say I have like some secret thing that's gonna revolutionize the industry. I don't. Um, but I,
Tommy: But these are, these are very, very important features that helps a business scale.
Gary: exactly things that help a business scale or a business like MSOs that are at scale. It's just more advanced tools that.
Tommy: Yeah.
Gary: you know. So not only, let's say we wanna change the price in a category. We have six sets of pricing. We have small town, big town, resort town, urban, rural, and we're gonna have, we're gonna dial in different prices in six different pricing schemes.
So it becomes more and more complex. As the industry gets bigger and bigger, the demands that they expect from us increase.
Tommy: Well, that's awesome. It's aLways great talking to you. I always learn a lot and this time you've given a lot of thought to somebody that is running a dispensary and how important it is. That you align your, your brand promise and your customer experience, which is the foundation of pretty much everything that you build your business on.
Before you go, how can our listeners get ahold of you and, and get ahold of Cova?
Gary: what, well, you can reach me at gary@covasoftware.com and then, um, we're at cova software, so you can, you can always get us
Tommy: Awesome. Well, thanks for coming on Gary and sharing. Sharing your knowledge.
Gary: Anytime. Love talking to you.
