How Do You Handle Investors In A Warehouse Grow?

[G Star]

I was shocked that my many searches didn't bring up anything!

We all know which way the wind is blowing, it's pretty obvious by the size of the operations people are building and ...operating.

When things get beyond a certain size, you can't pay for it all by yourself, especially up front. What is the best way to set things up for investors?

In my case there are 3 parties involved: The Store (Legal Retail Entity), The Grower (The Talent/Me), and The Investors (The Money).

Who Pays for what?
Who covers power, who covers labor, who covers the trim bill?
What should a profit split look like?

What has been proposed to me is:

1. The Store pays for Electricity, Nutes, Gas/CO2
2. The Grower Pays for Labor (Basically they want a product at the end, no headache)
3. The investors own the building and charge NO rent

Money (note, NOT PROFIT) will be split 50% to the store, 25% to the grower (ME), 25% to the investors.

I don't feel I should pay labor, but I wanted to ask around first before I got too greedy. I am in Los Angeles, this will be my first operation in a commercial space, I have operated out of homes for the past 7ish years with a 50/50 split with partners. (They cover costs, I only provide my services, we split trim fees)

Thanks for the help farmers!

 

[connoisseurde420]

This could go alot of ways. If I were the store or investor I would pay you per lb. And split running costs we with the store / banker. You are bringing something but not much it seems. Even from growers perspective. Where are plants coming from? Equipment? How long till return?
Sometimes you get salary position and don't worry about the rest. They pay everything is sometimes easier. A quarter of the pie is alot for running it with no cost to you, are you taking any other risk? Ie lease in your name??

 

[connoisseurde420]

Might work good the way they suggested, IF you can hire good help at reasonable rate. How much help you need, didn't mention a size. Warehouse can be from 10 to 100 lol. Makes a big difference on how you prepare and setup. Otherwise let it be their problem but make sure you are good with it. The team in the garden is what the success is going to hinge on! Good luck

 

[noone88]

everything is negotiable. Who covers the equipment and build out costs?

What might seem like a good deal to you may seem like a bad deal to me. And vise versa.

The only issue I see is relying on the store to sell all the product. They are in control of the money (and therefore, a lot of the power/control). What happens if they decide to replace you after a year?

Who covers the operating costs for the first 2-4 months before you see your first harvest?

What happens if the retail store gets shut down?

Anyone who's been doing this for a while has heard of these kind of deals going bad. And when it goes bad, it's defcon 5 type of bad. There are no legal contracts to protect any parties, so you, the "grower/talent" is the easiest to replace. Not many people seem to care about sweat equity.

KISS. We tell the investor to buy the warehouse. We pay the investor 3x market rent. We (shop and grower) determine the market rate for our product every quarter. The retail shop taxes the product. Everyone pays their own expenses. Protect your own ass, because no one else will do it.

 

[Bulldog11]

I pay for everything, grow everything, then move wholesale to dispensary. Done deal.

 

[Seamaiden]

That model is going bye-bye by 2018 at the latest. I'm finding myself rather fascinated with the middling aspect. My record is perfectly clean, I pass BG checks AND I'm bondable. Plus, I clean up really well.

 

[500lbs Guerilla]

Typically if you're in a partnership, expenses are split the same way profit is split. The exception goes to permanent structures such as construction and equipment, which is usually covered by investors, leaving nutes etc to be split. If the store is covering the cost of nutes, then maybe labor should be up to you. You're picking the nutes and the labor I assume, so do the math and see what works out best for you. You can try to have the nutes and labor split evenly also, so you and the investors cover 25% of all expenses and the store 50%, minus the investor responsibility to pay for all the construction and equipment...
At least this is how I see done around here. Like seamaiden said, lots of change in the upcoming years

 

[Herb Forester]

If nute and labor costs are even close to equal in your warehouse, please contact me asap and I'll fly out to save you millions. My contractual fee for setup, materials, and a year of 24/7 support starts at 50% of your current annual expense, with deeper discounts scaled to the project size. And yes I'm serious.

 

[G Star]

Some people just don't read...

1. The Store pays for Electricity, Nutes, CO2
2. The Grower Pays for Labor (Basically they want a product at the end, no headache)
3. The investors own the building and charge NO rent

Thanks for the help farmers!

If you're running a 100+ op in Southern California and only paying a few thousand for electricity...then we DO need to talk

 

[G Star]

If nute and labor costs are even close to equal in your warehouse, please contact me asap and I'll fly out to save you millions. My contractual fee for setup, materials, and a year of 24/7 support starts at 50% of your current annual expense, with deeper discounts scaled to the project size. And yes I'm serious.

thanks for the offer!

And thanks to everybody for chiming in.

 

[connoisseurde420]

keep us updated want to know what happens....

 

[noone88]

Approximate numbers from my records. Gonna round up:

Electricity cost for each light / per month: $60
Nutrient/media/co2 cost for each light / per month: $50

100 lights, looking at:
$6k a month for electricity
$3k a month for fertilizer, media, and co2
Rent for a 100 light warehouse is around 3k to 5k square feet. This cost is anywhere from $1 to $3 / sq foot.

100 lights can yield conservatively (assuming 80 flower 20 veg lights) about 40lbs a month.

To process 40 pounds, you're looking at market rate $150/lb, which is $6k a month.

So, in summary

PER MONTH
$6,000 electricity
$3,000 fertilizer, media, co2
$6,000 trimming fees
$3,000 to $15,000 in rent

Hope it helps.

 

[G Star]

@noone88 Thanks! That helps a lot.

I will adjust my numbers when I figure how much kWh cost for a commercial space...I know in residential around here it can get up to $0.28/kWh.

@connoisseurde420
I'll keep updating...hopefully I'll move it into the "Grow Room Design and Setup" by next month!

 

[noone88]

SCE provides my power, commercial rates.

 

[miko]

QuOTE="Seamaiden, post: 1571258, member: 12515"]That model is going bye-bye by 2018 at the latest. I'm finding myself rather fascinated with the middling aspect. My record is perfectly clean, I pass BG checks AND I'm bondable. Plus, I clean up really well.[/QUOTE]
How well do you clean up? :)

 

[miko]

I would do thirds. Easy and fair. No fights. Split costs and profits.

 

[Seamaiden]

How well do you clean up? :)

Well enough to fool doctors and lawyers into thinking I'm one of them! :D

 

[MrBlah]

@noone88 Thanks! That helps a lot.

I will adjust my numbers when I figure how much kWh cost for a commercial space...I know in residential around here it can get up to $0.28/kWh.

Figuring this out should be easy. Go to the local power company's website. They will have their rates listed for commercial operations. Power usage will need to include all your HVAC, circulation fans. pumps, computers, etc. as well, so don't forget that.

In my past life I was a mechanical engineer that did HVAC design. Feel free to ask any questions related to it.

 

[G Star]

Thanks again farmers. Buildout is almost done, we move in next week.

 

[connoisseurde420]

Get um coach