How to Price Cannabis Accounting Services for Pre-Revenue Businesses

Don’t know how much you should charge for providing Cannabis accounting services to pre-revenue businesses? You’re not alone! In this blog post, we uncover two main ways to consider setting your price. The first is by accurately framing the value you provide and asking a number of smart questions. The second is by reviewing a number of areas within the company’s pitch deck. Investing some time and energy into this process in the ways we suggest below will enable you to price your accounting services at a rate that supports your ability to offer maximum value to your clients and get paid what you are worth. 

You Are a Partner in Their Success, Not Hired Help 

Prior to getting into the how-to’s of pricing your Cannabis accounting services, it is imperative for you to remember that if you choose to work with this client, you will be the leader, guide, and partner in their accounting success. By no means are you hired help. 

Being confident, assertive, and playing somewhat "hard to get" can help you position yourself as a potential partner, not an employee. If a prospective client emails you asking for a quick meeting, name only one or two windows of availability for a quick 20-minute phone call or virtual meeting. If they accept, use that time to listen to their main concerns and ask them specific pertinent questions which demonstrate your expertise; hint at certain areas which are probably completely off their radar. 

Prior to the 20-minute mark, remind them that you have another meeting you need to get to. Schedule a follow-up meeting for a specific day and time. Later in the day, send them an email invite for that specified day and time. Talking to them for an hour and a half, saying your schedule is “wide open,” or diligently responding to every text they send automatically positions you as an order taker, so don’t do it! Do zero work until you have a contract (and perhaps a retainer) in hand. 

Do Not Charge Hourly for Your Cannabis Accounting Services 

Charging by the hour gives the wrong impression. Your price should be constant and high enough to ensure you make a good return for your effort. 

If you’re accustomed to pricing by the hour, the following advice can help you make an adjustment and not sell yourself short. Consider the rarity of the service you will be providing and the number of complex variables you will be dealing with (entities, seed-to-sale software, number of verticals, employees, state and federal tax, GAAP, etcetera). Factor in your overhead, including the investment you’ve made in learning Cannabis accounting. Adjust your hourly rate to reflect all of that. Next, estimate the weekly number of hours you will work on this client’s account. Multiply those hours per week by four to get a monthly figure. Write that number down, noting the system you used to arrive at that figure. Next, consider our other suggestions. Once you’ve done a few of those, you can return and see how this method worked for you. 

Base Your Fee on Benefits, Not Tasks 

Benefits are the big, top-level things you deliver that matter for your clients and their business. Getting them set up properly, keeping them compliant, paying state and federal taxes in a timely manner, properly maximizing their tax relief, and enabling them to sleep well at night are all benefits. Paying the municipal trash collection fee is a task. When you have the tools, systems, training, and a supportive, knowledgeable network, you can justify a higher pricing policy and bill a high fixed fee each month based on the value you provide. (Learn how to help Cannabis CEOs by alleviating their common accounting headaches.)  

Position Your Accounting Services as an Investment

Cannabis accounting, tax, & CFO level services should usually cost somewhere between 2-4% for every million dollars in forward revenue, adjusted up or down for the complexity of the client’s account and needs. If, once you assess all of the time and energy you will be spending on the client, you decide 3% is a price you feel good about, so be it. If, for example, that pre-revenue Cannabis cultivator expects to clear $1,000,000 in forward revenue in year one, you should assume a minimum price of $20-30,000 per year. 

As such, your fee is an investment for the client that directly impacts their growth and company’s value; it is not merely a cost. 

Cover for the Unknowns 

At first, it might be a good idea to add a 20% increase to account for any additional hours of labor you may incur. For instance, if your estimate for your services is $5,000 per month, put $6,000 in your offer letter, especially at the outset as you get going. In Cannabis and CBD /hemp companies, there are nearly always unforeseen "surprises," thus you should prepare for them in advance.

Company Growth Leads to Higher Fees 

You and your firm should grow right along with the clients you serve. Right from the start, communicate to potential clients that you will review their engagement on a quarterly basis. In order to avoid being bound by an early estimate, it’s crucial to manage this expectation up front. Also include this in your engagement letter.

Know Your Needs & Set Your Pricing Structure Accordingly 

While you’re the leader capable of helping that Cannabis client navigate the complexity of getting set up correctly and being compliant and audit ready, you might need to close a client soon. Perhaps you’re transitioning into Cannabis accounting. Perhaps you have a kid who’s starting college and that tuition payment is sizable. Whatever your need might be, work out what you consider as your fair price for this client. That is a great place to start!

Make An Educated Guesstimate on Pricing Your Accounting Services: Peruse the Pitch Deck

The company’s pitch deck and their financial model is where you want to look to get some cold, hard figures to work with. By looking at their valuation, projections, statement of cash flows, and other key areas, you can arrive at a figure for accounting, tax, and CFO services. Furthermore, by assessing the soundness of their deck, you can see how investment-worthy they are. If you choose to work with startups in the pre-capital raise stage, you can suggest a fixed fee that will enable you to support them during the raise. Once the capital is raised, you can move into getting your agreed-upon fees which you can include as part of the financial model. 

What to Analyze in the Pitch Deck 

Company Valuation - Located under investor economics, the valuation of the company tells you how much the company is worth today and is projected in the future. Consider whether their pre-revenue valuation is based on real value contained in the company or big dreams. 

Revenue Projections for Years 1–5 - How much are they projecting to make during each of these years?  

Statement of Cash Flows - Containing the projected cash flow for years 1–5, this statement should give you a good indication of how much money will be flowing in during every month of year 1, then annually for years 2–5. 

Summary Tab - Containing all of the company’s key metrics and assumptions, including rate of return at a year five exit, and overall investor ROI, do the figures and assumptions look good to you or are they overly optimistic? 

Best and Worst Case Scenarios - This section of the pitch deck is designed to give investors a good idea of what happens if the company’s predictions are off by 50% or more. As such, it’s a good indicator for you to discern what the potential outcomes could be and how you could be impacted by a best or worst case scenario. 

Amount of Owner Capital Invested - This figure tells you how invested that CEO/founder is in the company. If they have little invested themselves, what does that tell you about their level of dedication and commitment to the company? 

Learn more about pitch decks for Cannabis startups.  

The Final Figure

How many guesstimates did you do? 

If you did three: one based on need, one based on the pitch deck, and one on your usual hourly plus markup (discussed in “Do Not Charge Hourly” above), first make sure you’ve figured out the monthly figure for each. Deduce the average, add a little cushion, and make your offer. If you bid too low, you can increase the fee on day 90. Make sure to cushion for time and any additional help you may need. 

Close Great Clients

You will not close every potential client, nor should you. Your goal is to close great clients who value your service and leadership, pay you well, and enable you to grow your business in the manner you have established. Serving only a few great clients, not a dozen mediocre ones, is how you get to six or seven figures. Providing top-tier service for fewer clients is the name of the game in Cannabis accounting. Growing your expertise, making thoughtful, insightful decisions, and providing real, undeniable value is where it’s at, so hire great clients, partner in their success, and thrive! 

Learn more about DOPE CFO’s price quoting tool, workpapers, and non-salesy marketing system.