The Modern CPA Success Show: Episode 46
Today, we sit down with Adam Hale and Andrew Hunzicker, Founder and Partner of Dope CFO. Andrew is a subject matter expert for the AICPA on Cannabis Accounting.
In this episode, we sit down to learn more about the Cannabis Industry, what we need to know and understanding the opportunity available for CPA Firms.
Jamie Nau: Hello, everybody. Welcome to today's podcast. Today, we have a dope CFO on the line with us here. So we're really excited to get right into this. This is Andrew Hunzicker and his firm is actually called Dope CFO. So we're going to get a little bit more into that name and what he does. But before we get too far into it, Andrew, give us a little bit of your background and talk about how you got to where you are today.
Andrew Hunzicker: Sure. The quick story would be I got my CPA in ‘95 and was in, like many of us, in Big Four. I was in Dallas Price Waterhouse Coopers and then actually switched to Grant Thornton to move, like you said, moving to where I wanted to move Oklahoma City, which was where my original home was there. And like again, like many of us of Big Four I rolled out to a client as CFO literally on the first day of the century I think it was January 2nd of 2000. And I was there for 10 years, oil and gas CFO, my boss and myself, founded separately a drilling company in 2006 with private equity. And we did an exit of that company in 2010, to Chesapeake Energy. And when that happened, I basically packed my bags and I moved where we vacation, which is Bend, Oregon. And I still live here today. So it's kind of a vacation town and we have a ski area, et cetera. So lived here the last 11 years and been CFO on my own since then. Accidentally got into the cannabis space when Oregon was one of the first states to legalize. There was a lab here that needed help doing due diligence. And so I started helping them. And one thing led to another. CFO job, it was very interesting space. Nobody, especially in the CPA side at that point, would even touch cannabis. But I thought it was actually pretty fun. I'd been helping high tech companies out here who, typically the way I describe high tech companies, they've all got Harvard MBAs. They all tell you they know more about accounting than you do. I'm talking about the founders, but they're all broke. They have no money and they're raising money. Cannabis conversely, the CEOs are often, you know, in their thirties. They're pretty cool. They'll tell you they know nothing about accounting and tax. And by the way, they got eight million dollars because they're well-funded. They make great clients.
Adam Hale: And good customer appreciation nights? I don't know. I was expecting a different story into how you got started. But, yeah, that's pretty amazing. I mean, so were you scared off a bit at the beginning? Because we were talking about how the AICPA now is kind of opening up and really embracing it now. And, you know, it's only a matter of time before it's kind of whatever everywhere. But every time you would like go and look up any kind of guidance, they'd always be like, no, no, we don't touch it.
Andrew Hunzicker: The Journal of Accountancy has told me like three different times they won't write about it. Then I'll email back and it’s like oh, I actually saw an article you put in there. I've written for Accounting Today three times. But AICPA now is finally putting on a full conference. November 8th at Caesars in Las Vegas for two days. It's all cannabis. Most of the other big national firms you you've heard of are helping put on the conference. So a lot of players are there. And so, yeah, many CPAs early on was like, we're not touching this with a ten foot pole. They were scared of it, etc.. I didn't care as much because I had already I mean, I'm almost 60. Kind of semi-retired. I really wasn't that concerned. You know, I can take on any client I want. I only work part time as well since I've been here. So I wasn't as worried. But it's funny, the firms even like Bend, Oregon, where I live. One hundred thousand people, none of the CPA firms at first would touch it. Now, every last one of them has clients. I think what happens with most firms across the US is we expanding rapidly eastward. You say, oh, I'm not going to touch it. And then you just start turning clients away left and right. And then you're like, wait a minute, maybe I should do this. Maybe it's actually lucrative. It's you know, we talk about niches vastly underserved by CPA still. And it's a little bit complex. These clients, a single client, can easily be mid six figures, just one client. And those fees are growing. So, yeah, makes a great niche, and this is Mom and Pop, or, you know, your average one to two dispensary chain with maybe a farm on the side is a ten million dollar company. So they're not like getting a coffee shop client or whatever.
Adam Hale: Yeah, they've actually got the ability to pay. Now, do you find that most of them, you know, we were either on the retail side or the seed side, or do you find that it’s usually all over?
Andrew Hunzicker: It’s really all over. So, dispensaries and farms are the biggest side, but you'll find the cannabis companies themselves they start figuring out really quickly because the punitive tax laws, it's very advantageous for them to vertically integrate if the state allows it, which many do. And so more often than not, even if you start off with a dispensary, they're going to add a farm, the next thing farm adds is the processing, chemical processing to make the oil. Then they start making products. Some of them have delivery companies or distribution. And so you'll often find a mom and pop with 8 to 10 legal entities and vertical integration as well. So it definitely got some complexity, cost accounting involved for certain. And there's tax and compliance issues. There's the cash and banking issues. There's software issues because a lot of software won't serve that niche. And so you can either look at it as, oh, this is just a total mess. I don't want to touch with a 10 foot pole or it's got a ton of opportunity and high paying fees as well.
Jamie Nau: So if you do all that valuation and kind of look at it and say, I think this is something I do want to do. Other than attending that conference in November, where else would you get started? Because like you said, there's a lot of regulation. There's a lot of special things you need to understand in order to get into this industry. Where would you recommend someone start?
Andrew Hunzicker: Well, I mean, not to plug us, but at DopeCFO.com you'll find, we've got a complete program that is not just education it's actually all the tools as well. We built all the tools and work laborers from engagement letter controlled documents, charts of accounts, cost accounting templates. So if you're really interested, yeah, we've got a complete package. But even if you just want to check it out for the free side, we have tons of blogs and info about the cover, lots of different topics, and the conference in November will be awesome as well. This fall conference. There's going to be some tracks more for the small CPA firm for once you get in the space, and then about half the tracks are for bigger firms that want to go down the assurance, audit, advisory, and a public filings which will be coming along, you know, once we can get this thing legalized. Just saw the House today introduced a bill to fully decriminalize cannabis. So we're moving quickly, both state and federally. And so we actually saw this with CBD and hemp legalized completely in 2018. So, there's a decent chance that cannabis will go down that path as well.
Adam Hale: Yeah, I mean, and totally to plug your website. I mean, a couple of years ago, whenever we picked up our first client, you were the only resource out there. Like I said, everywhere else was saying, you know, disclaimer, don't do this. You all were great about sharing information, getting out in front of everybody saying, you know, this is what you need to do. That's how you do it. Like you mentioned, the programs on there, there really isn't any other resource out there like that. I mean, I know you're trying to change that and working with the AICPA and stuff, but definitely your website is the place to go.
Andrew Hunzicker: Yeah, there are a couple out there's the E.A. Group that does some tax return stuff, John Chillis Group. Also if you want, my Instagram, I actually just started on there recently. It's at DopeCFO1. So I put a one on the end of. I'm basically connecting daily and doing webinars or whatever the latest news in the industry. I needed someplace where I could talk daily. There's so much going on. It's funny, you know, five years ago we can have a big news story every month. It's every day you're reading about a new state or a new bill or a new whatever, and you can hardly keep up with all the stuff going on in space.
Adam Hale: Where do you see the industry heading as it gets more nationally accepted? I can't help but to think, you know, this is what I was thinking a couple of years ago. It's like all the big players, you know, that are getting kicked out of their space. It just seems like there would be a lot of consolidations coming.
Andrew Hunzicker: There would be tons of M&A. I think if you go out like 30, 40 years, I think you're going to see a ton of similarities to the craft brew industry and wineries. And so, you know, wineries have been around for hundreds of years and you could still open a winery. I mean, I know two or three wineries here in Bend, Oregon, that have opened in the last five years. So you can still, you know, 50 years from now open up a cannabis farm and develop a brand. And so I think on the product side, if you're a farm or processor or you make a product, which could be beverages, could be food, could be lotions or whatever, the brands are going to end up winning out the long term. You may see a hundred different power bars with CBD in them, but there's just going to be a few winners in the space. Same on the marijuana and strains. There are going to be people that want certain strains and don't want others. The dispensary side in the long term, I mean, it's kind of like depending if we go down the social where you can have like a pub and we can actually go smoke pot and drink beer and hang out. But if it's just to go buy some pot or whatever, there's already delivery companies like Dutchie that will deliver it like pizza. You can go online, pick what you want delivered to your door in twenty minutes. And so, by the way, Dutchie was founded out of Bend, Oregon. It's a billion dollar company at this point. I know the two founders are like, I don't know, young thirties. And they acquired Greenbit, a huge POS system and Leave Logic's. And it's crazy to see some of these companies go from nothing to billions of dollars in a couple of years.
Adam Hale: Yeah, that's why I was wondering if, like, big business would kind of take, you know, kind of consume the market.
Andrew Hunzicker: They will. I think so. Dutchie, which was just founded by a group here that really two young brothers, and they acquired Greenbit, which was a huge POS company. I know Kraft Macaroni and Cheese, they had acquired a 25 million dollars stake and flow of another POS system. And so right now, just you can look at software and cannabis. There are just hundreds of accounting solutions, POS systems or whatever, just for cannabis that are pretty big dollar deals. Then on the pharma dispensary side, there is going to be tons of gobbling up of companies. But then there will also I think there's always going to be the craft smaller player.
Jamie Nau: I was going to say because even with beer you have the craft breweries, you have the craft companies. But of course there's always Bud Light and Coors and some of the big players. It will be interesting to see who takes that path and how they do it.
Andrew Hunzicker: Budweiser you know, in our town, Bend, Oregon, we have like I think 20 craft breweries here because it's a resort town. Budweiser came in and gobbled up one of them for I think it was a 90 million dollar acquisition. I guess the other ones are still going strong.
Adam Hale: So still a ton of opportunity to help some of these less sophisticated business owners in terms of their financial sophistication, help them kind of get straight now that there's more guidance out there. Hopefully they'll get a little tax relief, too. We'll see. But, you know, once they get that, you know, it will be kind of a good normal business, is what you're saying. Like, you can get into cost accounting if you're on the, you know, more on the production side and then, you know, retail. So it's still kind of got the normal business model just in a very exciting time.
Andrew Hunzicker: Yeah. And since it's not just one niche, we were talking about this in the AICPA. It's actually a new industry, a birth of an industry, because you have sub niches like you could specialize in farming or retail or labs or whatever.
Adam Hale: Or the paraphernalia. We have somebody come out and doing that.
Andrew Hunzicker: So you got all these different sub niches and we're seeing that people are like, oh, I'm just going to focus on dispensary's. I'm just going to focus on product manufacturers. So there's all of that side of it. And then even when we legalize like we saw CBD hemp, there's just massive compliance. They have to deal with the FDA, the USDA and OSHA as well. Those kind of issues, and states. Every state has their own rules for these companies. And the FDA is treating CBD and THC like a medical drug since they're being tested and used for real medicine. And which means there's going to be a lot of compliance. There is a lot of CBD sold illegally across the US right now and as well as Delta THC products. So it's kind of the Wild West still. Someday it will be controlled. But buyer beware. You may buy a CBD product and think it's CBD. There might not be a drop of CBD in there because the FDA is way behind on catching and shutting these companies down.
Jamie Nau: So with it kind of being the wild, wild west, as a CFO, that gives you a lot of opportunities. There's a lot of things you can do. So obviously your niche is in the cannabis industry. But what is your niche within your niche? Like, what do you do for cannabis companies? Do you try to do everything or do you try to specialize in compliance or whatever the area they need is?
Andrew Hunzicker: So Dope CFO, people who come in our program, we tell them to as opposed to going to a cannabis company and say, hey, I'll be your bookkeeper, we have every skill set in our program. We have bookkeeper's, we have CPAs, we have enrolled agents, we have CFOs. But instead of saying to the client, hey, I'll be your part time CFO or I'll be your bookkeeper or I'll do your tax return. We go in and pitch, hey, we're going to outsource your accounting and tax part department from start to finish and your monthly fee is X, and we're going to do everything. Which is what the client wants to hear. I mean, you know, bookkeeping, data entry, controller work, CFO work, tax planning, tax returns, the whole ball of wax, and oh by the way yeah, we'll help you with H.R., payroll and your cash issues and even compliance with your state. They'll pay, you know, these cannabis companies either need a compliance officer or an accountant who can pick that up really easily. It's not that complex. And they'll pay you. Some people will pay you more for the compliance help than they will for the accounting. Just to maintain their license, etc.. Then you can, if you're a solo person and say you're a CFO, you can outsource the bookkeeping and tax returns or someone else in the community or whatever.
Adam Hale: Any idea of what kind of range of fees, you know, for listeners thinking, you know, hey, what is this kind of market? I mean, I'm sure it's all over the place and the complexity and the size can vary, but kind of an average engagement kind of look?
Andrew Hunzicker: It’s all over. But really, the mom and pop is going to be six figure. I often use in Bend, Oregon, where you know, eighty thousand people here. We have twenty three dispensaries, but a client that's two dispensaries opening a third, he's got a little coffee shop, just bought half a farm. It's twelve grand a month fee. He's doing eight million in sales. He's got 50 employees. He's got eight legal entities. So you'll find many times you can go, there'll be a dispensary in Boston and you're like, oh, it's a single entity. I'm going to come in to do the accounting and you're going to find out they've got eight legal entities because attorneys are telling them to set up all these multi entity structures. So we've got eight sets of books, eight tax returns. The way we price quote, we have a price quoting tool. We're going to look at forward revenues. We're going to look at how many legal entities, how many verticals are in, any consolidations, and the more complexity that just keeps adding our fee up. What kind of compliance help they need. I mean, you can even be mid six figures with Mom and Pop. I think Tammy and in Boston, she's not a CPA. She has a single dispensary client that's paying her about two hundred a year without even having her CPA. And that's just one client. And again, they're in this ten to twenty million dollar range. And these, in my opinion, if you're going to offer all in accounting CFO and tax for a ten to twenty million dollar company, they should be paying somewhere between one hundred and fifty two hundred up to four or five hundred a year. Five hundred thousand a year in accounting, CFO and tax. And the way I compare it to when I go back to my oil and gas days, we had ten to twenty million a year company. My boss, you know, paid me as a CFO almost half a million a year. I had a controller making two hundred. I had seven accounting staff making almost one hundred each. We took up half space of a building and oh, by the way, we outsourced audit and tax to Grant Thornton. So totally common for a ten to twenty million dollar company. They'll be spending way over a million in accounting and tax and CFO. But in today's day and age, we can outsource most of that and still provide great service. But simplify our life for the client.
Adam Hale: I'm sure everybody listening is lighting up right now. Pun intended.
All: Laughing [in audible]
Andrew Hunzicker: Yeah. When I talk to someone who says they're staying away I'm like, and I'm almost 60, if you're a younger accountant or CPA. I talked to my niece this morning that just passed her first part of her CPA exam. What better time to get in with all the remote tools we have and all the Internet, etc.. Zoom plus the birth of an industry. We will not see a birth of an industry like this in our lifetimes again, even if you're twenty probably. And so you've got this underserved niche, really high average fees for mom and pops and humongous growth. There's about one hundred thousand companies in the US right now in CBD and cannabis. That number will easily be half a million companies in two or three years. And so, yeah, lots and lots of opportunity.
Jamie Nau: So, yes, obviously to Adam’s point with his great joke there. So talking about engagement. For example, twelve thousand a month. How many hours/team members are you thinking it takes to service like that?
Andrew Hunzicker: Not that many. So, it depends on what they've already got over there. So like in this one in town, this actually goes back to 2014, they already had a full time bookkeeper. She had no clue how to do cost accounting or half the things. But that was okay. They loved her. She's super nice. So I just trained her. And so she still does all the day to day bookkeeping and data entry. And so on the CFO side, it's maybe, you know, four or five hours a week at most. We find for most clients, whether it's a start up or, you know, really mess clean up, the first six months is going to be pretty intense. But then even as the fees start to grow after month six, as they're growing, the work effort can actually go down once you put some systems and controls in place. We will use their staff as well. So things like inventory counts. Any kind of thing like uploading invoices, receipts, bank documents or whatever will have people that are not accountants doing a lot of that stuff as well.
Adam Hale: Do you find being on site is important? Or is this a really good opportunity for remote work like you kind of talked about before even with the farm.
Andrew Hunzicker: We pitch fully remote. That's part of our call with prospects. We let them know, hey, you're never going to see some person even if you're down the street. We do all this stuff remote. We find it adds more value to our time. You know, I learned that being on my own 11 years, I started realizing gosh this time with the client, maybe it gave them a little more comfort, but generally I wasn't getting any work done when I was at the client. I went home to do it. And so nowadays it's just like, look, we work remote. In my mind if you pick any niche, the whole entire idea of specializing in a niche is you can have a national practice from day one. And your basic selling point is I'm in Oregon, but say I find a farm over there in Indiana. I could say, look, you can Adam at Summit CPA, but he's a generalist. He doesn’t know anything about cannabis accounting or you can hire me. I'm going to do your accounting right. We're going to get your taxes correct. We're going to improve your cash flow, make you audit ready all the time. And so it's kind of that compelling pitch. What does the client really want at the end of the day.
Adam Hale: I'm going to tell them that I took your course and I'm just as good as he is now because I got a lot of support and he'll support me if I need it.
All: Laughing [in audible]
Andrew Hunzicker: I mean, the whole niche idea was so new to me and I think for decades, whether it was Price Waterhouse or Grant Thornton or just Joe CPA, we all bragged everybody that we could do everything in nonprofit, retail and every last niche. And then somewhere along the line figured out, wait a minute, what have I just specialized in a niche. And actually you can earn higher fees. Your life is easier. I unfortunately paid somebody seven grand. I joke about that. I took a marketing thing. I saw a Facebook ad, I got in the phone with this guy who is pretty well known at this point. He wasn't then he talked me out of seven grand on the phone, my visa. My wife almost killed me. She Googled him after I gave him seven grand is like this guy's a nobody. But I tell people he told me to pick a niche and become an expert. That was the only thing he told me that I didn't already know. And it was great advice because at the time it had never even crossed my mind to pick a niche.
Jamie Nau: Yeah, great lead-in for our listeners, because actually that's our next podcast. We're going to focus specifically on that. What it means to be an expert to get those higher prices. You can get a higher price point. You can get in there. Obviously, everybody can do the math on what you just said. You know, you're talking 500, 600 dollars an hour on a on a niche where when you're a journalist, there's no way you're getting that. It's because you're the expert and you're the safety net. And that's what they're paying for. They're paying for the fact that you understand the industry. And when something comes up, they're going to call you. And you know, the answers that that's what they're paying for is that premium.
Andrew Hunzicker: Yeah great point. And on the CFO side, these cannabis owners are dealing with so many headaches. Whether it's cash in banking or software or whatever. And if you can take away accounting, H.R. tax compliance, they will love you.
Adam Hale: Well, the nice thing to I think is, you know, you worry sometimes about the market being crowded by us. I definitely think it's a blue ocean. Obviously, it's expanding. But even the big hitters in our space, they still haven't really caught on to how to deliver personal service. And so they're still going to like you said, they're going to start adding all this compliance piece to everything. And the bigger firms are probably going to just gravitate towards audit compliance, maybe tax, and they're going to leave all of this extra value add stuff for smaller firms. So I still think there's plenty of room to get in and make a big impact and be able to double down in this in this space.
Andrew Hunzicker: Yeah, I totally agree. It'll be very interesting to see what happens over time. But these companies need good books because like you said, whether you're doing, they're all either going for an exit or an M&A or they're going to be audited by the IRS, or whatever the case may be or audited by their bank. They need good accounting and good financials. Still today, I think about nine out of ten cannabis companies don't even have close to good records.
Jamie Nau: We are getting close on time here. I am going to take a quick second to give out our email address. So I do believe we found Andrew through our email, and we would love to hear from other people that would love to be a guest on the show. I think this has been a great episode, so I'd love to hear from more people that would love to join the show. The email is email@example.com. Again, if you have ideas for the show email us there. So final thoughts. Andrew, what are some final thoughts you have for our listeners?
Adam Hale: Well, first of all, Andrew, I apologize. I have my blockbuster shirt in the other room from whenever I visited Bend, Oregon, and went to the last blockbuster. We didn't know each other at the time. But if I make my way back there, we'll definitely have to go somewhere and hang out. But I don't know for me, and we talk about this a lot, we've done it with our own firm and we really talk a lot about not only finding a niche, but then becoming a subject matter expert. Andrew, I think you're a prime example of being able to do both. And so, you know, hats off to you for not only getting into the space and becoming the expert, but then sharing with everybody else and creating these courses and giving people a foundation for, you know, because especially as accountants, we're not super creative people. We need some guardrails around some of this stuff and then we can get going. So I just want to thank you for having Dope CFO out there and providing that training and insight, because, again, it's helped us as well.
Andrew Hunzicker: Well, awesome. Well, thank you very much. Whenever I teach in my programs or others, it's just like the way I look at it, most businesses in the world, you've got to have a physical location and real estate and inventory and fixed assets and all of these costs. But luckily for accountants, we just need a laptop and a phone, basically an internet connection. So what's our asset? It's ourselves, our knowledge, our education, skills and tools. Invest in that just all the time. And it can be as simple as listening to a podcast like this and getting new ideas that can be free. To taking CPE or programs or writing degrees or whatever it is. You just build that knowledge up and it will translate into more value to your clients and you will hopefully be successful.
Jamie Nau: Well, thank you for joining the show. I'm going to take the last word here and I'll let Adam jump in and say that obviously, Grant Thornton alumni are the best podcasters because both of us are obviously Grant Thornton alumni. We will have to find more to get on the show. I appreciate you joining us.
All: Laughing [in audible]
Andrew Hunzicker: Yes. I had a great time. Thank you.
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