CPA Practice Advisor

AUG 2018

Today's Technology for Tomorrow's Firm.

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26 AUGUST 2018 ■ www.CPAPracticeAdvisor.com BUILDING YOUR NICHE PRACTICE Each month we explore the advantages and intricacies of developing and growing a niche practice. This month we're examining what it takes to serve the niche of accoutants serving cannabis businesses. How to Manage the Risks of Serving Cannabis Clients Experts predict that America’s cannabis industry will continue to grow over the next four years. The legal cannabis market was worth an estimated $7.2 billion in 2016 and is projected to grow. Medical marijuana sales are projected to grow from about $4.7 billion in 2016 to $13.3 billion in 2020. Adult recreational sales are estimated to jump from about $2.6 billion in 2016 to $11.2 billion by 2020. With this projected momentum in the growth of the cannabis industry, more and more CPA firms are weighing the business opportunities and risks related to expanding their practice into this emerging industry. Marijuana-related businesses are in true need of the professional accounting and tax services offered by CPA firms. However, at the heart of the challenge for CPAs as they evaluate these opportunities are the uncertainties that exist with respect to the legal standing of this industry. First and foremost, cannabis is still considered an illegal Schedule 1 substance under federal law, and there are no guarantees that current or future administrations will continue the discretionary position that is the foundation for this industry. This dichotomy creates ethical and moral quandaries for CPAs. For example, would rendering services (tax, accounting, consulting services, etc.) to cannabis clients be considered a lack of “good moral character” or an “act discreditable” by their state boards of accountancy? Also, would CPAs who render such services to cannabis clients be exposing themselves to allegations of “aiding and abetting” criminal activities? Thus far, eight state boards of accountancy have issued guidance on providing services to businesses in the marijuana industry, and the profession is pushing the other state boards of accountancy to provide guidance. Risk Assessment From CAMICO’s perspective, a CPA firm considering opportunities to accept marijuana business clients should adopt a risk assessment approach to evaluate the risks to their firm from such clients. For example, assess risks associated with the specific client attributes (all-cash How to Smoke the Competition When Marketing to C A N N A B I S CLIENTS By Becky Livingston, Penheel Marketing (https://penheel.com) As of August 2018, 31 states and D.C. have laws that broadly legalize the use of marijuana. What does that mean for accounting firm’s looking to increase clients in this area? Opportunity! As with any new industry, accountants have an opportunity to increase revenue by providing tax, accounting, audit, and business services, like bookkeeping, internal controls, workflow, payroll, and cloud-based solutions. In an article from CPA Trendlines the “green rush” is akin to that of the gold rush days, when investors were interested in the new market and investing money, which means business valuation opportunities. Here are some ways to leverage marketing to ensure you’re reaching your target market and to help them to understand what you can do for their business. Tip: If you’re concerned that marketing to this audience could negatively influence your mainstream clients, consider creating a different brand strategy for your new industry vertical using industry-relevant brand names, such as High Standard Accounting or Maryjane Accounting and Tax Services. Risk Management Opportunities Be very clear about the risk involved in this industry and how your firm can help business owners to manage that risk, including financing, legal issues, tax-related concerns, especially for multi-state providers, and more. Promoting your firm’s risk-management, startup experience is a good place to start. If you plan to do this with online advertising, you must know the rules about cannabis marketing that may impact the words you use in your advertising and placement options. You can find several of those rules at https://cannabiz.media/marketing-challenges-in-the-marijuana-industry/. Think Outside the Box With the many regulations around this sensitive product, you too must be sensitive in how your firm markets its services. Now is great time to get back to basics and to think outside the box. If you plan to use mailers, consider using lifestyle photos and words that resonate with this audience. Your goal is to put the business owner at ease with your firm and to help him/her understand you know the challenges he/she faces. Online Advertising If you plan to use online advertising, such as Google or Bing Ads, then consider RESOURCES FOR THE CANNABIS ACCOUNTANT • A Tax Accountant's Analysis of the Cannabis Industry - by Craig Smalley, EA - www. cpapracticeadvisor. com/12413559 • Valuation of a Cannabis business: www. cpapracticeadvisor. com/12382090 • Introduction to the Tax Implications of Marijuana: https://bit.ly/2MbX83i • Cannabis and Captive Insurance: https://bit.ly/2nqJhYY Building Your Niche Practice is sponsored by Intuit QuickBooks.

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