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How to y'all. I'm Elizabeth Gore. Welcome to the Big Idea from Yahoo Finance, the show that navigates the world of small business and entrepreneurship.All businesses start with one light bulb moment, and each week I'm going to take you on a journey with America's entrepreneurs. We're going to get between the spreadsheets with these operators to flow from their smallest failures to their biggest successes. As the co-founder of the small business funding platform Hello Wallace, it has always been my mission to help ensure entrepreneurs have the tools they need to live the American dream. So let's cowboy up.Today our big idea question is how do you enter a new industry? Today's industry focus is cannabis. Today's guest on the big idea is Aaron Gore, the founder of Garden Society, one of the largest cannabis companies in California and now across 4 states. Hailing from Wisconsin, Erin moved to California and happened to marry my brother-in-law, and by the way, gave me the greatest nephew of all time.But after moving to California, she jumped from solid corporate America to enter the wild west of marijuana in 2016, being one of the industry's first to enter. There is no one better than Aaron Gore to answer the big idea question, how do you enter a new industry?OK, I'm calling you EJ. I know you're Aaron Gore, but you're EJ to me. And I, I just love that you're here because I don't think there's anyone who could answer the question, or big idea question today is not how do you enter an industry, how do you start an industry? And my love, you have started an industry. I mean,Why cannabis? Oh,

it's such a loaded question. Um, you know, yeah, exactly. Pun intended. Um I fell in love with the plant for my own personal use, like so many of us, and I just want to acknowledge that cannabis has been around for thousands of years. The industry in California has been around since the 70s, really in the medical market in 1996, we legalized for the medical market.Um, but at the time, on my personal pain journey, like so many Americans, um, it was a combination of opioids and Ambien, and it just wasn't for me. I was young. I was looking for a healthy alternative. I was looking for something that helped me field

folks know you were a collegiate athlete at Wisconsin.

I was,

you had to have multiple surgeries and it was hums and bruises. I was pushing the wheelchair around. Iwas there. Yeah,

and you know cannabis is this incredible plant that helps me be the best version of myself andI fell in love with it. And then I found there were no products for me, there was no education for me. There was no community for me. So I set out to build what I thought the modern woman need, which was really what I needed to find. And through that found a community and built incredible products to help everyone feel better. So

I'm going to lead the witness because I know you so well. And you know, we always say, you know, you have your big idea, but was there was there a story, a person that pushed you along? And I want to talk about Mary Goose. Yeah.So one of your passion points with cannabis is, is particularly women who are fighting cancer, and, and how the pain management, the lack of appetite.I just just tell me about that inspiration and and how that helped youdevelop your products. Yes,

my mom's best friend, Mary Goose has stage 4 breast cancer. She fought it for 13 years. She passed away at Thanksgiving. But back in the day when I was when I was starting Garden Society and I was having parties and I was testing products, and educating, she came to me and she said, What about this? What about that? How do I?Sleep. How does that help me with my chemotherapy? And I really worked her through cannabinoid ratios and the homogeneity of the products and the stogeometry and all the different beautiful parts of our products. And she was so impressed through both the education, as well as the community of women around her that needed these products and how they couldn't access them legally. They couldn't talk to their doctors about them back then. They couldn't figure out.Because of all the prohibition, she looked at me and she put her hand on me and she's like, You're meant to do this. Like you should really do this. And I was working my butt off in a corporate world and trying to have a baby and trying to do it all as a woman. And you know, she gave me that push I needed to really take a step back and try to like really build something to both let me have the quality of life I want, build a business with the values I want, because I was building a business in a big corporation.And also help people along the way with really greatproducts.

Well, you have always given me the push I need and I love youand

we've got to be there. We've got to be each other's

to be each other's pillow in our mirror sometime. Well, I mean, some people are, I'm going to build a product, I'm going to build a beauty brand. You tell me about building an industry though. I mean, legalization comes around.I mean, I, my memory, and, and just so everyone knows, we are sisters-in-law. We live a vineyard in between our two houses, raising our children, and I used to go to Erin's house and, and first of all, you're an incredible chemical engineer and you'd be over these pots cooking this, cooking that andSo that's one thing to create a product, but creating an industry, I mean, how did you go about that?

Oh my gosh, it's so hard. And I would just, part of me says, never do it, but then part of me says it's the most rewarding thing. You know, you're a lobbyist, you're writing policy. I was a chemical engineer. I didn't know how to do any of that.But what I realized is the literal success of my business depended on it, because some politician would write something into law that would directly impact my bottom line, how many stickers I had to put on a product, how I could make my gummy, how it was tested, and what it meant for the customer, the end consumer. And so I started really advocating and creating policy, and then with that, all levels from my local city to my state to now at the national level.Um, so it's, it's nobody's better suited than the business owner to build policy and build the rules, but like we always stay in the industry, we're building the plane and flying it at the same time.

Well, Erin, I had this visual memory like knocking on your window and you're, you're sitting outside City Hall with a manila folder and you'reWriting policy that is probably going to impact your own business. Oh yeah. So

and I think I was breastfeeding.

Yes, my, my nephew Tommy. So, so I what I really think small business owners should pay more attention to policy. You had to write it almost, butHow do you judge the time of running your own business, creating products, your mom, you have so much going, but also tracking policy and legislation that would impact your business. Like how do you time manage that? Yeah,

well, we work really hard, especially as entrepreneurs, right? All the time. You know, you can say Google alerts, so there's a lot of technical things you can do today, but at the end of the, wait,

wait, tell me more.Actually I think that's really great tips. Oh, tell me more on that. Yeah,

exactly what you set Google alerts for any kind of news article, any kind of press release, any kind of all the governments have to publish things. So when there's public public speaking sessions or they publish draft regulations, like you can set that so it all comes to your inbox automatically. So it makes it really easy.parse. And then at the end of the day, like you can also build community around it. So I'm on a lot of working committees. So it's not just me doing it, but it's me working with a group of people who have like-minded goals. You know, the cannabis industry is really hard because I said, it's on a spectrum between criminals and hippies and luckily there's so many of us who are working together collectively across all spectrums of the business to drive legislation forward.And you always have to think about the greater good and how how do you build the industry not just at your own your own success, um, but that sense of community has really taught me a lot, but that also enabled me to have a larger voice. And also like filing for public comment, the first time I did it, I was so nervous. I was literally breastfeeding, giving public comment at the state and and now it's like so natural and normal, and now it's my responsibility. I feel like.

SoSo we talk about like, you have to really drive policy. We always on the big idea talk about money, money, money, OK. And the other thing that always blew my mind, I mean, I'm just I'm just going to say it. I, I watched you years ago have bags of cash like hidden here in your car, in the garden. I was like, it freaked me out, but there was no banking solutions.I mean, that is a new industry. Like how how do youhandle that? Yeah,

it's crazy the stigma we deal with in cannabis because of the scheduled nature on the federal level, even though it's legal in the state. So it's this state versus federal conflict. We bank, we all have checking accounts. We pay exorbitant fees for it. What we don't have is access to credit, and what we don't have is services around it. So like get a 401k.We keep getting denied for 401ks for our employees because of the federal illegality of it. We can't get a line of credit for payroll. We can't access any financing services like equipment financing or mortgages. Our personal bank accounts get shut down. My husband and his personal bank account has been shut down like 3 or 4 times. My employee's bank accounts get shut down. So it's really, really challenging.

I mean, it makes you such a resilient entrepreneur. So, so you couldn't get credit.A lot of small business owners for different reasons can't get credit. So how, Erin, I mean, you're, you've gone from 10 millions to double 1 millions this year alone. And how did you grow without credit? Like what's your, what is your financial advice to any industry entrepreneur?

Cash flow, baby. Yeah.

Well, tell me more

cash flow. You know, I think.Building a new industry and building a business, you have to be so resilient and creative and nimble. And I don't think I think people underestimate how opportunistic and open to change you need to be. So in our business, we opened up different revenue channels by making product different ways for different brands,Distribution points, different products, even within our own branded products, different states, because they all created different revenue, different profitability, and really measuring that, analyzing it quickly, and then doubling down on what's working and not being afraid to stop what's not working.

Erin, hold that thought. We've got to do a quick break and we'll be right back.Welcome back to The Big Idea. I'm Elizabeth Gore, and I'm here with Garden Society founder Aaron Gore. It's interesting because a lot of small business owners and entrepreneurs diversify a little later, and you, uh, first of all, just so folks know you are one of the largest cannabis brands in the state of California. You are now in 4.states almost going to be in 4 states, 4, yeah, it's an announcement that'll come. And but you, you very quickly, I remember, split up your absolute P&L with manufacturing with kitchens with so tell us a little bit about why you diversified in the beginning.And should entrepreneurs and small business owners really think about diversification.

So it was really good advice I got from a potential investor who never invested in me, but I will always remember this conversation. He said, What is your cash to cash cycle time and how do you measure that? What does that mean? So for our branded products here for Garden Society, we manufacture, we have to buy everything we need to make the products upfront, cash on delivery, because we're cannabis, nobody will lend to us or give us terms.OK. So we spend all this money to buy all the ingredients. We pay for the labor, we make the product. We sell it to our distributor. Cannabis is a three-tier distribution model. We sell it to a distributor who sells it to the dispensary, who sells it to the customer, and we get paid in about 120 days. That's brutal. So that cycle time is really long. So you're looking at like 160 days on a best case scenario. So he said to me, How do you drive fast?cash to cash cycle, from what you spend to what you collect. So I realized that if I made product for other people, I could make them pay for everything up front. I could pay the labor and I could charge them when I was done. You want me to deliver it? I need to be paid. OK. So I shortened my cash to cash cycle time, which covered my overhead. It allowed me to invest in my brand, but then all of a sudden had different revenue channels that offset my business and put a lot of.resiliency and cash flow and profitability into my business. It also allowed me to say I was bigger than I was because all of a sudden I realized I was really good and my team was really good at making things. And so we were making product for the biggest brands in the state. And so all of a sudden, other dispensaries who maybe didn't like Garden Society because we were women owned or we were too small or whatever. We had cannabinoid ratios, more modern products. UmThey would say, Oh, but you make that. Oh, you made that. Oh, I'll buy your product now. So it was like a brand building exercise. That's interesting. Well,

you have B2B and then you have B2C, right? And I'm curious, I just want to stay on this diversification because we're still in a tough economy, right? And no one can predict the cycles we've been through lately, particularly small business owners. So that, you know, does that diversification mean that when oneMaybe people are buying less, but the manufacturing supports your cash flow. And then another time manufacturing is down and so consumers are supporting. Is, is that the way itworks?

Yeah, exactly. That's exactly right. So like this year is really hard for receivables, like getting paid from other other dispensaries and we took a lot of plane crashes through the process and cannabis. And so we, through the last few years.We've been able to invest in our brand and our branded sales to customers is up almost 250%. So we actually decided to high five. OK, keep going. So in California, we actually decided to stop making product for other people because of too much effort and too hard to collect on that payment and just really focus on profitability and shrink our team to the most optimal, efficient.And really drive branded sales because that's where we were finding our growth and that's where we had invested all those years to build that momentum.

So I, I'm curious for those, now again, you're a very unique industry because you what do you always say each state is its own country when it comes to cannabis, but I'm curious, Erin.Because I watch you, you and I both get on planes all the time and we love our children, we love our husbands, but it's a lot to get on a plane, right? So you made the decision with your own time because no one else can open another state but Aaron Gore. So, you know, you're putting your California production.In, in, in another person's hands for a while? Are you, did you, did you scale to the point where they can manage that so you can now expand to New Jersey? Can you, for those small business owners who are starting to scale, like just talk about your time and when you decided, OK, this is running well enough. So now I'm going to go expand into this area.Only you, Erin,

can do. Yeah. You know, I did it with Ohio and it was rocky and we didn't do great. Ohio was our first market and there was a lot of learning. So when we went to New Jersey, we do a lot of reflecting. I think it's really important, especially new industry, fast growth, to carve time to say what worked and what didn't work, and how do I not repeat the same mistakes. And so like really being clear of like this is what went wrong, because you can figure out what went right. It's obvious, but what went wrong is more important to avoid.And then also hiring for those flexible skill sets in your leadership team. So I've been really conscious over the last few years to hire the right leadership team that could step in because there's no way I could do it all. Like I have an incredible team. I actually

think you can, but you're smart enough notto. I don't know.

I have a great team, so like we get we got California stabilized and then my teammate Brooke stepped in and so now she's running that. So I, and I have full trust of her. And so IWe can now focus on New Jersey. We got Ohio settled. So like I think who you hire and not I made mistakes to hire a title or to hire a resume. And what I've learned is it's so much more important to hire those soft characteristics that make for a good number 2 or #3, especially in a startup. Nothing's harder than outgrowing your team because they're growing so fast. So make sure you hire people.That can grow withyou.

So team is essential to scale and allows you to go do what only you can do. Exactly. So you're, I, I mean, you and I, oh my gosh, how many nights have we cried over the mistakes we've made and, oh my lord, the money owed the money owed, and so, you know, on the big idea, we talk about the dirty unicorn. What is the, the toughest mistake that you've learned from? I mean, uh, you and I have talked about a lot of them, but there's there one that comes to mind you can share with our listeners thatYou know, was your just your topdirty unicorn?

Yeah, I mean, I think it's really bad partnerships. Like it might be good at the start, but you have to really listen to your gut and listen to yourself and be capable of saying no.Like my hardest business situations financially, effort, emotional, all of it were because of bad partnerships. Whether I set a bad deal in place or I worked with assholes or you know like financial implications. And so I look back on it and it's like, I knew that was bad, but I was like beholden to the money or wanted to push through or ego or whatever.And so like my like from a from a like what not to do, it's like really partnerships are so hard, especially in cannabis, and there's so many partnerships because every states its own marketplace, right? And for Garden Society, we have our all of our stakeholders from policymakers to the customers toRight. So like if it's, if it's not good for you and the business, don't do it.

But that's great advice. And I, you know, what I always, when people think they're in a tough industry, all I can think of is my sweet sister-in-law, EJ, because you have things happen to you.And I'm going to bring this up because 2/3 of counties in the United States right now have had some kind of natural disaster. So small business owners, no matter how good they're planning, they get hit with something. You, I've seen you get through 3 major fires, um, andAnd then also things that you could never plan. I remember, um, I'll never forget this, you just finishing packaging all your new SKUs. They changed one law, and you had to throw out like over $100,000 in packaging. I'll never forget that. Yeah. These are the types of things you can't plan for. And so I'd love to both, how do you navigate the business through something like this, but also you personally. Yeah,

actually, I heard from a personal point of view at a Hello Alice conference back in the day.Um, every entrepreneur needs a mirror and a pillow, a place to be honest with yourself, and the great

Melissa Bradley.Yes,

it is a place to rest your head. And honestly, that's how I've gotten through it. I've had a mirror and a pillow because like it's been so hard. And on top of that, then you have in cannabis, you have no bankruptcy protection.So you have customers go out of business and I had my distributor unexpected in 3 days, go out of business and owe me almost $50 million. And I don't have credit. I'm dependent on that cash to pay my payroll, pay my employees. I can't go to a bank and ask for help. I'm only dependent on investor contributions, right? Raising capital that way.And so, like, I've, we've gone through a lot, and I think like really building resiliency, building some like wellness practices of like meditation and gratitude practice. I'm grateful every day I get to do cannabis for a living and make these incredible products with this incredible team.And I just think like you just have to be prepared to be flexible because COVID, we were not considered essential, so we had to close our factories for COVID. Then we got considered essential. Then we had to build all new policy and regulations around

COVID. You were during COVID.

Oh, it was just it's just like the extreme volatility in cannabis and around every turn, something goes wrong, you know. And so that's just where you have to really, really love it.

So Erin, our big idea question today is how do you enter an industry? What are your tips?

Well, for a new industry, I think you really need to understand that industry. I think you really, really need to have a passion for it because it's going to be so hard if you're building an industry and building a business. I mean, building a business is hard enough, let alone writing policy and regulations. And then I think you really need to understand what's your point of differentiation, because a lot of people think, I have this great idea, but it's been done or it's there.And it's different. So like really understand why you're distinct and different and how you're going to succeed, and then drive those values forward and not be afraid to to like we talked about be a lobbyist, you manage investor relations, you manage a team, manage products. You really have to be willing to do it all, especially in a new industry and thenmake the make the jump.

But Erin, thank you for coming on the Big Idea. I love you. I'm so proud of you and congrats on Garden Society. Thank you so much.At the end of each episode, I like to give a shout out to a small business who is doing amazing work. In honor of Aaron Gore's commitment to women's health, I am excited to shout out Whiskey River Soap and Candle Company from Newark, Ohio. This one says F cancer, other favorite soaps of theirs is everything from my personal space, hot moms, day drinking, and my personal favorite soap for hangovers. Find them at whiskey Riversoap.com.Thank you, Aaron Gore, for coming to our show, and thanks to all of you for joining us. We hope you learned a lot. This was the big idea from Yahoo Finance. Watch us every week on your favorite streaming service. Find videos at yahoofinance.com and listen wherever you get your podcasts.And if you follow on Amazon Music, just ask Alexa to play the big idea. You can also come say howdy to me on any of my social channels at Elizabeth Gore USA. I'm Elizabeth Gore, and as my grandmother always said, hold your head up high and give them hell. See you next time.

This content was not intended to be financial advice and should not be used as a substitute for professional financial services.