California has introduced the long-overdue regulations necessary to manage its cannabis industry and safely enact Proposition 64 — the 2016 ballot measure legalizing the adult use of marijuana. If you’re a plant-touching entrepreneur, this may feel like either the end of California’s so-called Golden Age, or an expansive new beginning. Regardless of your stance, the rollout of regulations is a rough one. New mandates for cannabis testing, licensing, and chain-of-custody procedures have combined to create a perfect storm that not all businesses will survive.

Fortunately, California’s Bureau of Cannabis Control is helping us into the new era of Proposition 64’s adult-use market with this transition period. This six-month span is allowing for exceptions to many of the rules. Your company can take advantage of the grace period until July 1, 2018. In essence, the transition creates time to clear old inventory that’s not compliant and some time to figure out how you’re going to deal with the new testing and chain-of-custody regulations. Savvy businesses are carefully navigating the transition and assessing the following three areas to avoid calamity.

1. Find A Cannabis Testing Laboratory And Get Clean

During the transition period, medical and adult-use marijuana products will be allowed for sale untested — that is, if they’re labeled as untested. A bullet dodged, but only for the time being. In July, testing will take effect, adding an extra step, an extra expense, and extra liability. Getting a laboratory relationship started is essential (right now!) for several reasons.

It’s painfully clear: There aren’t enough certified labs. Some experts foresee a need for 10 times the number of cannabis testing labs that are currently in operation. The need for testing dwarfs the state’s testing capacity. Establishing a partnership with a provisionally licensed testing lab now will streamline implementation later. In the chaos, labs will have their own challenges, too, including third-party certifications and licensing hassles from the state.

Another reason to test now? Your products may not be as clean as you think they are. Steep Hill Labs theorizes systemic pesticides transferred from mother to clone plagues most of California’s weed. According to Steep Hill, up to 77 percent of product sold in California may be affected, and the number of lost crops could be devastating. Even organic growers are testing hot for myclobutanil and other nasties simply based on the legacy of their genetics. The six-month transition allows you time to sort out any problems and ensure clean stock.

2. Go Full-On Transparent And Keep Perfect Records

In the black and gray markets, keeping records of crop cycles, plant counts, and product weights was a liability. Nobody wanted journals of grow data lying around. Secretism reigned. Now, as California’s system catches up with other legal markets, seed-to-sale tracking is flipping the relationship with authorities on its head.

Detailed transparency and eager, full compliance is a better approach today. Dot your I’s, cross your T’s, and establish operating procedures for careful data entry into cannabis-specific digital record-keeper Metrc. The new data requirements will extend from the cutting of clones all the way through your point of sale and into the pockets of your customers. Inventory tracking — both in your cultivation and retail environments — is the key to compliance.

What’s more, that fat database can improve how you cultivate. The state-mandated records of crop weight and potency test results will nicely complement your grow log. Given enough spreadsheeting prowess — or some specialized software — growers can now see what’s working (and what’s not working). Data will span from cloning right up to the end of the curing period, giving strain-specific insight into the causes and effects within your grow.

3. Stay Liquid

The new regulations are set to be massively expensive at every turn of the supply chain and, ultimately, make cannabis cost more. Immediately, growers will be hard hit with the double expense of testing and distribution. These added costs will be significant.

In 2017, the California Department of Food and Agriculture released an economic impact analysis predicting the cost of compliance in terms of effect on price per pound. When testing, distribution, and overall rule following are tallied, some experts predict the cost of bringing 16 ounces to market will increase by $560. That staggering number will trickle down to consumers — but before it does, it’ll have its effect on suppliers.

Budget for significant — and unpredictable — expenses incurred from your new, compliant operating procedures. A testing-jammed supply chain may create an expensive gap between chop day and payday. Come July, cultivators will absorb testing and distribution costs before reimbursement for their costs of goods sold. It could be a detrimental period without some cash on hand.

Hazards and obstacles aside, the rollout of Prop. 64 is promising thus far to be lucrative long-term. Once California’s regulatory system has stabilized, the legalized market should settle into a $6-billion-per-year rhythm. For those companies that can leverage the rollout period and weather the regulations, the normalization of 2018 will prove to be very gainful indeed.