If You’re Chasing Invoices in Cannabis, Listen to This ft. Brett Gelfand

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Bryan Fields: What's up, guys? Welcome back to another episode of The Dime. I'm Bryan Fields. With me as always is Kellen Finney. And this week we've got a very special guest, Brett Gelfand, founder of Cannabis Collects. Brett, thanks for taking the time — how are you doing today? Brett Gelfand: Of course, Bryan. Doing awesome. How about you guys? Bryan Fields: Excited to have you here. Kellen, how are you doing? Kellen Finney: I'm doing really well. Really excited to talk to Brett — really excited to dive into one of the industry's sore thumbs right now. How are you, Bryan? Bryan Fields: Yeah, I think that's a fair way to describe it. I think it's like a rite of passage — an unfortunate rite of passage — that if you're in the cannabis industry, you've likely faced a situation where you haven't been able to collect for a service you provided. It's not so easy to achieve that success, so having an opportunity to speak with Brett and understand the nuances of where the opportunities are, where the solutions are, could make a big difference for a lot of people who've unfortunately been in those situations. But before we get into the fun stuff, we have an East Coast–West Coast battle. Before we talk about loyalty, it's important to know where your heart currently lies and where you currently reside. So if you had to choose a coast, East Coast or West Coast, which one are you choosing? Brett Gelfand: I've got to go East Coast, and the reason is I just moved down here to St. Pete, Florida. My friends were like, "Wait, you're moving where?" And I love it. I'm originally from Atlanta, so already East Coast, and now I'm settled here in St. Pete, kind of setting my roots after years of traveling and being in Colorado, seeing both sides. But yes, to directly answer your question, I'm East Coast loyal at the moment. Bryan Fields: I love it. Let the record reflect that. So, Brett, for our listeners, can you give a quick background on how you found your way to the cannabis space? Brett Gelfand: Yeah, like I mentioned, born and bred in Atlanta, Georgia. As we know, Georgia is not the most friendly cannabis state in the world. But after college — after graduating from the University of Georgia with a finance degree — I got an opportunity to move out to Colorado, right outside of Aspen. I was essentially hired to help build a cannabis company from the ground up. Long story short, I was promoted to CEO at a really young age — I was about 24 years old, running a team of 60 to 70 people, and we'd raised $20 million. I learned the ins and outs of cannabis without having any idea what I was doing in business, and no idea what I was doing in cannabis. Trial by fire. That's when I learned the fire of collections and the absolute epidemic that was coming. That was back in 2015, and it led me to say, "I've got to find a better way to protect these companies and help collect money in this space" — through what I'm doing now, running a collection agency. Bryan Fields: So let's dive into that. When the idea first took hold, was it that you had a situation — an unfortunate event unfolded — and that led you to believe, "What can I do to fix this?" And you recognized that there was no solution? Brett Gelfand: Pretty much. My boss, who was CEO at the time, got sick, and that's what led to my promotion — running this organization. I had so much to do and so many people to manage that every day I'd wake up excited about pushing initiatives forward, building products, building brands. One of the main initiatives we started with — because we were in the mountains, close to Aspen, trying to compete with Denver and Boulder grows — we thought, "What a great idea, let's extend the first credit policy in cannabis." We were one of the first to do it in Colorado — actually extending net-30-day terms, net-15-day terms, especially because deliveries were really challenging in Colorado; there wasn't real distribution. So we ended up extending these credit terms, which was an insane initiative — in a good way. Sales went through the roof, the board was patting me on the back. The next thing you know, 60, 90 days later, we had this massive AR list, and I couldn't get anything done, because I realized everything mattered with cash flow. The only thing that actually mattered was making sure I could get this cash collected so I could pay this massive overhead I had and keep reinvesting in the business. So the stars aligned, because I was so tired of waking up every day being a debt collector — and my father actually was a commercial collection attorney for 30 years. I said, "Dad, you've got to get in business with me. We've got to start the first cannabis collection agency" and help mitigate this massive issue that's only getting worse. Bryan Fields: So let's stay with that. The terms you gave out — those are standard, right? Across most industries, most companies use those terms, and that was probably the intention — like, "Hey, we're just going to operate like normal businesses." And then was it just challenges from those customers saying, "Hey, we're not going to pay, we don't have the cash"? Did they ever give you a reason, or did they just go ghost on you? Brett Gelfand: Yeah, there are a couple of main ones, and now that I've been doing this for a while, they've kind of stayed the same. One is banking — the fact that we were doing cash pickups, and maybe the manager was there saying, "Well, look, the cash isn't available, I have to wait for the owner to come in and give me the cash." That was an issue. Another issue is that it's not just the banking piece — you have people who have never really run a legitimate business that are now running legitimate dispensaries and retailers, and they might not be the most savvy when it comes to inventory planning, cash-flow planning, accounts payable, accounting and bookkeeping in general. That was a nightmare. And the last one — which is becoming more prevalent as the industry advances, even though there's been a lot of maturity in the last few years — is that a lot of these companies don't have a credit and collection policy, but they're extending terms because that's become normal, almost like it was on the street with product before. Except now, when there's legal recourse to extend terms, you're essentially giving a free loan, and people are doing this without any underwriting, without formal contracts. When you extend terms, you're acting like a bank. But a lot of these cannabis companies haven't really realized that until they're getting absolutely hammered with past-due money. Now they're starting to wake up and ask, "What can we do about this?" Bryan Fields: So the right time is to get in contact with someone like you before they even consider extending terms — is that the approach? Brett Gelfand: So, yeah, there are two sides to this. One — if you are going to extend terms, you need to have a credit policy and a collection policy. Cannabis Collects, the nation's leading cannabis collection agency, is the cannabis industry's preferred partner when it comes to escalation to collections and legal. So if you can't collect money internally, you need to escalate that. But there are a lot of steps to get there — you need an internal accounts-receivable manager, you need to know what emails and touchpoints to be making once an account goes late before you even consider escalating to collections. The clients we represent that have a tight AR process and submit accounts to collections quickly are the ones getting paid back faster than companies waiting six, seven, eight months without any idea what escalation even means. The other prong, outside of the collection side, is the credit side — that's the proactive approach. What is a credit policy? How do you know who to do business with? What terms are you going to extend? What credit limits are you going to provide? This isn't just, "Hey, I've got this" — because right now the sales teams are basically controlling the sales process in cannabis, which is normal, especially now when every dollar counts. Salespeople are doing whatever they can to get into doors. But there's a huge disconnect between sales and finance and accounting. A lot of sales managers and VPs of sales are making credit decisions — saying, "Yeah, give this buyer net-30 terms on a $20,000 credit line," because they need that order, they need to sell it. But there's a huge disconnect, because just getting product from your inventory onto a buyer's shelf doesn't mean you're going to see cash. That's what we're trying to solve — you need to know who you're doing business with, have proper agreements in place. Step one, you're working with trustworthy people. Step two, if they do default, you have an escalation strategy in place so you have a chance of getting something back. Bryan Fields: There's a ton to unpack there. I think the first part is understanding — for small businesses, how do they know, based on the size and scale of their business, what's worthwhile for them? If you're a company of three, five, ten people, whose responsibility is that? How do you even start to put those pieces of the puzzle together? Brett Gelfand: Yeah, it's an awesome question, and it's something we thought about internally — we spun off from Cannabis Collects, the collection agency I've been building for the last seven years, because we realized we needed a proactive approach to help companies make decisions so they avoid this problem altogether. As much as we love growing our collection business, we're really trying to make an impact and help prevent this problem, because I know the pain — I've been there. So we started a sister company, the CCA — the Cannabiz Credit Association — whose entire intent is to help companies make credit decisions. What we just launched is called the Ultimate Credit Process — a customizable template that fits companies from a size of three up to a size of a hundred. There's a basic checklist of things you need to do no matter who you are. One: if you're a small team without the resources for a full-time AR manager or credit manager to make these decisions, then your owner, your CEO, or your accountant — somebody on the finance, accounting, or operational side — needs to have a check and balance with the sales team. So if a salesperson comes back and says, "Hey, I've got an order from this buyer for $10,000," there needs to be somebody — or a department, if you're bigger — responsible for deciding how to approve or deny that. Right now, we've made it as easy as possible on our platform — you can run a credit search and it shows low risk to high risk, with recommendations on what you should do, because we know resources are limited. It's just like any standard credit report used in every industry — Dun & Bradstreet, Experian, Equifax, even when you get a personal credit card. We're trying to make it as simple as possible, so an owner, accountant, controller, or credit manager can look up a company and say, "All right, these guys haven't paid — they're over 90 days on $200,000 to 15 other companies, we probably shouldn't give them terms, maybe we want to ease our way into it." But without that information, what we hear all the time is, "You know what, we think we know who the bad actors are, but we need the sales — let's just see what happens, because I'd rather get our product on the shelf, we need that relationship," instead of denying somebody or causing friction at the start of the sale just in case they don't pay us. I think the narrative is shifting, because people are going out of business now from making those decisions too often. Bryan Fields: That situation you described is so perfectly articulated, and such a terrible challenge for this industry. Everyone is fighting to survive — "This is an opportunity for us, yes it's a little risky, but we give them the product, then they sell it, why wouldn't they pay us? Because then they can get more product and do it again." Unfortunately, the cycle is so deadly, because exactly like you're saying, they don't get paid — whose responsibility is it to chase that down, who's spending the time doing that? Because there is nothing worse — and I can say this firsthand — there is nothing worse than trying to chase down someone who hasn't paid you, versus spending your time trying to grow the actual business. What had happened in the past, in your mind you're thinking, "I did that work, we helped them be successful, now they should just pay us for what we achieved." I can only imagine how many people listening to this are thinking, "My God, I wish I would have made that decision differently. I wish I would have known the CCA existed, because then I would have had the opportunity to know ahead of time that this was a risky venture." Brett Gelfand: And it's fascinating for me, because I never thought in a million years I'd be the owner of a collection agency — that's one of the least sexy titles you can have. My dad always wanted me to take over his collection practice when I was younger, and I'd just say, "Sure, Dad," never thinking it would happen. But really, when I wake up today — and you guys have probably experienced this, and I'm assuming a majority of your listeners have too — either a friend owes you money, or a company owes you money, it is an awful feeling. Especially if you're dealing with debtors who make you feel bad about chasing your own debt. There's even a Curb Your Enthusiasm episode with Larry David where he's like, "How am I the bad guy for chasing money you owe me?" They make you feel like the bad guy, and it's a ton of terrible energy. It happens to us — we have our own clients who we've collected money for, and we invoice them a success fee, and even they don't pay us sometimes. They make us feel bad for being too hard on our own collection practice, collecting their money. And it's like, where do you think you got that money from? How do you think you even recovered a dime? It's because of what we do for a living, and we got you paid. You can even feel that energy in me — it's frustrating, it's frustrating for everybody. So it's so important to separate emotion from business — which I can tell you firsthand is hard to do — and to have an SOP, a policy in place for what you're going to do. And if you can't collect, now you have a partner to take on that headache. It's not just about the financial side, or paying the contingency fee if we collect — because mind you, there's no guarantee to collect once something's gone old — it's also the energy and the time spent chasing someone who obviously isn't respecting your demand for payment, and that can cripple a company, especially if you're small. Bryan Fields: It may not be the sexiest business ever, but it's also absolutely critical for an industry to function and move forward. I think it's even more critical right now for the cannabis industry, where this problem is a little more rampant than in other industries, just because of its nuance and its maturity. I look at California — California has a really robust market, three or four billion dollars, and a lot of product gets sold in the state. But talking to manufacturers, they say, "We're only starting to do business with this dispensary or that one because they're the ones who actually pay the bills." And in my mind, I think one of the hardest things to determine is — that's all hearsay. They learned it because they did business with a dispensary and it just didn't pay them, so they don't do business with them anymore. There's no database, like you're describing, where you can just look up how often a buyer actually pays. So how did you guys go about aggregating that information? Walk us through the whole process of building the actual portfolio of information your team has now. Brett Gelfand: Sure, and that's an awesome point, because credit and leverage isn't bad. Our country runs off of credit, and companies run off credit — being able to get debt and leverage your business is a good thing if you do it the right way. So when companies in California tell us now, "We're just going COD because we can't afford any more delinquencies," I get it. But if the whole industry goes that way — just cutting off the ability to extend terms — that's going to shrink our industry. That's not a good thing. So, to answer your question on how we built this: we were fortunate that, from running Cannabis Collects for the last seven or eight years, we were the only ones with real-time data on who was being sent to collections. We're talking over $160 million of debt, 8,000 individual placements that our firm has taken on. I tried doing this back in probably 2018, a few years after I started the agency — I tried reselling credit reports from the other bureaus, but there was no data, because cannabis companies weren't reporting their accounts-receivable data. That's how these bureaus work — you have to report your AR from accounting to the bureaus, and no one was doing that. No one had any idea that even happened outside of cannabis. So the way we did it was we set up a private membership and provided access as a pay-to-play model, because now we had something to give. If you pulled a Dun & Bradstreet report, there was very little data. But now we could expand on all the claims across the country of who'd been sent to collections. And in exchange for signing up to see that information, you have to share your accounts-receivable information — anonymously, everything's anonymous — you share your list of buyers with us, and whether they're paying you within 30, 60, 90-plus days — your AR report. This started about a year and a half ago, and now we've grown to close to 250 members reporting their data, from names like Leafly and Jeeter, PAX and Connected — companies ranging from large operators to small mom-and-pops, because it's affordable for everyone to share their AR and get access. Wouldn't you like to know not only who's been sent to collections through Cannabis Collects — which alone is a gold mine of data — but who's paying Leafly within 30, 60, 90 days? Who's paying PAX? You won't know exactly who they're paying, but you'll have access to the aggregated payment behavior of those customers. For us, that's game-changing, because it's not only providing visibility on who to do business with and monitoring your existing AR so you know when to escalate to collections if needed — it's also finally providing the industry with guardrails. We've had debtors — retailers who were reported to the CCA — call our company phone line and say, "Hey, I wasn't granted credit terms because I heard I was on your platform as a high-risk buyer. What can I do to improve my credit score, because I really need credit terms, I don't have the cash to pay some of my suppliers?" And we say, "We can help you with that — if you pay off some of your debt, and get your accounts-payable list current, next month your credit report is going to look a lot better." So we're actually finally moving this industry to where we wanted it to go — guardrails, transparency, reliability, not only on vendors making good decisions, but now buyers having some accountability too. Bryan Fields: I think that's super important. But I can also imagine there are conversations where someone says, "Brett, I shouldn't be high-risk, I paid all my stuff, so-and-so's making that up." So how do you find the true information to validate that picture? Because at the same time, you're hurting that business if they're not rightfully in the wrong — it's a very delicate balance. Brett Gelfand: It is, and it's something that was obviously nerve-wracking to start, because the last thing we want to do is hurt companies that are doing the right thing. The fact is, we're getting accounts-receivable data directly from our members — so if it's showing in their accounting system that they're owed money, we're not doing anything other than taking that information and aggregating it. We do have an appeals process, just like most bureaus and trade credit associations have — if someone doesn't agree with what we're publishing, there's an appeal process, and we can validate whether that money's actually owed or not. After doing this for about 12 to 14 months, we've had probably fewer than 10 issues like that. The nice thing is we've been able to mediate them and get those resolved. Now there's finally a closed network of people willing to work out problems, instead of just running away from them. Bryan Fields: Are there any nuances from state to state that get baked into these reports? I don't know if certain states have different reporting requirements for accounting or things like that. Brett Gelfand: Great question. We keep it standard across every state, because there are a lot of multi-state operators who want to run reports state to state, and they want those reports to be standard. But there are tons of nuances. On a high level, what we're about to roll out is some really amazing macro data — like which growers in which state are owed money by, say, testing labs or retailers. We now have category-level information on a state-by-state level that we can start aggregating and pooling into macro data, so MSOs, investors, or banks can use that information — but also just so the industry knows who and why the bad actors are in the space, and what we can do to fix it. That's really the angle we're taking. But aside from California, which is obviously the start of the avalanche here, Colorado was really messy too. Michigan and Massachusetts have become terrible — I mean awful. Michigan is becoming an epidemic of collection issues. There are different platforms — sites like Facebook, where people are just posting, "I'm owed money by so-and-so," trying to find a solution to work together. The problem is that information is only active for a moment on a post, and it only lives there for a second. And there's also some red tape around antitrust law — federal laws around competition and making sure you word things the right way. If you were going to say, "We can't do business with this customer because they owe me money" — that could be a violation of antitrust law. And mind you, I'm not an attorney, and you should definitely get legal advice. But that's something I've had to get a lot of counsel on while building this association — making sure we're not violating antitrust laws when people are trying to communicate about who to do business with and who not to. I think it's evident that cannabis is a young industry and people are learning, but it's something to keep your eyes on — and more importantly, know there's a solution that's going to be much more effective than a Facebook group. Bryan Fields: So, just for a second — if I'm a business and I have a customer who didn't pay me, and my business is about to fail because I'm owed money, and I'm really angry, and there's no outlet, and I go on Facebook and essentially call them out — is that basically defamation, which could then be even more negative for my situation? You're not a lawyer, but... Brett Gelfand: I would say — I'm not a lawyer, so don't take this as legal advice — but I'd say, depending on the situation and how you word things, it could be. You should be sensitive to that. And that's the point — I've seen people on LinkedIn using it as a tool for leverage, and I don't blame them, I've been there before. Like, we need to find some way to get someone to pay us. Bryan Fields: Shame, shame! Brett Gelfand: Now, if that doesn't work, or if you want to take that risk and post on social media and do some kind of shaming — do what you've got to do, it's not my business. But it becomes my business if they don't pay you and you submit it to us — then our collection team handles it, and at the same time, that claim gets submitted to the CCA. So now it's reported as a flag that someone was sent to collections, their credit score goes down, and any member who wants to pull a report on that company isn't going to see them favorably. Versus if that same company that might want to do business with that person happens to see them shamed on LinkedIn that same day — it's very different having true credit reports and accountability, which is going to make a much bigger long-term impact. But I get the emotional response and the impact you want to make. Most of the time, owners and CEOs — people who probably have much better things to do — are spending a lot of time on that emotional response, to shame and post and chase bad actors. That's when it's important to understand: this is business, and you need to save your time and your opportunity cost, and go after good money instead of bad money. Bryan Fields: Yeah, I think everyone always likes to rely on social media for that feel-good emotional post across platforms — like, "We're just going to vomit it out for the universe," and so-and-so's mom from across the country is like, "Did you see that post Kellen did about that thing? He's shaming that one person." The cannabis industry is wild. But what do you say about Massachusetts and Michigan — why those markets? Are there any trends you're seeing that show market maturity, certain product categories, certain companies — any trends that show where problems lead, so that companies in, say, New York, a little earlier on, can keep that in mind before they hit the shelves? Brett Gelfand: It blows my mind, Bryan, that we can't just — you know, they say history repeats itself, and we've had the blueprint for years now. I can't give you a good answer, because I wake up every day asking, why is there an issue now in Massachusetts? Why is there a problem in Michigan? I think the biggest problems stem from the general foundation of how this country has set up cannabis, where banking is an inevitable problem. I'm sure you hear it every time someone's on this podcast — banking is massive. If people don't have access to banks and proper capital, they're forced to extend terms between themselves. That's a really important point, because if you can't get an easy line of credit like you could outside of cannabis, now you're forced to ask for terms, and that process gets done differently, because these cannabis companies are acting like a bank — like I mentioned earlier — without really having any idea how to do that, or any recourse. So you're basically an unsecured creditor. And the next thing you know, most of those unsecured creditors don't get paid — these companies go out of business, and the unsecured creditors get screwed over. So the important part is this foundation — the taxes in a lot of these states, especially California, what's happening now is crippling these companies' cash flow, market saturation, too many licenses, too much weed out there, and that's going to drive down prices. So people don't have the cash flow to pay back their vendors. I always see it as there are two types of debtors. There are debtors who have the motive to pay — they wish they could pay, but they don't have the means. They didn't necessarily make poor business decisions; they were just in a very difficult market and it worked out against them, and they wish they could pay but can't. Even if they're great people, you still have to get in line to get paid first, because they probably owe dozens of other vendors, and the only way to get paid is to get on that list — to get a judgment, to get a legal proceeding, so you have a chance to get something. So even if they're great people who don't have the means to pay, you have to recognize that and make sure you're in line. The other type — which is the frustrating part, and I think it's a small minority, well under 50%, but they're out there and probably louder than others — are the ones who don't have the motive, and might have the means. Those are just bad actors — I call them thieves. They're purposely stealing and taking advantage of vendors, and we deal with those people every day. Unfortunately, there's not much you can do when someone just doesn't want to pay. That's when you have to escalate it, get it off your plate, and use a professional like us who knows how to handle those people. Bryan Fields: That's when Kellen goes on Facebook and writes that long-ass rant — can I delete it later? Just post the gif for shame, shame, shame, and keep it moving. So let's talk about how the collection process actually works. Let's say they check the CCA, they felt comfortable with the risk, they moved forward. Now they're trying to collect — they've sent off invoices, sent multiple emails. How many days— Brett Gelfand: Yeah, you're like that. Bryan Fields: —should they consider before reaching out, and what does that process look like? Brett Gelfand: Totally — every company is different in terms of what you can do, but I'd say at least within 60 days from internal reach-out. You should have somebody on your team handling this, and it really should not be your sales team. After the first week, if someone goes past due, the biggest thing I can say is your sales team should not become collectors. Number one, if the customer does end up paying, it could completely disrupt the relationship with your sales rep. Number two, you're wasting your salesperson's time — the chance of collection goes down every day the customer doesn't pay. So you should have a designated accountant, AR rep, or collections rep — someone on your team handling collections — and they should be making outreach at least weekly until the account gets to about 60 days old. Then I recommend escalating to someone higher up on the team — a CFO or owner, depending on size — who sends a couple more emails. And the last thing I always recommend, before day 90, is a formal internal demand letter — something you could pull up on ChatGPT if you want, or we have templates we can provide — something very clear saying, "You have until this day and time to pay us, or you're forcing us to send this to collections." Make it very clear they're putting themselves in a position they don't want to be in, and there's a clear trigger date for when this gets escalated to a collection partner. That's going to make you look far more official and professional. And honestly, once it's gone 90 days — if they haven't paid you in 90 days and aren't communicating anything, not working out payment plans or settlements, nothing — that's the point where it typically needs to be escalated to a collection partner. They might give you every excuse in the book, but if they're not actually going to give you a settlement agreement, a payment agreement, or some kind of payment within 90 days, the chances of them not paying are very high without escalating to collections. Bryan Fields: So let's say they don't pay, and then we contact your team. How does that work? How involved are we, and what does that process look like? Brett Gelfand: Yeah, it's pretty cut and dried. You'd essentially submit a claim to our agency — which takes about five minutes — saying who owes you the money, their email, their phone, and any backup documentation so we can evidence and validate the debt. Our team takes that and, over the next 45 to 60 days — sometimes it could take a day, sometimes 90 days — does what it can to get in touch. As I mentioned, we have a ton of data, and typically we know these same repeat offenders — we've got them on speed dial, and sometimes we're managing 20 or 30 cases against the same debtor. Essentially, what we do is get in touch, figure out their motive to pay and whether they have the means to pay, and give our client updates along the way. Either the debtor proposes a payment arrangement or a settlement, and it's totally up to our client whether they want to take it or refuse it. We try to get that settled and worked out before we have to consider escalated options. But if there's no movement and no momentum on the file, the next step is asking the client if they want to escalate it to legal. We have one of the only legal networks exclusive to cannabis across the country — in every state where cannabis operates, we have associate counsel we can litigate those claims with, also purely on a contingency basis, so you don't have to pay attorney's fees. We have a full-time legal manager whose job is to manage that entire legal network and make sure our clients are getting updates. It's a lot of work, especially for some of our bigger clients who have dozens and dozens of cases every month, managing that caseload and making sure the money's coming in the door and the attorneys are doing their job. That's what we do — we can go all the way from an initial outreach from our internal collection team, through acquiring a judgment, which means the court stamps the fact that you're owed the money, through post-judgment activity in the legal process — garnishments, till taps, even having the sheriff walk into a store and take money from the register. Those things can all happen through the court process. Bryan Fields: So does the customer have to pay you before you get started — is there a fee? How does that work? Brett Gelfand: Yeah, no — and I would never recommend paying money to anybody to collect on bad debt, because now you're throwing good money after bad. We work purely on contingency. We did that because I understand how tight cash is, and there's no reason to charge or pay an attorney an hourly fee to send demand letters if there's no guarantee you'll get paid. Bryan Fields: Especially if you're already out, right — to double down on the bad even more. So let's continue with that scenario, because I think this is really helpful. We have a problem, we reach out to your team, we don't pay you anything up front, and we agree that if you collect the money, there's a success fee — we should talk about that. Is it phone calls, emails, in-person visits? What happens if the person isn't easy to find? Brett Gelfand: Totally, and it's funny, because people ask me all the time, "What can you guys do differently than what we can do? We can make a phone call, we can send a demand letter — I've got Bruno on my team who's great at collecting money." Listen, you might have great collectors, and there are a lot of factors here. One is the time and opportunity cost we're taking off your plate. Two, it's just like salespeople — you can have a really good salesperson who brings home the bacon, and we're a team with, I think, over a hundred years of combined commercial collection experience. Every collector we have, including our in-house attorneys, all they've done is collection work. We know how to negotiate and collect money, probably better than the average sales rep at a cannabis company, because it's a different — similar skill set, but different. There's a massive psychological part to debt collection: when you escalate a matter to a collection agency, it shows the customer you're very serious about your debt, because they're dealing with tons of other vendors whose sales reps or owners are saying, "All right, Bryan, I'll give you another week or two, I know you're trying, I know so-and-so isn't feeling well at home" — all these excuses people buy into. When you say, "You have until this time to pay, or I'm forcing this to my collection partner," that's when the debtor thinks, "All right, I really need to get this settled, because I don't want a lawsuit, I don't want to be reported to the CCA or any other credit bureau." It really changes the psychology — you're serious now, because you're willing to hire or retain an agency, which is essentially giving up on doing it yourself. Our rates are around 25% of anything we collect, so they know you're paying someone to do that work. If we're successful, they know you're more serious than maybe a competitor trying to do it solo. Bryan Fields: No, that's very clear, and you're right — the psychological difference between dealing with someone like myself, who's a little more emotionally attached and understanding, versus you, who's like, "Listen, there's no emotional feelings here, this is what I'm hired to do, this is what I do — you've been put on notice, if not, there are going to be repercussions." So how long does that chase usually take? I'd imagine some people are very good at dodging emails and phone calls, given that they know they're not paying and they've got that issue. So, 30, 60 days, and then it becomes a legal issue? Brett Gelfand: Yeah, typically about 45 to 60 days is when we'd really want to take it on, if there's no response, or if we've had prior experience — which is really the massive value-add we provide, because we've seen a lot of these same debtors over and over, and there might be a dozen cases already in legal, and we already understand their capacity to pay and how they're dealing with the legal process. If we get a claim from you tomorrow and this same debtor is already in five other legal cases, we need to get this to legal immediately — that's a huge value-add, because it saves months of time you'd otherwise spend submitting it to another agency or trying to work it yourself. After about 90 days of an account going past due, the collection rate drops about five to ten percent month over month — I have charts I could show you, but every month you wait, it just goes down and down and down. That's why, if someone wanted to subscribe or engage with our firm, we charge a higher rate after the claim is over a year old, because our rate of collection — which we do everything for free until we're successful — goes down as well, since the claims are so old. So we're trying to incentivize the industry to escalate matters before they're 12 months old, because they become much harder to collect. Bryan Fields: Yeah, that makes a ton of sense, because the longer people wait, the harder it is to collect, and the harder it is to collect, the less likely they are to get that money — and the whole cycle is broken. So, hypothetically, same scenario — we have an issue, your team's helping us out. Should we anticipate retaining 80%, 60% of the fee? Because I'm assuming there's probably some negotiation where the debtor says, "Hey, I don't have it all," or if they have some money, "I need a payment plan." How does that work? Brett Gelfand: Yeah, it's so case-dependent. If you were a client of ours and had a settlement on the table, given the conditions of cannabis, I'd have to understand where the debtor is at, whether we have any other experience with them, how they're paying other creditors. But right now, the motto is take the money and run — in cannabis today, the better we do for our clients, the better we do for ourselves, because it's all aligned through our contingency fees. We hope to get the best deal, but if it were up to me, and I were in our client's shoes with a settlement amount on the table that looks reasonable — because we know how quickly this market has been collapsing — it's less about your margin, because people will say, "Well, you guys are going to take your contingency fee, which comes out of our margin." There's no margin anymore once you have a collection issue. We're not talking about margin or profitability — we're talking about cash, period. We're talking about whether you're going to see a dime, a penny, or nothing. That's a big disconnect we try to overcome — when you send an account to collections, there's no guarantee you'll get paid. This is the final step, you're basically writing the account off, and if you see any money at the end of the day, great — but "oh no, my margin" — no, that's long gone. If you'd been able to collect your money within 90 days, maybe you could've given them a discount to pay early — a great incentive, built into your terms, like "pay within 30 days, get a 5% discount for paying five days early." There are all types of ways to creatively incentivize a buyer to pay early. If they don't pay you, let's stop talking about margin and start talking about whether you're going to see any cash in your bank — because right now in cannabis, people are not paying their bills. Bryan Fields: Is there anything unique about the collections space in cannabis? I know your team has experience with collections in other industries — is there anything super unique about cannabis? Brett Gelfand: Well, yeah, there's a lot. I'd point to a couple things — the banking side, from more of a business perspective — banking compliance, having to schedule cash pickups, that's insane. So many people don't have a bank account, which is normal for us now, but outside of cannabis that's just wild. But I'd say the more interesting topic here is the personalities we deal with. I've asked my collectors this in a lot of our meetings — just for fun, share some stories from today — and I ask them a lot, "Was this different than when you were working outside of cannabis?" And they're like, night and day. I mean, we have people — I don't even know, this is probably an R-rated or PG-13-rated podcast, I can't even share some of the things people say to our collectors on a daily basis. It's because of this shift from street to legal market, where you have some characters, and some of them are pretty scary — honestly, people can be pretty aggressive, not friendly at all a lot of the time. Because the market has gotten so tough, when someone's angry or mean, I think this can resonate whether it's business or personal — all those emotions are coming from fear. Anyone who's angry enough to rip into one of our collectors just for sending a demand letter because they owe a client money — you know that person is afraid of something. Now, in cannabis more than ever, they're afraid of not having money to put food on the table for their kids, afraid their business is going to go under. As much as I try to sympathize with that, I think we all need to level up and understand we're all playing a game here, and that game is more serious for some than others. But if you're doing a transaction, you're legally liable for the debt, and even if you're scared or worried, coming out with respect and saying, "I know I owe this money, I'm going to do my best to pay you," is always going to lead to a better outcome than acting out and being extremely rude, because you're going to get sued anyway, and you're going to have more problems at the end of the day. It's something I've had to work on too — to actually try to respect the situation of people who act so nasty, because you have to know their life is just not in a good place. So, a little more sentimental there, but I do think what we hear on a daily basis can be very aggressive, very rude, very scary — and that's just part of the characters who got into this industry, and part of how tough this industry has become, which leads to a lot of fear. Bryan Fields: Because it's a cash industry, do you have clients who pay spitefully — like they show up with a bag full of pennies or something? Brett Gelfand: The biggest tactic we see there — and it happened to us in Colorado all the time — we'd plan a pickup, and they'd say, "You're going to have $5,000 ready for us at the dispensary," and we'd get there and they'd say, "Oh sorry, we only got two grand, we don't have the other three, you'll have to come back next week." We're talking about driving from Carbondale to Denver — like a three-and-a-half-hour drive — and that happens all the time. It's just another way to delay and stretch out cash flow. It's a tough call, because a lot of these operators are thinking, "I need the sale, I need the customer, I can't burn the bridge with my relationship," and the buyers are doing their best to still act like the nice guy and make excuses for not doing anything wrong. The biggest question is how do you manage those situations — how do you maneuver being able to sell to a buyer who's acting nice but not paying you, when you really need that cash to grow and build your business? It comes back to having hard conversations, setting expectations, and not being afraid to say no to a customer. I think that's the biggest thing, and it's very challenging for everybody — how do you gain the courage to say, "You know what, I don't need this type of customer if this is how they're going to treat me," because I know there are more good customers out there — customers I'm not spending time with, that I could give more attention, try to upsell, try to work with to buy more — versus dealing with people who don't respect you. I think that applies in and out of business, but it's a big thing in the collection world. Bryan Fields: It's so, so hard to do. So can you give us an estimate of the potential size of the collections problem in the cannabis industry — how large that number could be? Brett Gelfand: The best stat I can give you is from a Whitney Economics white paper we participated in about a year, year and a half ago. In 2023, there was $3.8 billion in delinquent payments — that's what we found together. We took that information and analyzed it through the CCA, and I believe in 2023 more than 50% of that was over 60 days late. So anyone who was extended terms — the majority of those payments were paid after 60 days, meaning your cash-flow cycle is now two extra months longer than you expected. So when you're thinking about hiring a new sales rep, a new AR manager, or investing in a new machine, all that cash flow is now pushed out two months — that's a huge hit to your bottom line. I think that's a large number, and we're going to have more and more macro data I'd love to share with you guys, and you can share it with your audience. We do quarterly wrap-ups around credit data — which states are the biggest problems, how much debt is out there — and we're going to be distributing that information throughout the industry. Bryan Fields: Yeah, it's a staggering number. I guess — silly question — do you think it's going up, or down? Brett Gelfand: It's actually not a silly question, because the problem got so bad, there's been a lot of constriction around credit terms, like we talked about. And Kellen, you mentioned that a lot of people are going COD only now, and that's happening — so we're seeing less volume of claims coming in from the legacy states. The newer states are still experiencing the same problems — they're not learning from what happened before, which is — I wish I could just grab a megaphone and say, "Stop doing what everyone else did." I'm screaming every day: get on our platform, and if you don't want to use our platform to run credit checks, at least tell me you found something else to run credit checks with, because right now I haven't seen any other actual business or credit-reporting tool that can do what we do. Just find a solution, because the goal is to make sure you know who you're doing business with — period, I don't care what you're using, just make sure you know who you're doing business with. But at the end of the day, yeah, it's been less volume, but I think people are getting better at the quality of the business coming through. We were getting claims for past-due amounts from three, four years ago — people were submitting two-, three-year-old debt, because they didn't even know we existed, or didn't know what escalation meant. Now people have a little tighter understanding — there is recourse, we need to shorten the cycle, time is everything, time-value-of-money is everything in cannabis today. So I think we're getting maybe less volume, but the quality of the business is getting a little better, because people have better credit and collection structures in place. It's still in its infancy, and we have a lot of work to do, but it's much better than when I started — it was definitely worse when I was out in Colorado in 2015. I did exactly what I'm telling people not to do. Bryan Fields: Yeah, I think that information is so important, and for a lot of listeners, the time-value aspect is everything — those extra dollars can go a long way toward growing the business and keeping the lights on, and time seems to be the most precious asset. So I guess the last question — for our listeners who want to get in touch, who need help with their debts, where can they find you? Brett Gelfand: Yeah, www.cannabiscollects.com — that's Cannabis Collects. And anyone looking for credit reports, running credit checks on companies, please visit www.cannabizcredit.com — that's C-A-N-N-A-B-I-Z, Cannabiz Credit dot com — that's the CCA. And you can always find me on LinkedIn by searching my name — that's where I live a lot these days, because that's where a lot of these cannabis pros are. Bryan Fields: Thanks for taking the time, this was a lot of fun. Brett Gelfand: Awesome, Bryan. Thank you, Kellen.