Willie McKenzie: From Legacy to 8-Figure Cannabis Operation & Elite Cannabis Operators Mastermind

Willie McKenzie: From Legacy California to Profitable 8-Figure Cannabis Operation & Building the Elite Cannabis Operators Mastermind

Guest (Willie McKenzie): It doesn't just affect operators and the market. When that's happening, it's a public health hazard, because essentially what you're getting is unlicensed, untested, unregulated product coming into the market and making its way into the stores. Bryan Fields: What's up guys, welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellen Finney. This week we've got a very special guest, Willie McKenzie, co-founder of Le Coast Holdings. Willie, thanks for taking the time. How are you doing today? Guest (Willie McKenzie): I'm great, gentlemen. Thank you for having me. Appreciate it. Excited to dive in. Kellen Finney: I'm doing really well, really excited to talk to Willie. It's awesome to have a West Coaster on, bringing all that knowledge to the East Coast, right? Bryan Fields: Yes, yes, Willie is from the West Coast. I have nothing — I've desperately fought to find some sort of association with the East Coast. Undoubtedly, Willie, East Coast, West Coast, which one? You have to choose. Guest (Willie McKenzie): The West Coast is the best coast, we all know that. Bryan Fields: Man, I don't know, I don't know. So Willie, before we dive in, for our listeners who don't know about you, can you give a little background about yourself and how you got into the cannabis industry? Guest (Willie McKenzie): Yeah, sure. So, man, my trip in the cannabis industry starts many, many moons ago — late '90s, selling weed in high school, sold weed through college. I started growing in 2006 in my garage with a single light, went to twelve lights in a bigger garage, and then I eventually took outdoor under my wing and wound up with four farms up in the hills in Northern California. Prior to coming to Michigan — Michigan is my first foray into the regulated market — we have a medium-small, medium-sized vertical here: 50,000 plants outdoor sungrown for smokable flower, 360 indoor lights, a manufacturing and processing facility, and then three stores. Bryan Fields: Why make that transition from California to Michigan? Was there a moment where you're like, hey, I want to take this to the regulated market? What was that feeling internally? Guest (Willie McKenzie): Yeah, so 2017 I had a really rough year. A lot of people who have been in the medical market have established facilities in places where the municipality has said it's okay to have medical marijuana, but there's no guarantee that municipality takes on a recreational ordinance. So you may have a medical store, a medical farm, and that city or county may not have a rec ordinance, and you may not be able to take your facility into the rec market. That happened to me, unfortunately, on four farms. I had four farms that were okay for medical, not okay for rec. I started getting big fines from the county — $25,000 here, $5,000 a day there — and had to shut down all my farms. It was also a big fire year — we had this big fire in Santa Rosa that smoked my whole crop out right at harvest. So I lost like a million dollars that year, and I was really licking my wounds trying to figure out what to do next, and this opportunity to come to Michigan popped up. A good friend of mine was from here — we're in Manistee right now — he owned a bowling alley and had some local connections and was going to go after a retail license. So I said let's go check out the Midwest. Bryan Fields: Give us a little background about the Michigan market. You mentioned you guys have cultivation, manufacturing, and retail — is it a complete vertical? Describe the Michigan market and how it's different from the California market and what you were previously doing in the medical space. Guest (Willie McKenzie): Yeah, so Michigan has a great cannabis market — it has a long-standing medical market, so there are educated consumers here, there are operators who have been in the space for a long time. Much like California, much like Colorado, a really well-established market, and that has lent itself to a lot of brands here. It's the second biggest adult-use market in the United States, second only to California, and on a per-capita basis I think people in the Midwest, specifically Michigan, smoke more weed than anywhere else, even California. So it's a really strong market — if you want to be a national cannabis brand one day, you have to be in Michigan. We've seen our fair share of challenges — I think Michigan, outside of Oregon, has been the most challenging adult-use market in the US. We saw a massive price decline in 2021 and 2022, probably the sharpest decline of any state. It's been a challenging market to operate in, for sure, but things have gotten better — they've been enforcing things and the market has stabilized a bit. Bryan Fields: What do you think led to the price decline, and how does your team respond to that internally in order to recognize the price is crashing, adjust operations, and move forward? Guest (Willie McKenzie): The state really took a hands-off approach to enforcement. There was a period when this recreational market opened up where you could pretty much do anything you wanted — nobody was checking your work. You could check in thousands of liters of distillate, bring in thousands of pounds of weed, never turn on the lights at your grow facility, and just move your way through metric tags, have a harvest, send it out for testing, and never incur the costs associated with actually growing product — just check in product from somewhere else, from California or Oklahoma or wherever. That has kind of come to — I don't want to say a stop — but they've actually caught on to what people are doing. There was a change of guard at the head of the CRA, the Cannabis Regulatory Agency, and the new head of the agency is intent on enforcing the rules. People recognize that when that's happening it's a public health hazard, because essentially you're getting unlicensed, untested, unregulated product making its way into the stores, and if you know anything about testing standards in any of these states, there's a good chance whatever's on the shelf you're buying hasn't actually been tested. Bryan Fields: With testing, didn't Michigan implement multiple COAs? That's one of the changes the Michigan market made because there was lab shopping going around, right? Guest (Willie McKenzie): Yeah, there's been a lot of infighting around testing in Michigan. There was a large lab doing like 60% of the testing in the state that was having pretty questionable results, and the state couldn't verify their testing standards. They had invested a lot of money and were kind of a big dog, and they really pushed the state around. There was a big recall when the state first pushed back on them that froze literally half the products in the state. They bullied the state, and the state kind of got their ass whooped and has taken a hands-off stance to attacking bad labs, which are abundant. It's unfortunate, because as operators, I can tell you when I see a tag if it's bullshit or not. Outdoor flower doesn't come in at 45% — sorry folks, I've been doing this a long time, and that's bullshit, it just doesn't happen. There's no way that 45% of the weight on that flower is THC — it's just not possible. And the fact that customers can't really wrap their heads around that is a little funny to me, but it is what it is. One thing the state has done is move toward a state testing lab, which on one hand I think is a good idea, but on the other hand these guys can't walk and chew gum at the same time. The idea of them being in charge of getting product to market makes me sick to my stomach, because when we finish something I need it tested like yesterday so we can put it on the shelves, and if it has to go through a state lab, Lord knows how long that's going to take. Kellen Finney: I had this conversation at MJBizCon recently — unfortunately, if the third-party testing labs continue to be for-profit companies, this kind of stuff is only going to continue, and lab shopping is going to be a thing. The companies with higher potency numbers get a better price, better margins, better chance of staying in business, and they'll continue to support the lab doing these weird things. So unfortunately I think one of the only true solutions is a government third-party testing facility, because then you eliminate the for-profit, greed aspect. A lot of these third-party testing labs are startups too — they have to pay their bills, so someone comes to them and says if I sell my product at this number I get more money, that means I can give you continued business. So the only exit I could see is a government third-party testing lab, which is unfortunate. Do you see any other way forward? Guest (Willie McKenzie): I hate the idea of having any more government involvement in this business, because they've already got their paws in everything we're doing, and it makes everything that much more difficult, especially given the fact that they really don't know what they're doing. I do believe in capitalism and free enterprise. I think one thing they could do is have stricter penalties, because there are good labs out there — we work with a good lab, they're scientists, they're about the science, about research, and you couldn't pay them to fudge results if you wanted to. That means their business is much smaller than they'd like, because people take their business away from them wanting their stuff to test higher. If states had stricter regulations — because right now they'll give a weak-ass $5,000 or $2,500 fine to a lab that's fudging results and let them keep operating — unless the penalties have teeth, people are going to keep doing whatever they're going to do, because it's worth more to them than $2,500 or five grand. Kellen Finney: I think that's the main takeaway — people weigh the decisions and what the penalty is, and that's what we've seen from California to New York and Michigan, where people are weighing operating legally versus the unlicensed market. Bryan Fields: Staying in Michigan, is there a chance they could bring testing in-house and make operators certify the material themselves, putting the emphasis back on operators if products aren't properly tested? Guest (Willie McKenzie): It's certainly possible, although I think operators have the most impetus to fudge results. Also, everybody's struggling right now — it would be really cost-prohibitive to bring a testing lab in-house. But there's got to be something better than what's currently going on. This is not the solution that works, this is not the answer — I'm unfortunately not smart enough to figure the answer out, but someone who's smarter than me should. If you're out there and smarter than me and have a great idea about how to fix testing standards in Michigan and other states, let's hear it — call us. Bryan Fields: Was there an educational or learning gap when you moved from California to Michigan? Obviously California has been the leading educational and skill-building center for the industry — were there rule differences that surprised you? Guest (Willie McKenzie): Yeah, there are so many differences. I was coming out of the illicit market, let's call it, entering the regulated market thinking I've been a successful businessperson in my life — I'd built seven- and eight-figure businesses outside of cannabis before, plus I had this native cannabis knowledge from cultivating for so many years — so I thought I was positioned to be very successful. But when I got here I was like, holy shit, this is another level. This is no longer a situation where if you have a little business sense and can grow weed, you're going to win — you have to be sophisticated to succeed in regulated cannabis, and the learning curve has been extremely steep. I went from a dude who ran a construction company, did sales, and owned pot farms up in the hills where we sold weed in turkey bags, to an executive of an eight-figure business in a matter of two years, with a hundred employees, dealing with a regulated industry I'd never dealt with before, having CFOs, raising money — all this sophisticated stuff I'd never gone through. I had to take steps to educate myself — I took some classes at Harvard on accounting because I had big problems with accounting in the beginning; I was paying people I thought were smart, and they were giving me bad information, but I didn't know it was bad because I'm not that smart. For me, the biggest hurdle has been educating myself and leveling myself up as an entrepreneur, a founder, an executive, so I can play and survive in this regulated market, because this is close to a full CPG business at this point. Bryan Fields: It seems like it's definitely trending that direction. I'm assuming that education and experience you gained transitioning over led you to recognize there are certain principles and skill sets you needed in addition to what you brought to the table. Is this the intention now, helping others follow in your footsteps and give them guidance? Guest (Willie McKenzie): Yeah, it's as much me passing along information as it is fostering the sharing of information between operators. When the market collapsed here in Michigan — definitely the hardest year of my life, we barely survived, we lost millions of dollars, we were barely hanging on, there were plenty of weeks I didn't know how I was going to make payroll — entrepreneurship is lonely, they say, and if you add cannabis to that it's even more lonely. There's a very small group of people doing this at this level, and if we're not talking, supporting each other, we're really alone. So I started joining mastermind groups because I'd heard these were places where high-level entrepreneurs get together, commiserate, share best practices, network, and help each other. It was really helpful to be around people also doing big things, but I was always the only cannabis guy — we could talk about hiring executives and raising money, things common no matter what business you're in, but when it came to some of the stuff I was dealing with in a regulated business, they had no idea what I was talking about. Like, what do you mean the market fell 90%? In the housing market a 20-30% correction is a crash; if the Dow falls 25% that's a crash. Well, the distillate market in Michigan fell 90%, from $220,000 to $1,000, and we had to keep going. I had to show up every day with a brave face, not knowing how I was going to pay my bills or the people and keep leading, and these people didn't know what that's like. So I was like, I need to start something for cannabis operators, for people in the cannabis space — and the ancillaries too, right, because the people providing us marketing services, SEO, websites, insurance, everything, they're struggling to get paid by operators too. That was really the impetus — if we're not collaborating, not sharing information, we're dead. Especially if you're not some big corporate MSO with hundreds of millions of dollars to burn, we have to be working together. As a smaller company, I'm a couple-million-dollar mistake away from going out of business, and I've made a bunch of multi-million-dollar mistakes. If I can share the mistakes I made — hey, I paid three and a half million dollars for a license, that was a bad idea — and somebody in my group is thinking about spending five million on a license, I can say here's what I did and why it wasn't a good idea, because it's worth $500,000 now. That was the idea behind getting it started. Bryan Fields: I think that's so important, because cannabis is loaded with entrepreneurs and there's no playbook — every day you're chopping down trees moving forward, no modeling to understand your product might fall 90% and you have to figure out a new business plan immediately to keep the lights on and pay employees. So who was the first person you asked about this — did this fit, is this something you're looking to join? How did you brainstorm that idea next? Guest (Willie McKenzie): I talked to a few people about it. I talked to Anthony Aligo from 40 Tons, he was really interested. There were some people in my network I knew were interested in personal development and leveling up and learning from each other and sharing best practices, but unfortunately our industry is really coming out of the shadows and really compartmentalized — people still have this scarcity mindset, like sharing what's working for me is a bad idea because I'm taking food off my own plate. That's the wrong idea — we've got to share information because a rising tide lifts all boats. Bryan Fields: Once you got it going, walk us through some of the first mastermind sessions — how were they structured, and what's the plan going forward? Guest (Willie McKenzie): Sure, so we have a Zoom call every Thursday, and the basic concept is we have two to three people every call hop in the hot seat and talk about a problem they're dealing with in their business, and we process the issues together as a group. No matter what someone is going through, there are always a few people in the group who have already been through that issue. When I think about decisions I had to make early in my business, I made them in a vacuum — big, multi-million-dollar calls I was just making on my own. Now you have somebody sit in the hot seat and say, I'm thinking about investing $5 million into a new dispensary, here's the situation, and you've got four, five, eight people who've literally done the same thing, been through the whole market cycle multiple times, giving feedback on why it's a good idea or a horrible idea. And beyond that, this has been extremely hard — if you were a wrestler going through practice with your brothers, that creates camaraderie; people in the military who went to war together, that creates camaraderie. We in the cannabis industry are really fighting to stay alive right now, and doing it together as a group creates camaraderie. Being able to say, I have to make payroll in two days and don't know how, and sit with a group who's all been through that, bouncing ideas off each other on how to make it happen, is powerful. We also have a guest speaker once a month — this Thursday we have Brett Puffenbarger coming to walk us through his LinkedIn mastery. He's built a really large following on LinkedIn, he's one of the top voices in the cannabis industry, and he's got a formula for how he's done it. Personal branding is incredibly important, especially in cannabis where we're handcuffed in terms of what we can do on social media with our businesses — if you build a personal brand representing your company, your reach is so much bigger. Right now we have 26 people in the group and we're getting ready to splinter into two smaller groups because it's getting a little big, so I'll be running two smaller groups at that point. Bryan Fields: Going back to what you said about the creator economy — it's so important given all the restrictions in cannabis marketing. When people associate your face with a brand, it's an easier, secondary path to promote the product and the expertise behind it, and people trust that voice. I think that's the most important aspect — they see you delivering value consistently, and when they need help they think, Willie's been through this before, I'm going to go to Willie, and that separates you from consultants who people don't trust as much because they've been burned before without seeing delivered value. Bryan Fields: So who is this group for — is it just for executives, lower-level operators, people wanting to enter the space unsure about fit? Guest (Willie McKenzie): It's for founders, executives, people operating plant-touching cannabis businesses, and people operating ancillary businesses in the cannabis space. It's been extremely valuable — the feedback I've gotten, the interest we've gotten, I've had 450 applicants and we've got 26 people in the group, so we do a pretty good job vetting because the group is only as powerful as its members. We've been careful about who we bring in — it's got to be somebody who's going to gel with the group. Operators, executives, plant-touching, non-plant-touching — it's a great place for mentorship, creating bonds. People in the group are from all over the United States — we've got people from Colorado who've been operating for ten years already, people from New Jersey building their first store right now, and for a guy who's operated retail in Colorado for ten years to mentor somebody just literally building their first store is massive. I wish I'd had that when I first started — I would've made so many different decisions, I wouldn't have this big complex vertical operation, I'd be an asset-light brand like my guys from Uncle Arnie's and 40 Tons and Old Pal — those guys are crushing it without facilities, and I'm like, damn, that sounds like such a good idea. Bryan Fields: You should start a mastermind group for the government regulators — maybe some of the new states could've learned some lessons from the old states. Guest (Willie McKenzie): Long-term, that is my hope — that we're the group states and the federal government come to when putting together legislation, because the rules we abide by aren't made by us, they're made by lawyers and lobbyists who don't understand what we do, so our regulations largely just don't apply to us and don't make sense. I want us to have a voice, especially at the federal level, but also as new states come online — I'd love for us to talk to states and have input on how they're doing things, so maybe a state comes online with some good legislation, taking the best practices from other states and missing some of the mistakes instead of reinventing the wheel twenty different times and making dumb decisions. Bryan Fields: That makes way too much sense for them to even possibly consider. One of the things I've appreciated most following you on LinkedIn is a post: 'Do the things that others aren't willing to do.' Can you give more context on that? Guest (Willie McKenzie): I'm a pretty improbable success story — I was a homeless drug addict eleven years ago, lived in a halfway house, took the bus everywhere, had a hundred grand in debt. I really started over in my 30s with nothing, well below zero, and in the last decade I've built a pretty phenomenal life for myself, and it's because I'm willing to do stuff other people won't do. I started my career in sales, selling residential house painting door-to-door — that's the most effective way to sell that particular product, and a lot of products, but most people aren't willing to do it. It sucks, it's hard, but I'm willing to do whatever it takes to make it. I've lost 100 pounds, I run multiple businesses, I have a wife and a small child who I'm not willing to sacrifice time with, so to not become a fat, dad-bod piece of crap, I wake up at 3:45 in the morning to work on my mental health and go to the gym every morning, and post every single morning on Instagram at 3:45 when I get up. It's doing the things others aren't willing to do. So many people tell me, man, I wish I could get in shape like you, I'm just so busy — you're not that busy, you're just not willing to do what it takes. You value your nine hours of sleep more than being jacked, and that's fine, but don't complain about not being jacked, because I only sleep four or five hours a night — that's not a flex, but I have three things in my life: work, family, and sleep. If I want to do something outside those three, one has to be sacrificed. I cannot sacrifice work, I have too much riding on it; I cannot sacrifice my family, that's a commitment I've made; so sleep is what I sacrifice. That's something I'm willing to do that a lot of people aren't. Bryan Fields: I think that's perfectly said, and there's nothing else to add — you take people by their actions, not their words. Was there a specific piece of advice given to you, or a turning point where you realized this was the direction and these priorities were locked in, or was this always ingrained in you? Guest (Willie McKenzie): When I moved in with my wife — she was my girlfriend at the time — she was waking up before I was, and I felt like a bum. I had this realization one day that if I wanted to make this woman my wife, build a nice family, be a good provider, I had to kick my ass into gear. I didn't own a company yet, I was an employee at a painting company making less than a hundred grand. I started reading personal development books, waking up early, building daily habits that promoted success, and amazingly my sales went from a million-two a year to five million a year. Then I started owning a third of the company, then investing in cannabis farms, spending my time outside my 9-to-5 mastering other things — mastering cultivation, my side hustle, outdoor cultivation, which became my main hustle and is now an eight-figure business. I've always wanted to be successful, but for a long time my inputs didn't match the outputs I wanted — I wanted to be rich but didn't work that hard. So personal development and mastermind groups have absolutely been the biggest catalyst in my success. Bryan Fields: In a world of specialization, how important has it been to your career to try and diversify across all these different skill sets — how does that impact your day-to-day now? Guest (Willie McKenzie): If I had to say I have one specialty, it would be sales — I'm a really good salesman. I'm a shitty executive, I'm a horrible manager of people — I've done a bad job managing people in my business, and I recently brought in some legitimate 50-year-old executives who really know their stuff, who've run big companies before, and before this year I couldn't do that because the business couldn't afford it, so I had to be that manager. But my specialization is I'm a salesman, and I'm an entrepreneur — willing to take risks, put my money up, get shit off the ground. I like the messy, hectic startup stuff, willing to sit in Zoom meetings and go jump in a tractor or run an excavator, but I'm not great at anything specific. Bryan Fields: I don't think you give yourself enough credit, but I think that's part of the mantra. If you could put anything on a billboard, metaphorically speaking, to get a message to billions of people — could be an image, a quote, a word, something that inspired you — what's the first thing that comes to mind? Guest (Willie McKenzie): Fortune favors the bold. Bryan Fields: What question do you wish more people asked you? Guest (Willie McKenzie): How did you get sober? I think sobriety is a superpower, and I think more people could benefit from it. Bryan Fields: When you started your journey in the cannabis space, what did you get right, and most importantly what did you get wrong? Guest (Willie McKenzie): Right: quality, culture — I'm from the culture, I've been doing this a long time, well before the government said it was okay. Wrong: branding. I come from selling weed in turkey bags, and I didn't understand cute packaging at first, so we had a couple of brands really flop — spent a lot of money on packaging and marketing on something that was confusing and didn't work, before we finally found the brand, Kaduzy, that's doing well now. Bryan Fields: What is the most expensive lesson you've ever learned? Guest (Willie McKenzie): Don't overpay for licenses in an emerging market. Kellen Finney: Prediction time, Willie — what skill do you predict will be most influential for leaders over the next five to ten years relative to the cannabis industry? Guest (Willie McKenzie): Flexibility — the ability to pivot, to be nimble, to make decisions, not get stuck, not get bogged down in something, and ride it until you die. Kellen Finney: Great answer. I think the ability to learn is similar to what Willie said — he had to go learn specific skills, taking classes at Harvard. That kind of thing is going to continue to be very prevalent in the cannabis industry, especially with drinks, other form factors, branding, big pharma coming in, big tobacco coming in — I think all of these factors will force executives to continue learning new skills and new areas for their business to be successful. Bryan Fields: I go back and forth — I think having people from counter opinions give input on your decisions, different from what you're thinking, could be helpful. I think what Willie said about being in a vacuum and hearing other people's perspectives is critical. So many companies think they know what customers want, but in reality consumers vote with their preferences by where they spend their money, and if companies applied that feedback more directly and took constructive criticism more aggressively, it might help them navigate challenges and recognize sometimes it's timing, not the wrong product. Bryan Fields: Willie, for our listeners who want to get in touch, learn more about you, or join the group, where can they find you? Guest (Willie McKenzie): Willie McKenzie on LinkedIn, Elite Cannabis Operators on LinkedIn, and Willie McKenzie Official on Instagram. Bryan Fields: We'll link it all up in the show notes. Thanks for taking the time, this was a lot of fun. Guest (Willie McKenzie): All right fellas, nice seeing you. Bryan Fields: Thank you. Kellen Finney: Thank you.