As part of my series about the “How to Navigate and Succeed in the Modern World of Finance,” I had the pleasure of interviewing Michael Scott.
Michael Scott is the chairman, CEO and founder of Cannapreneur Partners, a leading cannabis investment firm specializing in early-stage startups. He has been instrumental in bringing cannabis companies from pitch deck to nine-figure valuations with the infusion of smart capital, strategy and purpose-driven leadership. During his two-decade career in Wealth Management, he became one of the youngest top 1% ranked advisors at Ameriprise Financial. Michael is also the founder and owner of entrepreneurial holding company BAM Partners LLC.
Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
When I was born into this world, the house my mother lived in was smaller than the conference room I’m in right now. I had a cardboard box as a crib and never met my biological dad. During my early days in school, I was one of the “free lunch” kids, so others could tell that my family didn’t have much. My experiences growing up under these circumstances helped determine my outlook later on.
Fast forward to 2016, I had founded many businesses and put some amazing leaders in place who were running the companies well. As a serious workaholic, I knew it was time to take time off and focus on growing myself personally and professionally. I did some traveling, bought my mother her dream house in South Korea and began to study numerous billionaires. I was intrigued by the ones that came from nothing — entrepreneurs who created and built empires — and I connected with them.
I also studied the way that these billionaires created value in exchange for money, deal structures or partnerships, and noticed they used recurring keywords: entrepreneurial leverage and capital leverage. My goal became to use what I learned within an industry that I perceived to be the most explosive: cannabis.
This realization was just before adult-use cannabis legalization began in Massachusetts, and I was confident that the state’s market was going to be a leader in the industry. There was rampant inefficiency in the space which stemmed from and a lack of business knowledge and experience. I knew I could bring those tools to the table while delivering amazing investor returns. This was really the catalyst that prompted me to launch Cannapreneur Partners, a cannabis investment firm helping entrepreneurs attain success while guiding investors to make more educated decisions and thoughtfully place capital.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
It was the very first pitch that I ever took in cannabis. Before our first meeting, I had stressed that I would not strike a deal with a company associated with the illicit market on a state level, especially as a highly-regulated owner of a wealth management practice. Lo and behold, in came two guys to pitch their business, swearing that they did everything by the book and had no affiliation with an illegal operation. After a few meetings, it was revealed that each of them had a long history of felonies directly related to their business.
The lesson: It’s important to create an effective filter when selecting potential business opportunities. Those two business owners attempted to mislead us, but the most problematic aspect is that we accepted and continued the conversation with them because we didn’t yet have an efficient strategy for the vetting process.
Is there a particular book that you read, or podcast you listened to that really helped you in your career? Can you explain?
The 7 Habits of Highly Effective People by Stephen Covey is one of my favorite books of all time. It helped me become a better businessman, entrepreneur and overall human being.
Principles by Ray Dalio has also been influential. Ray comes off like a modern-day Stephen Covey in many ways, but with a wealth management spin. He’s a very insightful person and runs the world’s largest and probably most sought-after hedge fund.
I read Tim Ferriss’s 4-Hour Workweek when it came out in 2011 and it was my first glimpse into entrepreneurism, back at a time where my whole life was all about being a private wealth advisor and managing investment assets. This is when I became more aware of the difference between working harder versus working smarter.
Are you working on any exciting new projects now? How do you think that will help people?
At Cannapreneur Partners, our goal is to find the all-stars at early-stage cannabis businesses that are purpose-driven and have values aligned with ours. These are entrepreneurs we believe will be successful with or without us, but our strategy, capital and resources will turbocharge them to the next level. We essentially act as a Shark Tank for the cannabis industry — even one of our newest strategic advisors is Shark Tank’s original shark Kevin Harrington. The second prime function of Cannapreneur is to partner with investors and help them land explosive investments to create amazing shareholder return and dividend yield.
One partnership I’m particularly excited about is with a war veteran and former police and SWAT officer. We plan to launch a dispensary called Joint Operations, and a percentage of the profits we generate will go into a pool to subsidize cannabis costs for veterans. As medical cannabis treatments are not covered by insurance, veterans dealing with PTSD must pay thousands of dollars a month for their medicine, when normally it would be a $10 copay. Many have to use opioids for medical treatment, and its use by veterans is often a component that leads to suicide. Cannabis is proving to be an effective medicine and opioid alternative for veterans which has been successful in minimizing their suicide rate.
Thank you for that. Let’s now shift to the central focus of our discussion. Extensive research suggests that “purpose driven businesses” are more successful in many areas. When you started your company what was your vision, your purpose?
When I first became interested in cannabis investment, there was only one thing keeping me from jumping in with two feet — I couldn’t see how it connected to my purpose of helping society. I then saw firsthand how it helped my mother with her PTSD, after which I went from skeptic to raving fan and became 100 percent convinced that the world has cannabis all wrong. Once I realized I could help society by enhancing the availability and removing the stigma of medical cannabis, I saw the connection to my purpose.
As a private wealth advisor, I was considered an industry-leader and the foremost advisor as it relates to behavioral finance. It’s easy to get caught up in the money, but the reality is that it’s all about how you utilize that money. There’s a reason why a large number of lottery winners and professional athletes end up bankrupt. If you give somebody power tools, they might be able to build a house, but if they don’t know how to utilize those tools, they could also cut their arm off. Wealth is a powerful tool that your average person does not know how to wield. That’s why I aim to help entrepreneurs who share my values raise and utilize capital to achieve their goals and make a positive impact.
Do you have a “number one principle” that guides you through the ups and downs of running a business?
Find your purpose and connect it with your career. Otherwise, you’ll end up connecting it to making money, which is an empty path. I’ve met people that have a lot of money but have empty lives. To bust your butt for 70 hours a week to grow your net worth and not have a relationship with your loved ones, leaves you unfulfilled. To live a purpose-driven life is energizing and invigorating.
Additionally, strive to make values-based decisions. To do this, it is imperative that you know your core values, in order of priority. Personally, mine are family, integrity, leadership, loyalty and helping others. At the end of the day, we are all seeking happiness, and I believe the path to happiness is directly aligned with making values-based decisions.
Lead generation is one of the most important aspects of any business. Can you share some of the strategies you use to generate good, qualified leads?
Number one, I leverage my contacts, whether that is a business partner or other existing relationship. Additionally, referrals are always one of the best sources of lead flow. Third, networking opportunities such as conferences or hosting events can help to generate quality leads. As many of those aren’t happening at the moment due to the pandemic, we have shifted to online lead generation through the creation of educational webinars. Lastly, strategic partnerships are a great way to enhance lead generation.
If a fellow CEO would ask you for advice about whether to bootstrap or to look for VC capital, how would you help them weigh the pros and cons of that decision?
It completely depends on the stage of the business. If a business is at a stage where it can generate revenue from an influx of capital, it makes sense to do so. Alternatively, a CEO may have six months of bootstrapping work to get through before they reach that point. The sweet spot is the intersection of where strategic planning meets business needs that can turn into revenue.
What measure do you use to determine the value of a company? What advice would you give to other leaders about how to get an optimal evaluation of their business?
Valuing a business is one part eBay, one part eHarmony. The eBay component is purely the financials, or what someone is willing to pay. The eHarmony side is all about relationship building and emotional value. An example of this type of value would be someone running their grandfather’s bakery — maybe they feel joy by keeping the business alive. As a business owner, you would want to check off both boxes if possible.
What would you advise to a founder who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?
Start by looking at why the business is different today. Oftentimes, the answer rolls back to the decision making of the founder. It’s important for a CEO to reflect on what they are doing differently and identify the mass restrictor. A mass restrictor is like a kink in a hose; you can keep turning the faucet up or change the nozzle, but nothing is going to flow through. My advice to CEOs and founders is to pinpoint that the kink in the hose.
If the machine is working well and has built a solid team, then it’s all about marketing. Invest the time and energy into getting your message out. My generation did what I refer to as “dumb marketing” — sending out 25,000 pieces of mail and hoping for a 1% response after spending a ton of money. Today, you can utilize sophisticated, ultra-targeted marketing via social media.
What are the most common finance mistakes you have seen other businesses make? What should one keep in mind to avoid that?
- Not having sufficient cash reserves.
- Raising too little money.
- Improperly forecasting monthly financials and neglecting the analysis of prior forecasts.
- Overlooking the inclusion of a CFO or a solid numbers person that can help with financial management.
Ok, here is the main question of our discussion. Based on your experience and success, what are the five most important things one should know in order to succeed in the modern finance industry? Please share a story or an example for each.
- You’ve got to be tenacious. The finance industry, where I’ve spent the bulk of my career, is fiercely competitive. A lot of people are focused on the bottom line. Having said that, you have to understand the difference between friendly competition and when something goes too far.
- Be self-aware. Everybody has shortcomings, so it’s important to be grounded in reality and figure out how you can grow and improve.
- Put your pride and ego aside. If you don’t keep those in check, it will blind you.
- Focus on emotional intelligence (EQ). As a society, we often look at IQ to predict success, but EQ is one of the most important things that a human being can develop in their lifetime — not just for success, but to experience deeper levels of love, to be a better person and to make better decisions.
- Surround yourself with the best values-aligned people.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
- Find balance between work and life. The days that you’re disconnected from work are equally as important, if not more important, than your workdays. People need to recharge the batteries. Even if you love what you do, disconnecting makes it so much more exciting when you go back to it.
- Meditate. I’ve gotten really into meditation in the last five years and it’s changed my life. I use the app Headspace for 15 minute breaks throughout the day.
- Fitness Bursts. Just 30 to 90 second fitness bursts get the blood to flow better through the brain. It’s as simple as some pushups or squats. It will help you make better decisions and increase performance.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I am very crystal clear on what my purpose is in business. I’m striving to build something called a philanthropic business model; by replacing the thought of money with energy. In traditional business models, the business generates cash flow, which pays for business expenses, taxes and employees, and what is left over is for the entrepreneur.
Billionaires create energy that establish new jobs and generate more taxes. At the same time, incredible sums of money are stored in their accounts — all of that energy just sitting there. Often, these billionaires will compete with other billionaires, leading to a big ego contest. Other times, you have people like Bill and Melinda Gates, who use their money (energy) by giving it away, and that’s so inspiring to me. I’m committed to hitting a certain net worth, then having any leftover revenues funnel into a nonprofit foundation designed to give back to society. I believe I was meant to be a successful entrepreneur and then give most of the money away, and to inspire others to follow a similar path.
How can our readers follow you online?
You can learn more about Cannapreneur Partners out at cannapreneurpartners.com, or by following us on Twitter and LinkedIn. If you’re interested in investing with us, our door is always open. The simplest thing would be to pick up the phone and give us a call. We’re happy to share what we’re doing and explore if there is a win-win investment opportunity.