The Cost of Building Cheap

With the difficulty of finding financing in the cannabis industry, it may be tempting to build a cultivation facility as cheaply as possible. While this may sound like a great option in the short term, chances are, you will be kicking yourself in the future as monthly bills stack up, making it difficult to turn a profit.

December 10, 2015

With the difficulty of finding financing in the cannabis industry, it may be tempting to build a cultivation facility as cheaply as possible. While this may sound like a great option in the short term, chances are, you will be kicking yourself in the future as monthly bills stack up, making it difficult to turn a profit.

As a long-term play, efficiency is key to success and profitability in any company. While the cannabis skies may seem wide and blue right now, as legalization continues become the norm throughout the country, competition will increase. The only way to maintain a stable company when that happens is to ensure yours is operating as efficiently as possible.

Energy consumption in a cultivation facility is huge – amounting to tens of thousands of dollars a month – and can have a big impact on your bottom line. Once equipment is purchased, the only real way to save money on electricity bills is to upgrade to more energy efficient equipment. Sure, there are small, quick ways to save money, but the option that will have the biggest impact is upgrading your equipment – upgrading to a basic Surna climate control system can save you roughly $141,000 per year* over traditional HVAC. However, if you started out by purchasing the cheapest option, you now have to factor in the added cost of a new system before those savings can be realized.

The savings from a high quality, efficient system can be realized quickly and an ROI can often be seen within a few harvests. After that, the monthly savings are pure bottom line. Definitely worth the up-front cost, if you can afford it.

When it comes to lights, the traditional wisdom has been to find the most efficient bulb and then find a reflector that fits your budget. The logic being that the reflector won’t impact the light output dramatically, so the bulb selection is more important. With typical reflectors that have been designed for home growing, without much thought or engineering, this logic made sense as there was little to differentiate performance from one to the other.

However, with the Surna Reflector, it is possible to increase the output of a DE HPS bulb while also increasing the amount of light that reaches the plant canopy, all while using the same amount of energy. This extra light can add up to big money by increasing plant yields. Our calculations show that it is possible to increase revenue by more than $470,000 per year** simply from the additional light, which costs nothing to produce, reaching the plant canopy and resulting in higher yields.

This can lead to an ROI within 8 months on the Surna Reflector, and after that, the additional revenue goes straight to the bottom line.

As you can see, thinking long-term when building a cultivation facility and creating a budget is important. While it may seem like a lot of money upfront, the monthly savings quickly add up, increasing your profitability in the long-term.

Don’t fall victim to the appeal of building a low cost facility. Spend the time and money to do it right the first time and you will be thanking yourself later.

 

* based on electricity cost of $0.109 per kilowatt hour, 800 light facility
** based on 800 light facility, 1.5 pounds per light, $2,200 per pound, 4.5 harvests per year

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