Kate O’Connor-Masse, Co-Founder and CEO of BatchNav – Interview Series

In an industry where every plant, harvest, product shipment, and retail transaction must be tagged and documented at every turn, using data collection and interpretation software is invaluable. By analyzing clear trends and patterns, cannabis businesses can optimize operations across every department—from deciding how many plants of a specific strain to grow, to determining which product categories and brands are most advantageous to put on sale. Data holds tremendous power for every corner of the industry.

To explore the impact of this data and how collection technology can support cannabis operations, mycannabis.com spoke with Kate O’Connor-Masse, Co-Founder and CEO of BatchNav.

What were the most worthwhile courses you took while obtaining your MBA at Arizona State University? Which courses gave you an advantage throughout your career?

Before going to grad school, my career was focused on Sales & Marketing. I would never have expected this, but Financial and Managerial Accounting courses, plus Operations were my favorites. These have turned out to be essential in developing BatchNav!

Prior to co-founding BatchNav, Inc, what roles did you hold in the biotech and biopharma sectors?

I worked in Reimbursement for both biopharma and medical device companies, twice as a Field Manager and Director, then as a Senior Director of Reimbursement & Corporate Contracts, as a Director for a biopharma launch, then as a reimbursement strategist for new medical devices (in the US and internationally). My “sweet spot” is helping manufacturers compliantly navigate the highly technical and confusing world of coding, coverage and payment in the US healthcare system. Without effective strategies to address the three legs of healthcare access, the greatest product ever invented could languish and never get to patients.

What were the most common compliance issues you faced when working in compliant reimbursement strategies roles with those companies? What caused those payouts to be non-compliant, and how did you usually remedy those situations?

I have told my teams and associates that, “An ounce of prevention is worth a pound of cure.” The most important aspect of compliance is knowing the rules and being compliant in the first place, not fixing the problem after the regulatory or government agencies have charged the company with a failure. 

Off-label prescribing is allowed for physicians and other prescribers, but the promotion of off-label products is not allowed. That line can be blurred, which is where the trouble starts, usually due to management pressure to meet sales goals. Being extra careful to avoid even the appearance of off-label promotion is essential.

How does the experience of running a commercial farm provide you with a greater and more shared understanding of the daily ups and downs of cannabis cultivation as well as the struggles of cultivators?

Cannabis is a plant, so by definition, we are in the agriculture business, just as if we were growing cotton, corn or tomatoes. The margins happen to be larger here because of the particular plant, which takes a minimum of five months to grow and requires constant care and human tending. That means a lot of capital is tied up in product that won’t be sold for six months or more. Operators must know their actual costs of production so that they don’t make expensive mistakes during this long cycle. 

Arriving in cannabis with 15+ years of ag experience helped us to understand and empathize with the concerns growers have, because we lived them. Just as we did with food ag, we developed solutions to fine-tune production processes for the cannabis plant so that its best attributes–aroma, flavor, potency, quality–could be leveraged for patients and consumers, profitably.

When did you first notice the issues for cannabis businesses that inspired you to eventually co-found BatchNav? How have those particular issues impacted cannabis businesses already?

With a background in business and specifically in agriculture, we learned early on that operators don’t know their actual costs. We struggled along with everyone else, using huge spreadsheet models that still didn’t reveal what we needed to know to manage costs effectively. We tried various software platforms for cannabis, but all came up short in delivering actual costs, which we believe is critically important to remain profitable. That’s why we built BatchNav: Too many operators have discovered they weren’t making any money growing this incredible plant, and the number one cause is not understanding and managing costs.

From your experience with both BatchNav and previously in biotech as well, what is the grand importance of standardized data and operational metrics? Does that importance change across different departments, or is its importance universal?

The importance of having solid, standardized Key Performance Indicators (KPIs) can’t be overstated in biotech or in cannabis, but they vary by industry, process and department. In the past, gm./sq.ft was thought to be the most important cultivation metric. In truth, it’s a valuable operational metric, but it only shows how much you grew. Cost/gm. is an incredibly important KPI, because it marries financials to operations–how much did you grow, and how much did it cost you? 

From a technological standpoint, what all went into the creation of BatchNav? How were the needs and operations of cannabis businesses specifically considered when designing the platform?

An enormous amount of financial and operational architecture went into BatchNav, followed by an equally large amount of coding. We based it on our own experience as cannabis growers, meaning that we included all of the categories that impact profitability: Labor, Supplies, Machines and Overhead. Then, we solicited the input of other professional growers, cannabis chemists and cannabis CPAs. Their input and validation led to a robust platform that addresses every element of growing and producing quality cannabis, from seed through harvest through lab processing to Finished Goods. BatchNav can tell the cultivator or the lab processor how much every batch, strain and SKU cost to produce, and why.

Given that there are licensed cannabis businesses throughout many states, how does the BatchNav system take into account the small but significant differences between state cannabis regulations?

Because cannabis is still regulated as a dangerous product (Schedule I, akin to heroin), the states have implemented track-and-trace compliance based on their unique view of the plant. That means that every state has a different set of regulations, with some being more stringent than others. These systems were designed to let the state know what the item is, where it is, and how many there are. BatchNav works alongside track-and-trace software, providing the business metrics and manufacturing KPIs. 

It’s worth noting that the cannabis plant essentially is grown the same way, regardless of state or location: The phases of production don’t change because the plant development process is relatively straightforward. Strain differences cause growers to adjust for those in some stages of production or environment. In addition, climate differences determine whether outdoor, indoor or greenhouse is the better environment for producing particular strains at the lowest cost.

What are some clever but useful ways that BatchNav collects data across the many necessary departments of a licensed cannabis business? How does the data that BatchNav produces assist and strengthen the operations of those many different cannabis departments?

BatchNav is process-mapped for cannabis growing and processing, so every action that produces a cost at every stage or department is accounted for. That allows managers to evaluate every process stage, so they can effectively manage workers and work. Small changes to process can yield big savings, but only if you know what the actual costs are.

How do you envision the partial federal rescheduling changing the ways that BatchNav operates and collects data? In particular, how would some reform and relief from Tax Code 280E change the financial-based sectors of the platform?

If adult-use cannabis actually is rescheduled, 280E will become a moot point, but the need for accurate costing will continue. 

BatchNav doesn’t eliminate 280E—it helps operators maximize the production costs that can legitimately be capitalized into inventory, while creating the documentation needed to support those allocations during a tax examination. 

One important caveat: BatchNav is not a tax planning tool and does not determine what is legally capitalizable. Those decisions should be made by the operator’s CPA or tax attorney. BatchNav provides the operational records, batch-level cost accumulation, and audit trail that allow those professionals to apply their accounting methodology consistently and supportably. Notably, BatchNav supports Generally Accepted Accounting Principles (GAAP), which delivers confidence and transparency to investors, regulators and creditors.

Thank you for joining us, Kate! For more information on BatchNav, please visit its website.