Mistakes cannabis sellers make

1. Pricing off 2021

Sellers anchor on what a neighbour got in 2021 or on a number an MSO floated years ago. The market has reset. Public multi-state operators with market caps above $100 million traded at a median 5.1x enterprise value to 2026 EBITDA in November 2025, and private single-licence businesses generally sell below public multiples. An unrealistic asking price does not just slow a sale. It signals to experienced buyers that the seller will be hard to close, and they move on. Start with how much a cannabis business is worth.

2. Handing over control before approval

This is the mistake that can cost you the licence. Approval takes months, the buyer wants in, and a quiet handover looks harmless. It is not. In Washington a buyer cannot take operational control, manage inventory, or control bank accounts before the Board approves. Most states have an equivalent rule.

Courts will not rescue you either. In HMLL LLC v. MJM Holdings, a Colorado Court of Appeals decision (2024 COA 85) summarised by Fairfield and Woods, an out-of-state investor used resident stand-ins instead of the state’s approved investor channels. When the relationship broke down, the court denied relief to everyone under the unclean-hands doctrine, and a $350,000 note went unenforced.

If a buyer needs to be involved early, do it through a disclosed, regulator-compliant agreement. See interim management services agreements.

3. Comparing offers by headline price

Viridian Capital data reported by Forbes put cash at under 2% of disclosed cannabis deal consideration in 2025. A $5 million offer with $1 million of cash is not better than a $4 million offer with $3 million of cash unless you have good reason to trust the paper. Put each offer into the same grid: cash at close, note terms and security, stock and lock-up, earn-out conditions, and what happens if approval is denied. The method is in cash vs stock vs seller note.

4. Books that do not tie to track-and-trace

Cannabis buyers verify revenue against the state system, the point-of-sale, bank deposits, and tax returns. If those four do not agree, the buyer assumes the worst and either cuts the price or leaves. Sellers often discover the gaps only when a buyer’s accountant does. Reconcile a trailing 24 months before you go to market, and be ready to explain every cash adjustment. Buyers’ methods are described in verifying revenue with track-and-trace data.

5. Hiding tax debts and violations

They will be found. Liens are public, regulators publish enforcement actions, and buyers ask for tax transcripts. A problem you disclose on day one with a payoff plan costs you some price. The same problem found in week eight costs you credibility and frequently the deal. If you owe back taxes, read selling with tax delinquency. If you have open violations, read selling with compliance violations.

6. Not knowing your own state’s transfer rules

Sellers sign letters of intent that their state does not allow. Examples:

• California licences are not transferable. Owner changes must be reported within 14 days, and if every owner changes the buyer needs a new licence before operating (4 CCR 15023).
• New Jersey bars transfers of more than 50% of ownership until at least two years after operations begin (N.J.A.C. 17:30-9.3).
• Social equity licences in several states carry holding periods or limits on who can buy.

Structure, timeline, and even the buyer pool depend on these rules. Check the state license transfer rules overview and your state page before you negotiate.

7. Forgetting the landlord and the city

The state is one of three approvals. Your lease probably requires landlord consent to an assignment or a change of control, and a landlord who knows you are mid-sale has leverage. Your local permit may need its own transfer application or hearing. Sellers who leave both until after signing add months. Read your lease now; see landlord consent and cannabis lease clauses.

8. Loose confidentiality

Telling staff, vendors, or a friendly competitor too early is a classic error. So is sending financials to a “buyer” who has not signed an NDA or shown funds. In a small licensed market, word travels fast, and competitors use it. Release information in stages: a blind summary first, detail after an NDA and proof of funds, the sensitive material only after a signed letter of intent. The full approach is in selling a cannabis business confidentially.

9. Granting exclusivity to an unqualified buyer

A letter of intent usually gives the buyer a period of exclusivity, often several months. If that buyer cannot pass a background check, cannot meet residency rules, or does not have the money, you have lost that time and your momentum. Banks and the SBA do not fund plant-touching acquisitions, so “I’m getting a loan” is not an answer. Before exclusivity, ask for proof of funds, the names of every owner and funder who will appear on the application, and whether any of them has been denied a licence.

10. Ignoring tax until the purchase agreement

Structure drives tax, and structure is set in the letter of intent. Common surprises:

• A C corporation that agrees to an asset sale pays tax twice.
• Depreciation recapture is taxed “in the year of sale,” per IRS Publication 537, even if you are paid over five years.
• Buyer stock is generally taxed when received, not when the lock-up ends.
• Dual medical and adult-use operators who have not separated their books cannot show a buyer the medical earnings that Treasury has said will fall outside 280E.

See taxes when selling a cannabis business.

11. Coasting once the letter of intent is signed

Cannabis deals spend months between signing and closing. If revenue slides, a licence renewal is missed, or a violation lands during that time, the buyer will reprice or walk under the contract’s conditions. Run the business as if the deal will fail, because until the regulator approves and the money moves, it can.

A quick self-check before you go to market

Question	Ready if
Do I know what my state allows me to sell, and how?	You can name the application, fee, and who must approve
Are my books reconciled to track-and-trace for 24 months?	Differences are explained in writing
Are taxes current or documented?	You hold transcripts and any payment agreements
Is my lease assignable with time left?	Consent terms are known and the term runs well past closing
Do I know my after-tax number?	A CPA has modelled likely structures
Do I know my minimum cash at close?	It covers tax, debts, and fees

A fuller preparation plan is in preparing a cannabis business for sale. This page is educational and is not legal or tax advice.