The Company’s EVIO Labs are setting the standard in the growing cannabis testing market
Whether you’re looking to ease the symptoms of cancer or just looking to unwind on a Friday evening, marijuana is the substance of choice for many Americans. The social stigma of pot continues to dwindle (there will always be some squares), and as a consequence more and more states have sought to legalize the use of cannabis for both medical and recreational purposes.
In fact, medical marijuana has become legal in 25 states, while recreational marijuana use has been decriminalized throughout the nation. Four states: Colorado, Alaska, Washington, and Oregon have (to varying degrees) legalized marijuana use for recreational purposes. Also, more states have recreational legal marijuana on the ballot, including the most populous state, California.
With legalization comes regulation, and with regulation comes the mandate for quality control standards—just like any other legal substance. And there is a lot that must be tested such as levels of potency, pesticides, E.coli, yeast, mold, and other contaminants etc. In 2015, Governor of California, Jerry Brown, signed the Marijuana Regulation and Safety Act which will give the state some of the most comprehensive regulations in the nation. With only 5% of California cannabis currently being tested, these regulatory measures (and similar ones nationwide) provide a tremendous market opportunity for companies able to nimbly operate in the growing cannabis testing market: Enter Signal Bay, Inc.
Goodbye Oregano, Hello EVIO
Signal Bay, Inc. is the Oregon-based Life Science company operates through its three subsidiaries: EVIO Labs, Signal Bay Research, and Signal Bay Services. Going public via reverse merger in 2014, Signal Bay focused primarily on providing research and consulting services to cannabis growers, product manufacturers, and other industry professionals.
“We provide data collection and industry research as well as help entrepreneurs in the cannabis space get licenses and put them in touch with capital opportunities,” explained CEO of Signal Bay, William Waldrop. “To date, our consulting and research expertise has been responsible for the generation of over $80 million in deal flow.”
But while some Signal Bay personnel were satisfied with this impressive consulting and research business, CEO William Waldrop and other top management saw a much larger opportunity in the cannabis testing market, a market that is expected to grow to over $520 million by 2020. Leveraging their expertise in the industry and client relationships, the Company to redirected its focus on its EVIO Labs division. With three cannabis testing currently operating in Oregon, the Company now controls 95% of the legal cannabis testing space in the state. Next stop for Signal Bay is the new “Green Rush” state California, where Signal Bay has signed a Letter of Intent to acquire another testing laboratory.
“This key move in California will provide us a solid foundation in what is virtually a wide open market,” added Waldrop.
By the end of 2016, Signal Bay is expected to have 5 of its EVIO Labs operating in total, helping more than double the Company’s 2015 revenues of a little under $600,000 to over $1.4 million. By 2020, Mr. Waldrop expects the Company to be doing over $45 million in annual revenues operating 30 EVIO Labs.
But is this kind of growth possible for such a young company? Mr. Waldrop believes it is. The key, he asserts, is Signal Bay’s business model, a model that sets it apart from the competition. A model that best achieves economies of scale.
It’s the Economies of Scale, Stupid…
There are only a handful of companies trying to capture the growing cannabis compliance testing market. However, these companies are mostly in the business of owning and operating independent labs, each of which provides core testing services. In simpler terms, each lab is its own centralized entity, operating as basically its own business. But the limber management team at Signal Bay, a team that has redirected focus in the past in light of new opportunities, has developed a business model they liken to Quest Diagnostics (NYSE:DGX) an industry leader in clinical laboratory services.
“It’s the hub and spoke model,” simplifies Waldrop. “In each state we have one centralized testing laboratory with other ancillary testing facilities in local markets statewide. The core centralized lab handles the bigger, high dollar testing functions while the smaller localized labs handle collection, sampling, and other testing services. This enables us to develop networks of testing laboratories that operate efficiently within each state.”
The ‘Profit’ Of Weed Testing
Signal Bay isn’t in the business of building laboratories or acquiring an empty lab and setting up shop. Rather, the Company acquires currently operating cannabis testing laboratories, along with the existing client base. Once acquired, Signal Bay ensures that the laboratory is operating up to its reputable EVIO Labs standard. With years of industry consulting and research expertise, Signal Bay looks to increase the lab’s efficiency and expand its client base, as well as work with existing personnel to educate them on how to improve quality control.
“With our three operating labs in Oregon, we currently have a client base of over 700 customers,” continued Waldrop. “With our California acquisition, we will be acquiring around 300 clients alone.”
A crude comparison might be to think of Signal Bay as the cannabis testing version of the CNBC show, “The Profit.” Like the way business expert Marcus Lemonis revamps some small family business, Signal Bay acquires a cannabis testing laboratory and revamps it to guarantee quality and efficiency. The Company is essentially in the quality control business, a business that, with more and more regulations mandated by states legalizing marijuana, will continue to grow exponentially.
The real key to the cannabis testing business, however, is understanding the local market in which each lab operates.
“The most important thing people need to understand about the cannabis business is that it is very much a relationship-based industry,” said Waldrop. “It’s all about close client relationships, and understanding the market on a local level.”
Test Locally, Grow Globally
Signal Bay is a young company, but one that might just be poised for significant growth. With a big footprint in Oregon with eyes on California and Maryland, the Company’s EVIO Labs might become the standard in the growing cannabis compliance testing industry. If the young Company can continue to grow smartly without becoming overextended—and continue to grow its EVIO brand—it might just leave its cannabis competitors up in smoke.
About Signal Bay, Inc.
Signal Bay, Inc., through its subsidiaries Signal Bay Research, Signal Bay Services and EVIO Labs, provides advisory services, operational management and analytical testing services to the legal cannabis industry. Learn more at www.signalbay.com or the company can be reached directly @ 1-888-544-EVIO.
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