Think Like a Manufacturer
Cultivation is manufacturing with a biological process. Direct materials, direct labor, indirect production costs, work in process and finished goods all apply, and the batch is the natural cost object.
Once costs attach to harvest lots, everything downstream becomes possible: unit cost, margin by strain, yield variance and defensible inventory value.
Building the Cost Model
Capture direct materials — nutrients, media, amendments, consumables — by batch. Capture direct labor by activity through job-coded time tracking. Allocate indirect production costs using a documented basis such as square footage, canopy or plant count.
Review the allocation study whenever rooms are added, repurposed or taken offline, and retain each version with the period it applied to.
- Direct materials charged to batches as consumed
- Direct labor from activity-level time records
- Utilities allocated by metered or documented basis
- Facility and equipment depreciation split by production versus non-production space
Work in Process
Plants in veg or flower carry accumulated cost that belongs on the balance sheet, not in the current period's expense. Roll work in process forward each period and transfer to finished goods at cure completion.
This single discipline eliminates the phantom loss and phantom profit pattern that makes uncosted cultivation financials useless for management or lending.
Yield and Variance
Report grams per square foot and per light, wet-to-dry conversion, dry-to-saleable conversion after trim, and waste by category. Track them by room, strain and cycle.
Persistent variance almost always localizes to a room, a strain or a crew, and the financial consequence is measurable in cost per pound.
Using Cost Per Pound
A trustworthy cost per pound answers pricing questions, tells you whether a strain earns its canopy, sizes the impact of a lighting or nutrient change, and establishes the floor below which wholesale volume destroys value.
In a market with sustained price compression, operators without that number are managing blind.
