When Cannabis Deals Go Wrong, Part 5: Cannabis Deal Expectations and Conflict Management

When Cannabis Deals Go Wrong, Expectations and Conflict Management: The Problems Usually Start Long Before Litigation

In the first four installments of our When Cannabis Deals Go Wrong series, we explored what happens after relationships begin to break down.

We discussed unlawful detainers, lease restructures, seller financing, and the uncomfortable reality that sometimes even winning a legal dispute can still result in losing significant value.

But most deal failures do not begin in a courtroom.

They begin much earlier.

They begin with expectations.

This article is not legal advice, financial advice, or mental health advice. It is simply an observational analysis from years of working with cannabis operators, landlords, buyers, sellers, lenders, and investors across California.

And if there is one lesson we continue to see repeated, it is this:

Most conflicts start when expectations and reality drift too far apart.

In an industry that has endured wholesale price collapses, regulatory uncertainty, tax burdens, banking limitations, and shifting federal policy, managing expectations may be one of the most valuable skills an operator can develop.

Rule #1: Underwrite Three Outcomes

One of the most common mistakes we see is forecasting only one future.

The optimistic one.

Every deal should be evaluated against three scenarios:

Conservative Case

What happens if things go worse than expected?

Base Case

What is the most likely outcome?

Optimistic Case

What happens if everything goes right?

Then ask a more important question:

What breaks?

For cultivators, this became painfully obvious.

Many operators built business plans assuming:

• $1,500 per pound indoor flower

• $2,000 per pound premium flower

• perpetual demand growth

Very few modeled $600 flower.

Yet that market scenario played out over the last couple of years. Only recently have prices  recovered from those brutal lows.

The operators who survived were often not the smartest or the best funded.

They were the ones who considered the downside before it arrived.

Rule #2: Write It Down

Many disputes begin with a simple phrase:

“I thought we agreed.”

Term sheets.

Letters of intent.

Deal summaries.

Follow-up emails.

Documentation is not about distrust.

It is about clarity.

A well-written LOI or term sheet often prevents months of confusion later.

Memory is imperfect.

Stress makes it worse.

Write it down.

Rule #3: Skin in the Game Matters

Earnest money serves a purpose.

So do deposits.

So do personal investments of time and resources.

People tend to treat commitments differently when they have something at risk.

That does not guarantee success.

But it often improves alignment.

Transactions move more smoothly when all parties are genuinely invested in the outcome.

Rule #4: Assume Friction

One of the most useful rules in cannabis may be:

Do not expect things to work perfectly.

Because they will not.

Permits get delayed.

Construction costs increase.

Financing falls through.

Harvests disappoint.

Regulations change.

Employees leave.

The question is not whether problems occur.

The question is whether your deal can survive them.

An ounce of prevention is worth an ounce of cure.

Build that assumption into your underwriting and your expectations.

Rule #5: Learn the Difference Between a Soapbox, a Tissue Box, and an Idea Box

Years ago, someone shared a framework that has stuck with us.

When people are frustrated, they are usually looking for one of three things:

A soapbox.

A tissue box.

Or an idea box.

Sometimes people simply need to vent.

Sometimes they need empathy.

Sometimes they need solutions.

The mistake is offering the wrong response.

Giving solutions when someone wants empathy can make things worse.

Offering sympathy when someone needs action can be equally frustrating.

Active listening remains one of the most underrated business skills in cannabis.

Many conflicts become manageable when people feel genuinely heard.

Rule #6: Separate Intent From Outcome

Bad outcomes do not automatically mean bad intent.

This is especially important in cannabis.

Many businesses struggled because:

• wholesale prices collapsed

• taxes remained high

• capital disappeared

• regulations changed

Not because someone woke up intending to fail.

That distinction matters.

Assuming bad intent too quickly often accelerates conflict.

Separating intent from outcome often creates room for productive solutions.

Rule #7: Remember That Everyone Is Human

The cannabis industry has not been easy on anyone.

Operators are stressed.

Landlords are stressed.

Investors are stressed.

Employees are stressed.

Regulators are stressed.

Many people are carrying burdens that are not immediately visible.

That does not excuse bad behavior.

But it does provide perspective.

Sometimes the best way to move a difficult situation forward is to remember that the person sitting across the table is dealing with uncertainty too.

A Lesson From Earlier Installments

In previous installments we discussed:

• Seller Financing in Cannabis Deals

• Winning the Eviction and Still Losing the Asset

The common thread was not legal strategy.

It was human behavior.

Most deal problems start long before the first legal filing.

They start when assumptions go unspoken.

Expectations become unrealistic.

Communication deteriorates.

Trust erodes.

By the time litigation arrives, the real damage often occurred months earlier.

Final Thoughts

Cannabis has been a roller coaster.

Especially in California.

The industry has survived:

• price compression

• oversupply

• taxation

• limited banking

• shifting federal policy

• constant uncertainty

The operators who endure are not necessarily those who avoid conflict.

They are the ones who manage it well. And endured. 

They communicate clearly.

They document expectations.

They plan for adversity.

And they remember that business, at its core, is still about people.

Sometimes the best deal strategy is not a legal strategy at all.

It is managing expectations before they become litigation.

Disclaimer

This article is not legal advice, financial advice, or mental health advice. It reflects observations from real-world cannabis transactions and market participants.

Every situation is unique and should be evaluated with qualified professional advisors.

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FAQs

Q: What causes most cannabis deals to fail?

A: Many cannabis deals fail because expectations become misaligned, communication breaks down, financing changes, or market conditions shift unexpectedly.

Q: Why is underwriting multiple scenarios important?

A: Modeling conservative, base-case, and optimistic outcomes helps operators understand risks before they become problems.

Q: What is the purpose of a letter of intent (LOI)?

A: An LOI creates clarity around expectations and deal structure before significant time and money are invested.

Q: Why does active listening matter in negotiations?

A: Many conflicts escalate because participants focus on responding rather than understanding. Active listening often uncovers solutions faster.

Q: How can cannabis operators reduce deal-related stress?

A: Clear communication, realistic expectations, written documentation, and planning for downside scenarios can significantly reduce conflict and uncertainty.