Data Rooms & Diligence: SOPs, METRC/Seed-to-Sale, Inventory Controls

Winning or selling a deal often comes down to the quality of your cannabis due diligence package. Buyers, lenders, and insurers price execution risk, not slide decks. A disciplined data room—anchored by clean SOPs, defensible METRC/seed-to-sale exports, and auditable inventory controls—compresses timelines, tightens yields, and improves certainty to close. If you’re preparing to buy or exit, benchmark structures and pricing against live cannabis businesses for sale while you assemble the materials below.

Executive perspective

A professional data room does three things: (1) proves control of product and cash, (2) shows repeatable operations through SOPs and training, and (3) reconciles production, POS, and general ledger so QoE reviewers can validate EBITDA/SDE without guesswork. Treat your data room like a product: versioned, curated, and easy to navigate. Your LOI and APA will move faster, and your lender’s DSCR model will look better when shrink, variances, and compliance questions are answered up front.

Semantic lenses this guide uses: SDE, EBITDA, QoE, LOI, APA, DSCR, zoning, CUP, TI, C1D1.

Data room architecture (the folder map that works)

Organize content the way underwriters think. A simple, repeatable structure:

1. Corporate & Licensing – Articles/LLC, cap table, organization chart, active licenses, renewal dates, inspection history, any citations and cures, local approvals (zoning, CUP), site plans.
2. Operations & SOPs – Current SOP library (publish date + owner), training records, competency sign-offs, change-control log.
3. Seed-to-Sale (METRC) – Active/archived tag lists, item definitions, packages, transfers, manifests, API partners, permissions matrix, audit logs.
4. Inventory & Costing – Cycle-count calendars, count sheets, variance logs and approvals, scrap/waste documentation, costing methodology, stock valuation workbooks.
5. Sales & POS – POS exports (SKU masters, price lists, tax configuration), discounts/returns policy, cash handling.
6. Financials – Monthly P&L/BS/CF, trial balances, journal entries, revenue/cost bridges, adjustments, working-capital walk, EBITDA build.
7. Facilities & Safety – Floor plans, material flows, sanitation, pest control, equipment schedules and maintenance logs; if co-located extraction exists, keep C1D1 documents clearly separated.
8. HR & Governance – Role matrix, onboarding/offboarding checklists, background checks (as permitted), policy acknowledgments.
9. Legal & Insurance – Leases/deeds, TI exhibits, endorsements, claims history, vendor contracts with termination rights.

Rule: one authoritative copy per artifact, named with YYYY-MM-DD_version_owner. No duplicates, no “final_v7_really_final”.

SOPs that survive diligence (and run the business)

SOPs are only useful if they’re current, trained, and auditable. For cannabis due diligence, reviewers expect to see:

• Document control: Numbered SOPs with revision history, approver signatures, next review date.
• Core operating SOPs: cultivation or manufacturing workflows; sanitation; environmental monitoring; calibration; preventive maintenance; CAPA (corrective & preventive action); deviation handling; internal audits.
• Inventory SOPs: receiving, quarantine/release, lot creation, put-away, picking/packing, shipping, returns, waste/destruction.
• Seed-to-sale SOPs: tag management, item masters, package creation/combination/splits, transfer and manifest rules, end-of-day reconciliations.
• Cash/POS SOPs (retail or distro): open/close, dual custody, variance thresholds, refunds/voids, discount authorization levels.
• Change control: who can edit SOPs, who can alter system settings (METRC/POS/GL), and how changes are communicated and trained.

Attach evidence: training rosters, quiz scores/competency checks, and the last two internal audit reports with closed actions.

METRC/seed-to-sale evidence pack

The goal is to demonstrate that your state traceability records are complete, consistent, and reconciled to physical inventory and books. Provide:

1) Master data snapshots

• Item catalog (types, units, testing requirements, equivalencies), tag inventories (active, voided, retired), and locations (rooms/vaults/bays).
• Permissions matrix: list of users with roles and the rationale for elevated rights.

2) Transactional extracts

• Plants & harvests: plantings, veg/flower moves, harvest weights, wet/dry splits, destruction, and QA holds.
• Packages: creations, conversions, splits/combinations, adjustments (with reasons), and transfers.
• Transfers/manifests: shippers, receivers, dates, quantities, exceptions.
• Waste: destroyed product with witness attestations and reasons.

3) Reconciliation exhibits

• Three-way tie-out: METRC on-hand ↔ count sheets ↔ GL inventory balance (by category).
• Variance log: every count discrepancy with root cause and approval trail.
• Cutoff proof: schedule a clean count date; freeze movements; show pre- and post-count METRC and POS snapshots.

4) API & integration notes

• Inventory/POS/ERP integrations used, data flow diagrams, and last vendor SOC/pen test summaries if available.
• Known integration limitations or workarounds (e.g., how returns/voids propagate).

Deliver extracts in flat files (CSV) with data dictionaries. Include pivot-ready summaries: by item, by room, by aging bucket, by disposition.

Inventory controls buyers and lenders look for

Shrink and sloppy costing are the fastest ways to lose value. Put these controls in writing and show evidence they’re used:

Cycle counts & year-end

• ABC cadence: high-velocity/high-value SKUs cycle weekly; medium monthly; long-tail quarterly; full physical annually.
• Blind counts: counters don’t see book figures.
• Dual custody: two people for vault entries and high-risk movements.

Variance governance

• Thresholds: set absolute and percentage thresholds for auto-review; require supervisor approval and root-cause analysis above threshold.
• Root causes: receiving errors, unit conversions, label swaps, API sync gaps, pilferage; track trends and corrective actions.
• Waste/destruction: scheduled windows, witnesses, METRC entries, and video bookmarks if your policy calls for them.

Costing & valuation

• Methodology documented (e.g., weighted average); consistent across periods; ties to BOMs and actuals.
• Yield & recovery tables (cultivation/extraction): planned vs. actual; investigation for outliers.
• Aging and write-downs: slow-moving, expired, or non-conforming stock policy, with approvals and GL impacts logged.

Segregation of duties

• No single person can receive, adjust, and approve the same inventory.
• Admin privileges in METRC/POS limited; quarterly user access reviews signed by management.

Financials that withstand QoE (and speed credit)

Quality of Earnings reviewers don’t need perfection; they need consistency and explanations. Provide:

• Monthly financials (P&L/BS/CF) for 24–36 months, plus TTM with variance commentary.
• GL detail and trial balances that tie to statements; list all manual JEs related to revenue, inventory, and COGS.
• Revenue bridge from POS/ERP to GL; show tax configuration and exclusions.
• COGS bridge from BOMs and labor standards to GL; explain capitalization vs. expensing calls.
• One-time/owner add-backs with documentation to build EBITDA/SDE cleanly.
• Working capital walk: AR/AP/Inventory seasonality; any consignment or pre-paids.
• Covenant math: if debt is contemplated, include a simple DSCR schedule using conservative cases.

Compliance and local approvals (what belongs in the room)

Even if your transaction is asset-only, diligence will test premises and local approvals. Include:

• License summaries with scope, renewal dates, and any open corrective actions.
• Local permits and CUP conditions (odor, hours, lighting, security lighting/cameras, traffic/parking)—and a short memo confirming ongoing compliance.
• Incident log summary (robbery, diversion, regulatory notices) with disposition and corrective actions.
• If extraction is on site: a one-page statement confirming separation of any C1D1 areas, with current permits/inspections (no design details needed, just the status and scope).

Keep this section factual and current; avoid promises or forward-looking claims.

How to stage diligence in 30, 60, and 90 days

Days 1–30 — Get clean and complete

• Freeze your folder map and appoint a data room owner.
• Publish your SOP index; fix expired or unapproved SOPs; close easy CAPA items.
• Export METRC plants/harvests/packages/transfers; run a spot reconciliation and cure anomalies.
• Pin a counting calendar; perform a blind cycle count on top SKUs; update the variance log.
• Generate a POS↔GL revenue bridge; document tax setup and discount policies.
• Build a 24-month financials package with a simple EBITDA bridge and working-capital walk.

Days 31–60 — Answer before they ask

• Add a Q&A tracker: number each question; post the answer and supporting docs; flag policy changes for change-control.
• Prepare sensitivity tables (yield, price, labor, energy) and a downside DSCR case if debt is involved.
• Validate user access in METRC/POS; remove stale admins; export a permissions snapshot.

Days 61–90 — Lock the optics

• Run a mock buyer walk-through: trace one SKU from seed-to-sale across systems to GL.
• Refresh training rosters; capture any late sign-offs.
• Close open variances and incident actions; publish a tidy summary.
• Freeze versions and tag the room “ready for LOI” with a change-log moving forward.

Red flags that widen yields (fix these now)

• Unreconciled METRC to GL or chronic negative on-hand in POS.
• Variance logs without approvals or large one-time inventory write-downs without root cause.
• SOPs out of date or untrained (no sign-offs).
• Owner-heavy add-backs that lack documentation.
• Local approvals unclear (e.g., CUP conditions unknown, renewal dates missing).
• Cash handling gaps (no dual custody, no drawer limits, frequent POS voids with admin overrides).

Sample table of contents (paste this into your data room)

• 0. Read-Me & Deal Calendar
  1. Corporate & Licensing
  2. Local Approvals (zoning/CUP)
  3. Operations & SOPs (+ Training Evidence)
  4. Seed-to-Sale (METRC): Masters, Transactions, Reconciliations
  5. Inventory: Counts, Variances, Costing, Aging
  6. Sales & POS: Exports, Taxes, Discounts, Cash SOPs
  7. Financials: P&L/BS/CF, TBs, Bridges, Add-backs, Working Capital
  8. Facilities & Safety (incl. C1D1 status if applicable)
  9. HR & Governance
  10. Legal, Insurance, Leases/TI
  11. Q&A Log + Change-Control

Cannabis due diligence playbook for buyers (quick hit)

For acquirers running cannabis due diligence, move fast and focus on the choke points:

• Seed-to-sale reality check: Pick three SKUs; trace from planting/receipt to sale/disposition across METRC, POS, and GL; confirm tag integrity and unit conversions.
• Inventory truth: Demand the variance log, aging, and last three cycle counts; spot-check high-shrink categories.
• Revenue quality: Reperform the POS↔GL revenue bridge; confirm taxes and discounts are configured correctly.
• COGS discipline: Compare planned yields/BOMs to actuals; investigate chronic deltas.
• Local risk: Read CUP conditions, renewal dates, and any open notices; ensure premises control aligns with your APA timing.
• People risk: Review role matrix, admin access, and turnover; validate onboarding/offboarding timelines.

How to use 420 Property while you prepare

Keep your expectations honest by checking the market. Review current cannabis businesses for sale to see how sellers position SOP maturity, METRC cleanliness, and inventory practices. Borrow the best disclosure patterns for your own room—or sharpen your buyer checklist before you tour.

Build a data room that closes deals. Ship a complete SOP library, METRC/seed-to-sale extracts that reconcile cleanly, and inventory controls that stand up to scrutiny. Then pressure-test your pricing and terms against live opportunities on 420 Property’s businesses-for-sale marketplace and move to LOI/APA with confidence.

Disclaimer

This article is for educational purposes only and does not constitute legal, engineering, financial, or tax advice. Always consult qualified professionals and your local Authority Having Jurisdiction before making decisions.

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