In the ultra-competitive cannabis industry, staying ahead requires more than just putting out a quality product — it demands strategic partnerships that drive profitability and differentiate your brand. One of the most impactful (but often underutilized) relationships is the one between cannabis operators and their lab testing providers.
Beyond meeting regulatory requirements, lab testing provides valuable insights that can shape operational strategies, improve product quality, and enhance consumer trust. By leveraging the results and expertise of a trusted lab, cannabis businesses can unlock key competitive advantages to set their brand apart in a crowded market.
In the final installment of our three-part blog series with ACT LAB Chief Revenue Officer Austin Stevenson, we’ll explore how you can maximize the value of your lab testing partnerships to achieve sustained growth and profitability. Just joining us? Catch up on parts one and two of the Q&A series now!
The Importance of Driving Long-Term Profitability for Cannabis Operators
Long-term profitability is the cornerstone of success for cannabis businesses, especially in an industry marked by evolving regulations, fluctuating consumer demand, and tight margins. Driving sustainable profits requires more than just cutting costs—it hinges on making informed decisions that enhance efficiency, product quality, and customer satisfaction.
Lab testing plays a pivotal role in this equation by providing actionable data that you can use to optimize cultivation practices, refine product formulations, introduce new products, and ensure compliance with safety standards.
By proactively integrating testing results into their business strategy, it becomes possible to establish a solid foundation for long-term financial health and industry leadership. How? Our very own CRO, Austin Stevenson, is here to discuss just that!
Meet ACT LAB’s Chief Revenue Officer, Austin Stevenson
Austin Stevenson has over 15 years of experience in high-impact, diverse leadership roles. From venture growth to private equity and Fortune 500 companies, he’s worked across various industries including biotechnology, consumer goods, enterprise software, and finance. He has been named to the FORBES Magazine 42.0 list and is also a San Francisco Business Times “40 Under 40” award recipient. In 2024, Austin joined the ACT LAB team as our Chief Revenue Officer.
With 2025 underway, let’s see what Austin has to say about using your testing lab partnership and results to drive profitability and develop a competitive edge that will position your cannabis brand for long-term, sustainable success.
Austin Stevenson, CRO, and Mallory Paul, VP of Commercial Development, visiting our Pennsylvania client Holistic Industries.
Q&A: Driving Profitability Through Lab Testing
Using Your Lab Partnership & Testing Insights to Drive Profitability
Q: What are some key strategies cannabis businesses can implement to improve profitability in a highly regulated market?
A: Improving profitability in our industry requires a strategic approach. First, focus on operational efficiency—streamline processes to reduce waste and lower costs. Second, differentiate your products through quality and innovation to justify premium pricing. Third, leverage technology for better inventory management and customer engagement; this can boost sales and reduce overhead. Lastly, stay proactive about regulatory changes to avoid compliance issues that can be both costly and damaging to your reputation.
Q: How can a cannabis company assess and improve the profitability of each product line or SKU?
A: Assessing profitability at the SKU level involves a detailed analysis of both the revenue each product generates and the costs associated with manufacturing it, including production, packaging, compliance, and lab testing expenses. Here are key considerations:
Understand the Impact of Potency on Pricing and Profitability:
- In the cannabis industry, higher-potency products often command higher retail prices. However, relying solely on inflated potency results can be detrimental. Some labs may engage in “potency inflation,” which not only misleads consumers but also risks eroding trust in your brand if discovered.
- Consumers are increasingly savvy and frequently discuss and scrutinize lab results on platforms like Reddit. Questionable potency claims can lead to negative publicity and damage both the lab’s and the brand’s reputation.
Partner with Reputable Labs for Accurate Testing:
- At ACT LAB, we focus on providing Precision Potency results with tight Relative Standard Deviations (RSDs). This means our potency measurements are consistent and reliable.
- Accurate lab results allow you to price your products appropriately without fearing recall risks or regulatory issues. They also help maintain consumer trust, which is crucial for repeat business and long-term profitability.
Make Data-Driven Decisions to Optimize Your Product Portfolio:
- Use precise lab data to identify which products are truly delivering value. If certain SKUs are underperforming, consider adjusting their pricing, reducing production costs, or discontinuing them altogether.
- Accurate potency and quality data enable you to fine-tune your product offerings based on what the market genuinely values, rather than relying on inflated metrics that could backfire. By emphasizing transparency and accuracy in lab testing, you not only comply with regulatory standards but also build a strong, trustworthy brand. This approach reduces the risk of recalls and reputational damage, enhances customer loyalty, and ultimately improves the profitability of each product line you offer.
Q: In what ways can partnerships with testing labs enhance a brand’s reputation to drive sales and increase profitability?
A: Partnering with a reputable testing lab like ACT LAB significantly enhances your brand’s credibility. It shows customers that you prioritize quality and safety, which are crucial factors in building consumer trust. For instance, we’ve developed a consumer-friendly Certificate of Analysis (COA) that features a QR code you can place on your product packaging.
When scanned, this QR code provides consumers with transparent and accessible information, including both quantitative and qualitative insights on your products—such as terpene profiles and cannabinoid content. This level of transparency not only educates consumers about the unique attributes of your strains and products but also differentiates your brand in a crowded market.
By making detailed lab results readily available and easy to understand, you build trust and encourage customer loyalty. Educated consumers are more likely to make informed purchasing decisions and become repeat customers. Ultimately, this partnership can drive sales by enhancing your brand’s reputation and fostering a strong connection with your customer base.
Balancing The Necessary Costs of Testing With Value Adds
Q: How can lab testing impact your bottom line?
A: Lab testing is a mandatory expense in the cannabis industry, but its impact on the bottom line can be significant—especially if you’re not partnering with an agile and cost-effective lab. Working with a lab that isn’t efficient or responsive can lead to delays, additional costs, and even compliance issues, all of which eat into profitability.
Q: What are some methods to control costs in compliance and lab testing without sacrificing product quality or safety?
A: This truly starts with building strong relationships with your testing labs. Negotiating bulk testing rates or loyalty discounts can lower expenses. Investing in compliance software can streamline reporting and reduce labor costs associated with manual compliance tasks. Additionally, training your team on compliance protocols can prevent costly mistakes that lead to fines or re-testing. Remember, cutting corners isn’t an option in our industry, so focus on efficiency rather than shortcuts.
Controlling costs in compliance and lab testing is crucial, but not all labs offer the same value. Working with a lab that lacks agility can lead to inefficiencies and higher expenses. Here are some methods to do so without compromising on quality.
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- Identifying an Agile Lab: Agile labs adapt quickly to changing regulations, ensuring your products meet the latest safety and quality standards. They also provide fast turnaround times, allowing you to bring products to market efficiently while maintaining consumer trust. This empowers you to navigate market demands, scale operations, and address issues proactively.
- Consolidate Testing Services: Working with one lab that offers a range of testing services under one roof eliminates the need to coordinate with multiple labs and simplifies compliance. Not leveraging this can result in higher administrative costs and potential gaps in compliance.
- Leverage Technology and Innovation: Your lab should be utilizing the latest technology to streamline testing processes. Not working with such a lab means missing out on innovations that could save you time and money. Here’s How:
- Advanced Real-Time Analytics with NIR Technology:
- At ACT LAB, we’ve introduced cutting-edge Near-Infrared (NIR) technology that provides real-time data on potency, terpene profiles, moisture, and water activity across various product forms—including dried flower, ground flower, and extracts like distillates and concentrates.
- This technology enables immediate decision-making related to product placement, enabling you to optimize your product profiles and maximize margins.
- Significant Cost Savings and Efficiency:
- Implementing our NIR technology can lead to substantial cost reductions. We’ve estimated that operators who adopt this technology could save up to $77,000 annually by minimizing the need for in-house wet chemistry tests like High-Performance Liquid Chromatography (HPLC) and routine QA testing.
- These savings not only lower operational expenses but also accelerate decision-making processes — allowing you to bring products to market faster without compromising on quality.
- Product Differentiation and Marketing:
- Detailed cannabinoid and terpene profiles from lab tests help you understand the unique characteristics of your products. Leveraging this information in your marketing materials highlights specific benefits, flavors, or effects, setting your products apart in a crowded market and directly appealing to consumer preferences.
- Stability Testing for Product Development:
- Stability testing identifies how your products maintain potency, safety, and quality over time under various conditions. At ACT LAB, we specialize in stability testing for beverages, infused pre-rolls, and gummy products. This provides insights into shelf life, optimal storage conditions, and packaging requirements, ensuring consistent product performance from production to consumption.
- Regulatory Compliance and Market Access: In states like Michigan, Pennsylvania, and New York, stability testing is a regulatory requirement before launching new products. Conducting these tests not only ensures compliance but also avoids costly delays or reformulations, accelerating time-to-market and building trust with regulators and consumers alike.
Drive Long-Term Profitability Through Data-Backed Insights With ACT LAB!
If you’re looking to increase profit margins and make improvements to your operational efficiency, look to ACT LAB! We’re here to be a long-term lab testing partner you can truly count on for compliance and beyond.
Whether your goal is to develop a new SKU, expand into new states, or improve existing product formulations, our passionate team of scientists and business development executives is in your corner. Find ACT LAB in your state or request testing today to get started.