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Cannabis Testing: Empowering analytical profit

by Mike May
Published: Jun 01, 2017   
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With 15 years of experience running analytical labs, Seth Wong, President of TEQ Analytical Labs, understands the economics of lab testing. This cannabis-testing lab benefits, too, from having a sister business, Industrial Laboratories , that has 70 years of experience in testing food and drugs. That reveals one rule of thumb for running a profitable cannabis-testing lab: Add some experience to your team.

“This is a business where you are paying high dollar for the staff, not just office space,” Wong explains. “There’s a high capital cost for employment and instrumentation.” So, anyone looking to get into cannabis analysis needs to show up with some financial backing. In addition to setting up a normal lab with fume hoods, chemical-proof countertops and so on, having enough workspace also matters. “Make sure there’s room to expand,” Wong points out, “because everyone runs out of space.” He adds, “You need a large enough area, because labs that are too cramped can lead to mistakes.”

To make an operation run as efficiently as possible, a beginner might miss some crucial elements. For instance, Wong says a lab should be “easily cleanable and not cluttered, so you don’t have contamination flowing through the lab.”

Ongoing costs

The pace of improvement in analytical instrumentation means that a lab must update equipment more often than a novice might expect. “Put your equipment on a shortened depreciation schedule, because you are constantly adopting new technologies due to lower sensitivities or even customer interest,” Wong advises. On average, an analytical lab should expect to update some equipment about every three years.

Just running a lab also costs money. “You spend a good portion on consumables,” Wong explains. “The quality of the chemicals and reagents impacts results.” So, buy the best ones that you can, but make sure they are appropriate for the job. For more sensitive detection equipment, the reagents can matter even more, because contaminants in solvents, for example, can detract from the results.

Standards and reference materials must also be purchased to calibrate instruments and methods. TEQ Analytical Labs runs many quality checks with controlled samples, duplicates and blanks. “That creates a pretty high quality-control cost,” Wong says, “but people must be able to rely on your data.”

Pushing for profit

In a developing business like cannabis analysis, some customers will not understand how much good lab work costs. Plus, some providers will try to win clients based on turnaround time and price, which can spawn additional false expectations among consumers. “We need to educate clients about what it takes to turn out the right science,” Wong says. “We sell product assurance and reliability.”

To be profitable over time, a company must know where to spend money and where to save it. A successful and long-running business is not all about the bottom line. Instead, the success of a business arises from applying resources—money, time, expertise, whatever—in the right amounts to the right places. In many cases, only experience can teach that. So, if you lack the experience, talk to someone who has it, like Wong.

“At the end of the day,” Wong concludes, “your reputation is at stake, and maybe someone’s life.” So, a cannabis lab must be profitable to stay in business, but it must do that while generating accurate data.


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