Cannabis MSO MariMed CEO’s sudden death shows need for succession plan

Mere months before Robert Fireman died suddenly in December, the co-founder and former CEO of Massachusetts-based MariMed shook up the cannabis company’s management team and created a succession plan.

Doing so would prove to be prescient.

After MariMed hired Susan Villare as chief financial officer in May 2022, former CFO and co-founder Jon Levine briefly moved to the role of chief administration officer.

“Then we decided that I would be better off as president of the company, which put me in a position where I can help prepare for any type of succession plan if necessary – not based on Bob’s health,” Levine said in an interview with MJBizDaily, “but based upon the fact that we had to look at all roles in the company and what succession plan would be at all times so that you’re not caught off guard.”

Fireman, who had served as board chair and CEO of the multistate operator since 2017, died on Dec. 11 from complications of a respiratory illness. He was 74.

Levine, who turns 58 on March 21, was appointed interim CEO of MariMed, which has operations in Illinois, Maryland, Massachusetts, Missouri and Ohio.

In March, Levine accepted the role on a full-time basis, and Edward Gildea was appointed board chair.

“It actually worked to our advantage because we took that initiative,” Levine said.

“We were fully prepared to make a smooth transition from Bob’s leadership to mine.”

MariMed’s story serves as a lesson to the cannabis industry about the importance of having a succession plan in place.

A 2021 survey by the Society for Human Resource Management showed that 56% of the members surveyed said their organization didn’t have a succession plan.

In addition, 24% of those surveyed said their organization’s succession plan was an informal one.

Startups and succession planning

MariMed, which trades as MRMD on the Canadian Securities Exchange and over-the-counter markets, isn’t the first cannabis company to experience tragedy.

Brett Roper, the co-founder and interim CEO of Denver-based Medicine Man Technologies (which now operates as Schwazze), died suddenly at the end of 2018.

Co-founder Andy Williams was appointed interim CEO in Roper’s place.

Roper had asked the board to start looking for a new CEO in June 2018 because he was planning to transition to a semiretired role.

Justin Dye took over as chair and CEO in 2019, and Williams departed the company in 2020. (A Schwazze spokesperson declined to comment because new management has since taken over.)

In early 2021, Keegan Peterson, the 33-year-old founder and then-CEO of Denver-based payroll and human resources software company Wurk, died suddenly.

Scott Kenyon, formerly the executive chair and a board member of the privately owned company, took the helm of Wurk shortly after.

A 2020 Harvard Business Review story highlighting the need for succession plans at the height of the COVID-19 pandemic notes that smaller companies and startups are particularly vulnerable to losing key leaders.

The thought processes and strategies of founders as well as the niche expertise and skills of management can be crucially valuable and irreplaceable.

“Moreover, when the pool of internal executives is small, boards need to think creatively about back-up plans and ways to divvy up critical responsibilities to ensure business continuity,” one director told the authors.

MariMed reports strong results

While it was a surprise to have to implement its succession plan so quickly after creating it, MariMed’s leadership transition has gone as well as can be expected.

“We’re one of the most profitable and well-managed companies in the cannabis industry,” Levine said.

“We continually have positive cash flow and income. It’s not common in this industry to be able to do that, and that’s because we ran everything lean and mean.”

Last week, the company reported that its revenue grew from $121.5 million in 2021 to $134 million in 2022.

Gross margin was down to 44% in the fourth quarter compared with 50% in the same period in 2021.

In 2022, MariMed’s net income was more than $13.6 million, up from $7.6 million in 2021.

Levine was already intimately familiar with the operations and strategy of the company, having co-created it with Fireman.

The business plan – which included expanding operations in Maryland and negotiating a $35 million loan – was already in place.

Levine describes the late Fireman as his “brother” and said the two business partners and friends balanced each other out, bringing different skills to the table.

Fireman, a former attorney, brought a sharp eye to reviewing documents and legal negotiations.

Levine, who overcame dyslexia growing up, is now working to bring the same level of diligence Fireman would have.

In his closing remarks during MariMed’s latest earnings call, Levine said he’ll honor Fireman’s legacy by staying committed to the family-like culture of the company.

He even compared MariMed to a “Cinderella team” in the NCAA basketball tournament – that is, an underdog that could ultimately rise above the competition.

“I watch our team every day, and I know that we have what it takes to win the championship,” he said.

“In all seriousness,” Levine said, “assuming no delays, 2023 should be another year of accelerating revenue growth, with 2024 reflecting the full impact of all investments we made over the past two years.

As Bob always said, I would encourage you to continue watching the MariMed story.”

Source: https://mjbizdaily.com/marijuana-mso-marimed-ceos-sudden-death-shows-need-for-succession-plan/