(This is the ninth in an ongoing series offering tips and advice for marijuana and hemp extraction companies. The eighth installment is available here.)
Used extraction equipment is white-hot right now in the cannabis industry.
Manufacturers who refurbish extractors say they can’t keep up with demand, and the thriving secondhand market gives established players new options to recoup some money to use toward larger machines.
It’s a trend driven by complementary market forces:
- A maturing cannabis industry, leading to increased options for pre-owned extraction equipment.
- Pandemic-related supply-chain disruptions, prompting extractors to seek domestic sources for processing equipment.
- Enduring industry volatility, where some deep-pocketed firms bought top-of-the-line extraction equipment but soon went out of business or ratcheted back expansion plans, sending choice extraction equipment to the secondary market at deep discounts.
So it’s a good time to find quality pre-owned extraction equipment. Savvy cannabis entrepreneurs can build a processing lab for 50%-75% the cost of buying new.
But there’s intense competition for the good stuff.
“I cannot keep used equipment in stock,” said Jeremiah Seims, manager of the processing division at Prospiant, a greenhouse and extraction company headquartered in Cincinnati.
“As soon as it’s (refurbished) by service, they’re gone.”
The heated aftermarket for extraction equipment has understandably led to some bad deals and equipment that doesn’t work as promised.
MJBizDaily caught up with insiders who have bought and sold used extraction equipment to find out how to score quality pre-owned extraction equipment. Their top six do’s and don’ts:
DO: Know your options
Think of used extraction equipment like a used car. The more casual the listing, the more legwork required to avoid buying a lemon.
Extraction equipment abounds on eBay and Craigslist. Make these listings your first stop to see what’s out there.
But buyer beware. The savings can be significant, but be prepared to:
- Ask why the machine is being sold.
- Get documentation on the equipment’s lifetime throughput, similar to the mileage on a used car.
- Demand a complete service log and maintenance schedule.
- Find out if any components are still under warranty and how helpful the manufacturer is servicing the machine.
“We’ll get calls that say, ‘Hey, we bought one of your extractors from so-and-so.’ And they have no idea how to run it,” said Alex Hill, chief operations officer at Isolate Extraction Systems in Louisville, Colorado.
“They don’t even have all the documentation needed to successfully install the equipment. … They kind of put the cart before the horse.”
For less stress, consider refurbished equipment.
Similar to electronics manufacturers, extraction makers often buy back used equipment, replace worn-out parts and resell the piece. The shopper pays more than used, but less than new.
“You’ll pay more for certified pre-owned (equipment), but it comes directly from the manufacturer, and if there are issues with the equipment, there’s that additional layer of customer service,” said Jim Makoso, director of Lucid Lab Group, a Seattle vape and extraction company.
DON’T: Buy anything you haven’t seen
Continuing the used-car analogy, even the finest refurbishment demands a test drive. Plan on a personal visit to see a demonstration.
As one unhappy buyer told MJBizDaily, watch the seller as much as the machine. If the seller appears surprisingly pleased to see the equipment functioning correctly, that’s a red flag.
Makoso recommends also asking for details on what to do if there are problems.
“The more complex the instrument, the more you want to go in person and check it out,” Makoso said.
DO: Ask your friends
Ask colleagues if anyone is thinking of upgrading or knows someone with equipment they’ve outgrown.
Consider going to the manufacturer that made your current setup. Ask if they can refer you to other customers who might have what you’re looking for.
“I get called every single day with companies saying, ‘Can I trade this in? Or do you want to buy this back? We want to change direction, or we’re going to go to a larger system,’” Hill said.
Also, attend MJBizCon or another trade show and network, network, network.
“If you can buy something from a friend in the industry, that’s your best bet,” Makoso said.
DON’T: Forget about electricity
One common mistake operators see on the secondhand market is buyers not making sure their electrical systems are compatible. Don’t assume that an electrician can easily adjust non-compatible components.
“This is a common oversight,” Hill said,
“Someone might hire an electrician to wire it up and think it’s gonna be done that day. And all of a sudden it turns into a two-month project because you have to bring in more power. You have to buy this transformer, or reduce the voltage. There might be a lot more to it.”
DO: Consider yourself temporary
As soon you’ve got pre-owned extraction equipment up and running, start thinking about selling it.
Recall all the legwork you needed to vet and buy the piece, and then keep detailed logs on service, throughput and general operations – all the stuff you wanted to know as a buyer.
The documentation will help you sell the piece later and save even more. Keep in touch with the person who sold it to you.
“It’s just like selling a used car,” Seims said. “So if you trade your car in to Chevy, they’re going to give you a fair market trade-in value. But if you take that same car and sell it person-to-person, you’re going to get a higher value. It’s the same thing with me. I’m going to give you a lower value than you’ll get on the street, but I’m probably the easier option.”
DON’T: Start using secondhand equipment right away
Make sure the equipment you bought is sparkling clean. Then clean it again.
Several buyers told MJBizDaily to plan on at least a run or two before considering the equipment ready for your product.
“Consider them prep runs or cleansing runs,” Makoso said. “Get it cleaned and sanitized before you start moving product out the door. You’ll be glad you did.”
Kristen Nichols can be reached at [email protected].