How Predicting Customer Needs is Vital for Growth and Success

I had the pleasure of interviewing Marco Hegyi, CEO of GrowLife, Inc., one of the nation’s most recognized indoor cultivation product and service providers.

What is your “backstory”?

I spent 35 years focused on building technology for the software industry, working for companies such as Yahoo and Microsoft. I was drawn to the developing cannabis indoor cultivation industry as I developed solutions to challenges with great people while navigating confusing government regulations. There are a lot of hurdles in the legal cannabis industry including state versus federal policies, banking issues, high prices that have plummeted by 80%, and others. Having the foresight to identify these hurdles early on allowed us to shift GrowLife’s strategy from general to proprietary products that drive down growing production costs.

What do you think makes your company stand out? Can you share a story?

Shortly after Colorado legalized cannabis for adult use in 2014, many small public cannabis-related companies began to increase in value. GrowLife reached a valuation of $540 million, about $0.78 per share, about 120 times its trailing revenue. This was beyond shareholder confidence; it was a hyper-bubble experienced by many public companies and the SEC published a warning to the over valuation challenge.

In 2014, the early days of recreational legalization, many publicly traded cannabis-related companies including GrowLife went into hyper-valuations. In our case, we climbed to 120 times revenue, meaning that PHOT was valued at over $500 million on trailing revenues of $4.5 million. As a result, the SEC put out a “calm down” memo to the market, but shareholders across the board kept buying and overvaluing the companies. In April of 2014, the SEC halted about a dozen of us for 10 days. When this happens, companies are put in a gray market or limbo type of state where shareholders suffer. Even though PHOT was never accused or shown to have any fault by any regulator like the SEC, everyone suffered and a class action lawsuit filed. Less than 1% of companies that enter the gray market ever come back. It’s like Hotel California.

I joined GrowLife about four months before the SEC halted us, and I had to decide if I wanted to stay or leave. I called up a former CFO that had worked for me and asked him to scrub the company; If it was clean I would stay- if not, I would leave. It was clean. Even so, many former board members and management left, we settled the lawsuit without fault and 22 months later climbed out of the gray market. It took another 18 months to get back to active trading, but we did it. We beat the odds, but it was the toughest four years for all of us, including our shareholders who showed great support. We’re proud to have recently uplisted from the OTC Pink Market to the OTCQB market, which reflects a high-level of financial transparency, shareholder accountability and trading platform stability.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

Truly it’s no one person, but every GrowLife employee, director and investor that has stood by us through thick and thin. It’s our advisers that never hesitated to put their names next to ours and friends of the Company who silently gave more than they took. I guess if there is one group to which I am most grateful, it’s the long-term shareholders who rode through losses and have not given up. Their trust and continued investment kept me going when I didn’t want to. I have been most fortunate to have good people challenge and support me for years.

Are you working on any exciting projects now?

There is the public story and the private one. Publicly, we are innovating on cultivation fronts where we are developing necessary technology to drive down growing costs for our customers. We’re decreasing costs on the supply front, as well as through saved labor and electricity. Even though we have a goal of saving growers’ money, the quality of their product and their partnership with their staff are non-negotiable. As a result, we have developed an entire grow room that automates labor-intensive work and electricity for temperature and lighting to cut off at least 70% of the growing cost. Since labor cuts are off the table, we looked at increasing the quantity of plants without having to increase labor and lower electrical costs. We take care of all of the tedious infrastructure so cultivators who use our products are set to grow a successful, quality product.

As for the private story, we are also helping to lower the cost because the selling price for cannabis has plummeted. Cost reduction isn’t just necessary to make a greater profit; growing systems must be streamlined or cultivators will go out of business, or even be pushed to selling on the black market. None of the operators we work with want to go backwards and see the industry once again dominated by the black market. Cannabis growers want healthy product regardless of discouraging federal policies, and GrowLife will do everything we can to support this industry in making sure legal growers can stay on their feet.

How have you used your success to bring goodness to the world?

My focus as the CEO of a public company is to increase shareholder value and reward our loyal shareholders for sticking with us through thick and thin. We also do what we can to protect the environment by distributing eco-friendly products that are better for the plant and the planet.

Do you have a favorite book that made a deep impact on your life? Can you share a story?

Malcolm Gladwell’s David and Goliathspeaks to me about the importance of not playing the game the same way the larger companies do. On that note, I am focused on preparing GrowLife for collaborating with larger corporations in order to further lower production costs for all of our customers. But as GrowLife scales, we never want to lose sight of our core values and mission to keep growing affordable. I believe that operational efficiencies can be had with the right tools in the hands of artisans who know cannabis and take pride in delivering the highest quality to their customers and patients.

What 3 things would you advise to someone who wanted to emulate your career? Can you share an example for each idea?

First, partner with your customers. Early in my career I learned that the power of a successful company or leader is in the customer. I’m not only talking about customer service, but working as a partner with the customer. Understanding the customer’s needs today and, most importantly, tomorrow. While all customers have needs, consumers are different from business customers. Consumers are trying to make their dollars stretch but business customers are competing and are complex buyers because they have to generate revenue and ultimately make a profit.

Second, predict your customers’ needs. GrowLife has been a nationwide company since the start and has been able to see the trends of competition, and subsequently the needs of our customers, before they even do. When the flower sold for $10 per gram, no one cared if it cost $2 or $3 to produce. Now that it sells for about $2 to $3 per gram, every penny counts. Our business customers are excited to see us provide a complete growing process that should bring down their cost to under $0.50 per gram.

Third, listen to what your customers have to say. If you truly listen and predict their needs, it doesn’t matter if you are the CEO or a staff member, you and your customers will be successful.

Jilea Hemmings is the CEO & Co-Founder of Leaf Tyme. She is running a series on the latest innovations impacting the cannabis industry


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