How to Acquire High Volume Pre-roll Automation & Manufacturing Equipment (Purchase, Finance, Lease, as-a-Service)

‍

Financial Proof:

PaaS Delivers a Superior ROI

When evaluating any production investment, two key financial metrics matter most: Net Present Value (NPV) and Internal Rate of Return (IRR). These figures quantify how profitable an investment will be over time when considering cash flow, risk, and depreciation.

Understanding the Metrics

NPV (Net Present Value) measures the total value of future cash flows in today’s dollars. A negative NPV means the investment fails to recover its cost or generate sufficient return over its lifespan.
IRR (Internal Rate of Return) reflects the annualized effective compounded return rate that makes NPV equal to zero. In simple terms, it shows the rate of profitability an investor can expect over the life of the asset.

Buy vs. PaaS: What the Numbers Reveal

At first glance, the traditional equipment purchase model might appear attractive for long-term ownership. However, even under optimistic assumptions, the Net Present Value remains negative across all time horizons, demonstrating that purchasing production equipment underperforms compared to a PaaS model.

For example:

Over 3 years, owning a machine yields an IRR of -2%, meaning the investment actually loses value after factoring in depreciation, maintenance, and opportunity cost.
At 5 years, the IRR improves to 6%, but the NPV still shows a loss of $85,592.

Even after 7 years, when the equipment is nearing obsolescence, the investment has not fully recovered — the NPV remains negative at $56,230.

‍

PaaS VS Buy Pre-roll Machines Using IRR and NPV

These losses represent cash flow that could have been redeployed into product development, expansion, or branding — all of which deliver much higher ROI in cannabis operations.

The PaaS Advantage: Pay for Performance, Not Potential

By contrast, Production as a Service (PaaS) eliminates the large upfront capital expense and replaces it with a predictable, per-unit operational fee tied directly to output.
In this case, the production throughput is approximately 89,000 pre-rolls per month or 1.07 million per year. Under a PaaS agreement, those units translate directly into revenue-producing activity, rather than sitting as depreciating capital assets on a balance sheet.

Because PaaS costs are tied to Cost of Goods Sold (COGS) rather than CapEx, every dollar spent contributes directly to operational production — aligning expense with revenue generation and improving both cash flow and tax efficiency (especially under 280E constraints).

ROI and Opportunity Cost

When modeled using discounted cash flow analysis, the effective ROI of a PaaS arrangement significantly exceeds that of an equipment purchase because:

No Upfront Investment: Capital remains available for higher-yield activities.
No Depreciation Risk: The provider absorbs equipment obsolescence and upgrades.
No Downtime Losses: PaaS includes service, monitoring, and performance guarantees.
Scalable Output: Costs flex with demand, ensuring efficiency at any volume.

Put simply:

The negative NPV of ownership transforms into a positive, compounding ROI under PaaS — where every dollar spent produces output and profit instead of depreciation.

‍

Details & Additional Thoughts - Production as a Service vs. Buying or Leasing Pre-roll Automation Equipment

Why the No-CapEx PaaS Model Is Transforming Cannabis Manufacturing

Production as a Service (PaaS) provides companies an opportunity to innovate production without heavy capital investment, freeing that capital to be redirected where ROI is most impactful. In the cannabis industry, that means resources can be reinvested into product development, additional licenses, or new retail locations rather than tied up in depreciating equipment.

The Rise of “As-a-Service” Models

Over the past decade, and accelerated by the COVID-19 pandemic, as-a-service business models have rapidly expanded across industries. Whether Production as a Service (PaaS), Machines as a Service (MaaS), or Software as a Service (SaaS), these models democratize access to advanced technology, automation, and data systems once reserved for large enterprises.

In cannabis manufacturing, PaaS provides smaller operators and emerging brands access to Industry 4.0 automation, robotics, smart sensors, and data-driven optimization, without requiring the multimillion-dollar investments that typically accompany such capabilities.

This evolution supports a more circular, efficient economy, reducing waste while enabling manufacturers to pay only for the production they use.

What Is Production as a Service (PaaS)?

At its core, Production as a Service is a business partnership where the manufacturer provides the production equipment, and the client pays solely for throughput, that is, units produced.

Rather than purchasing and maintaining equipment outright, customers essentially lease the system’s capabilities on a per-use basis. They gain immediate access to the most advanced manufacturing technologies while eliminating the downtime, depreciation, and maintenance costs associated with ownership.

Why PaaS Outperforms Traditional Equipment Purchasing

The No-CapEx model delivers flexibility and focus. By replacing large capital expenditures (CapEx) with predictable operational costs, companies can direct investment toward higher-yield initiatives like R&D, market expansion, and retail development.

At the same time, PaaS providers such as Accelerant Manufacturing leverage Industrial Internet of Things (IIoT) monitoring to track performance, detect inefficiencies, and anticipate maintenance before downtime occurs. This not only maximizes production uptime but also continuously improves output over time.

In traditional ownership models, a single breakdown or technological leap can instantly devalue a company’s investment. Under PaaS, risk shifts away from the operator, and innovation remains constant.

Learning from Other Industries: The Rolls-Royce Model

The concept of PaaS isn’t new. Rolls-Royce pioneered the idea in the 1960s with its revolutionary “Power-by-the-Hour” program for aircraft engines. Instead of buying engines outright, customers paid a fixed fee per flight hour, which included maintenance, replacements, and performance monitoring.

Today, Rolls-Royce uses advanced IIoT systems to collect engine data and proactively service customers, ensuring reliability and performance without the risk of obsolescence.

This same principle powers Accelerant Manufacturing’s model for cannabis production: operators gain access to state-of-the-art, U.S.-built automation systems with ongoing monitoring, performance analytics, and upgrade pathways, all without capital investment.

From CapEx to Cost of Goods Sold (COGS): A Smart Tax Strategy

PaaS converts what would traditionally be a capital expenditure (CapEx) into a Cost of Goods Sold (COGS) expense. This shift can create meaningful tax advantages, especially under IRS 280E, which limits deductions for cannabis operators.

Because PaaS fees are tied directly to production output, they fall within COGS, making them deductible operating expenses. In contrast, equipment purchases and depreciation cannot typically be deducted under 280E, which inflates tax liability.

In short: PaaS not only preserves cash flow but also optimizes your tax position.

Modular Flexibility and Continuous Innovation

Accelerant’s modular design philosophy ensures that PaaS customers benefit from scalable, upgradable automation. As operators grow, their systems expand within the same footprint, eliminating the need for costly equipment replacement.

Rather than owning machines that depreciate and eventually require wholesale replacement, PaaS customers benefit from continuous upgrades aligned with the latest productivity innovations.

The result is an evergreen production environment that evolves in lockstep with technology, without the financial drag of ownership.

Financial Comparison: PaaS vs. Purchase

When viewed through the lens of Net Present Value (NPV) and Internal Rate of Return (IRR), traditional equipment purchases often deliver poor returns compared to a PaaS model.

Consider the case of Accelerant’s PRO pre-roll system:

The PaaS structure bundles maintenance, parts, and software updates into a single predictable fee.
Output is tied directly to usage, allowing operators to scale production with demand.
The modular system supports capacity expansion within the same footprint, avoiding new capital cycles.

The analysis is clear: companies achieve higher ROI, lower risk, and better cash-flow efficiency by paying per unit rather than purchasing equipment outright.

Obsolescence Management: Built-In Futureproofing

Every manufacturer must plan for obsolescence, the moment when equipment becomes outdated or unsupportable. Under traditional ownership, those costs fall entirely on the operator.

In the PaaS ecosystem, however, innovation and obsolescence management are built into the model itself. Since providers are compensated based on output, they have every incentive to keep systems upgraded, efficient, and reliable.

This creates a true partnership, one where both parties benefit from innovation and continuous performance improvement.

Conclusion: The Future of Cannabis Manufacturing Is “As-a-Service”

For cannabis operators navigating tight margins, regulatory constraints, and rapid growth cycles, the No-CapEx Production as a Service model represents a smarter, more sustainable path forward.

By shifting risk, cost, and innovation to expert partners, brands can focus on what truly drives success: building their business, their products, and their customers.

‍

Schedule a Meeting

‍Jim Pavoldi