A smoother ride

Features - Business management

Steer clear of these 5 potholes on the crowded road of business.

June 7, 2021

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While conducting valuations on nursery operations for banks, courts, buyers and sellers around the United States, I have discovered five primary areas — we’ll call them potholes — that successful nurseries navigate well. The ultimate pothole is debt, usually blamed on bad luck. Luck had little to do with it. It was the result of bad decisions in these five key areas. Growing good stock is easy. Managing your business well is harder.

None of this is theoretical. This has been hammered out on the anvil of experience by successful operations. Let’s go to school on them.

The sales and marketing pothole

This single pothole dooms most nurseries that fail. They can grow great product, but they can’t sell it. Effective sales, marketing and order processing start to finish includes six elements.

A. An accurate perpetual live inventory with pricing easily accessed by a customer for review. Every successful nursery has one at some level.

One nursery used the “ASK BRIAN” system for inventory and pricing. BRIAN was the source of all knowledge. If you needed to know if something was available, ASK BRIAN. If you wanted to know the price of something, ASK BRIAN. The whole catalog and inventory lived in Brian’s head. They are no longer in business.

A successful inventory includes what is it (sorted by Latin and common name), how many units you have, what they look like and price. Answer their questions before you are asked. Pricing must be market driven. No nursery operates in a vacuum. Nurseries within 500 miles make your market. Every nursery believes they have top quality and should get top price. The reality is customers expect quality and buy when you have the right plants priced in line with the market.

B. A quick response system by phone, email, text such that no inquiry ages more than half a day. The people manning this effort must be knowledgeable but ready and willing to hand off a complicated situation to management when necessary. The owner should not try to field every call. This is a staff position.

C. A competent website that answers frequently asked questions. A recent gallery of photographs is important. Sometimes “Could you send me a picture” can be answered by, “I have a recent one on the website.” Some nurseries use Facebook’s easy upload system to catalog recent photos. We waste precious time sending a texted picture that doesn’t tell the real story. If you do text a picture to someone, also post it on Facebook.

D. Use occasional direct mail and broadcast email for notifying willing readers of specials and staying on their radar. Make them newsy and interesting. Entice people to read them.

E. Develop new markets and new customers. Tragic failures happen to those held captive by a handful of customers who dictate your nursery activity. No more 20% of your volume should come from your top 10 customers. Be constantly developing new relationships. Use brokers for distant markets to expand your reach.

F. Get rid of overgrown or obsolete inventory. In shade trees for example, anything over 3 inches begins to lose relative value quickly. At 6 inches it’s over. This focus keeps trees from overgrowing and meeting the bulldozer. God helped you grow that tree, but he can’t help you sell it. Don’t abuse it like that head of lettuce you brought home from the store rotting in your refrigerator before it’s used. Turn it into cash at any price before you have to discard it.

The inventory mix pothole

Don’t try to be all things to all people. Stop reading bid sheets to make product selections that languish. Add to your plant palette slowly. If it doesn’t sell, stop growing it. The plant patent universe is constantly pushing “winners.” Resist the pressure. There is nothing wrong with growing something proven, just don’t be the first guinea pig.

Poor choices in plant selection have ruined many good nurseries. The best nurseries boast a palette of signature products that sell reliably every year. Ignore talk of the next big thing touted by people selling liners. Grow what you grow well. A nursery in our area has made an art out of growing perfect Skyline Locusts. Every one is cookie cutter. They sell all they can grow. Multiply that times 300 premium items and you have a mix that creates a successful nursery.

Produce what you can grow, sell, and ship as a package. If you grow perennials and grasses, can you ship them all as a package with that load of B&B? Decide who you are.

One exceptional grower produces just five spireas, six boxwood, four yews, five red maple, five oaks, three viburnums, and so forth in his carefully honed palette. Do less and do it better. Be choosy who you marry in the plant world. Divorces are messy.

The production cost pothole

Rules of thumb matter in liner purchases. Pay no more for a container liner than 20% of the price at which you are likely to sell that item. This means that a liner for a 3-gallon shrub you will sell for $13 should not cost more than $2.60 landed. In seedling grade species like dogwood or redbud, it should be no more than 15%. If you actually get $20 for a 5-gallon shrub you might spend up to $4 for a larger liner. Be certain you can actually get that $20 on a steady basis. Liner costs can eat a nursery alive.

A finished 2-inch tree in the ground is worth on average $90. The 20% rule makes your target liner cost $15. There are people who pay more than double that and wonder why their margins dwindle.

Many plants are easy to produce out of season from a hardwood cutting like certain Salix, Viburnum, Cornus, Platanus, Populus, Sambucus, Physocarpos, Cephalanthus and others that root easily from hardwood cuttings. Never with patented stock, but when they are out of patent. Propagate only within your skill set. Softwood cuttings are another level. Buy liners when it makes sense. Liner cost control results in better margins.

The labor-over- capital pothole

Every owner complains about the difficulty in finding reliable workers. Wages are rising. It is the number one problem today in horticulture. Successful nurseries know how to properly balance capital versus labor costs in production.

Invest in capital items to reduce labor costs. The cost of production from capital includes fertilizer and chemical weed control with equipment used for cultivation and spraying. Yet even today there are nurseries that send workers out with weed whackers, hand sprayers, hoes and fertilizing from a coffee can; work that should have been accomplished with better capital utilization.

The most efficient operations have pared their cost of labor to less than 20% of sales. One operation has cost of labor at 16% of sales. His operation is clean, orderly, weed free, pruned, fertilized, staked well, and free of diseases and pests. His finished product sells out every year and everything he produces is first quality.

Modern capital use has made former production methods obsolete. The tree spade came into use in the early 1970s and everything changed, yet many operate like it’s 1960 in how they use labor.

The know-your- numbers pothole

The best nursery operations have detailed records of every liner, every field and every container cost. Potting and media costs are understood to the point where they can decide if it makes sense to produce certain plants.

They map where the plants are set down after potting. Every plant has a tag of common and Latin names with codes for liner source, date potted and projected finish date. The printed inventory reflects this information including the location which is on a detailed map.

This works so well they could hire Annie, the barista from the coffee shop who knows nothing about plants, send her out with the map and a list of things to pull for an order from the inventory. Armed with these simple tools, she can pull a full order accurately. Suddenly she’s a nurserywoman.

I saw this at a nursery in New Hampshire. Their records included where the plant is right now, how many, when they are ready, what block, what row. Our barista can go to that location on the map, find the plant by the tag and load it on the trailer. This level of detailed record pays for itself again and again in lower labor costs and better order fulfillment.

A B&B operation I work with has a successful program that includes a plan-o-gram of where the trees are to be planted before lining out. Every block has a metal sign with its number. Rows in the block start from the sign and then to the left. Every tenth tree is labeled with common and Latin names in the field. That tag contains other info like year planted and liner source. With proper paperwork and a block map, our barista can tag a complete order for digging. Yet many send out unskilled labor to dig trees and expect them to know what they are looking for. A system only works by working the system.

Money management

Successful nurseries know how to handle money. They get it done by paying and getting paid. They know what others owe them and what they owe others. You can’t get paid if you don’t send out a bill. They also keep government at arms length by doing what is required to stay in business.

They constantly look for better ways to control costs. Knowing when to spend more pays off when a careful cost benefit analysis is done. In forensic accounting I run across businesses that still operate out of a shoebox. That might have been good enough for great-grandpa, but not today.

Don’t let the priests of technology enchant you; be careful in implementing some flashy new control system touted to solve all your problems. There’s not always “an app for that” for your phone or computer. Software can lull you into believing quick control for your books, your HR function, or the management of your operation. Some of these systems make life more difficult. Successful operations function when they are analog with digital helps. If you can’t do it on a yellow pad, you won’t do it with software. Managing a nursery is planning, organizing, directing, coordinating, and controlling. It is the execution of systems, not goals. A spreadsheet can create a fantasy without providing the needed systems to execute. Plan well but work the plan.

Final thoughts

Success is filling orders resulting from effective sales and marketing based on an accurate inventory with a palette of items that sell, while controlling costs, using capital over labor, and knowing your numbers.

As you grow, staffing in key positions is critical. Sales, marketing, and inventory control is one department. Money handling, reporting, and record keeping is another. These two functions are very different. The temptation to have them both handled by one person never works. Good record keepers can’t sell, and good salespeople make lousy bookkeepers. Choose well.

Ultimately the mark of a good nursery is the ability to stage and load a quality and accurate shipment to a customer who is happy when they receive it, pays for it and comes back for more.

Gene is a certified personal property appraiser specializing in nursery business appraisals; generedlin@att.net. Opinions expressed are those of the author and do not necessarily represent the views of GIE Media, Inc.