The Nursery Management Conference took place Sept. 14-16 in Arlington, Texas. Here’s a glimpse of what you missed if you didn’t attend.
The inflation effect
Timothee Sallin, co-CEO of IMG Enterprises, parent company of Cherrylake, Inc. kicked off the Nursery Management Conference with a market outlook.
One of the many topics Sallin addressed was the effects of inflation on tree prices. Nurseries don’t raise prices to meet the level of market demand. If they do raise prices, it won’t be enough to keep up with inflation.
Sallin presented a graph showing the nominal price of a specific size container tree from 2003 to 2021. The same tree that had an average sale price of $90.70 in 2003 sells for $104.64 today. However, he says cumulative inflation of 48.4 percent since 2003. So that $90.70 tree would cost $134.60 in 2021 dollars.
In order for a nursery to be financially healthy, it needs to be profitable. Sallin says the key to being profitable is to raise prices faster than input costs increase. With supply short across the board, now is the right time to push for higher prices. It takes fortitude, but nurseries need to realize that while their customers may gripe, they will understand.
“We are in the perfect situation to test elasticity,” he said. “You’ll need the stomach. You’ll see some sales stop as people go to the guy down the road who didn’t raise his prices.”
Competitors that didn’t raise their prices will sell out fast. But if plant material is scarce, you will still sell your stock and you can be profitable doing so.
Alec Charais, chief marketing and product development officer for Bailey Nurseries, talked about customer retention and how Bailey aims to keep those new customers that became hobbyists during the COVID lockdown.
"We have covered 'a decade in days,'" Charais said. "COVID transformed consumer behavior, now and forever."
This is especially true in the adoption of digital storefronts, curbside delivery options and other customer service initiatives.
Now that restaurants, concerts, movies and travel are back in full swing, the green industry needs to work diligently to keep consumer dollars from sliding back to those other areas.
The good news, Charais said, is that the work-from-home movement and lower travel spending is not going away. Growers and garden centers can still benefit.
"You don't have to make a trip to consume our product," Charais said.
Millennials, in particular, believe home is an expression of their personal style, he said. And if the industry succeeds in marketing to them in ways that reach them on their level, they can decorate that home with lots of plants.
Although he reminded the attendees not to ignore the boomer/Gen X customer, he planted the reality that the wealth changeover is happening sooner than you may think. By 2029, millennials will control the largest percentage share of disposable income.
E-commerce boot camp
One of the constant themes from the Nursery Management Conference was that 2020 changed the way we do business. Consumers and B2B customers alike expect online sales to be readily available, manageable and convenient. After the pandemic surge in gardening, more of those consumers are searching for plants online. If you have a retail element to your business, you’ll want them to find you and not your competitor at the end of their Google search. But even if you are strictly wholesale, e-commerce can help you. It’s not a simple process, but it can be done, and it has been done. Growers of all sizes are making it work.
Bill Jones, president and founder of Carolina Native Nursery, spoke about his experience as a small grower using e-commerce in his business. The North Carolina nursery and its clientele are laser-focused on the environmental impact of natives, especially how they provide food and shelter for a variety of pollinators and birds. The nursery specializes even further into indigenous rhododendrons, azaleas and mountain laurels that are grown from seed.
Here are a few highlights of his presentation:
Jones is a fan of Google ads. Spending $60 per month results in tons of impressions. Jones said this really helps with search engine optimization, which in turn helps more people find his business’ website.
AdWords is pay-per-click. So make sure your keywords are specific. For instance, Jones sets “native azalea” as a keyword to track instead of simply “azalea.” That means the AdWords program will have better odds of sending him a high-quality potential lead. That’s because someone who searches for “native azalea” is more likely to be interested in what Carolina Native Nursery offers than someone who searches for “azalea.”
Watch out for hacks. After a fall 2019 hack, Jones upgraded his e-commerce system. The whole site runs on WordPress, which has a fairly simple interface and tools. For $1,400, he added a WooCommerce plugin that takes the nursery’s inventory right from a Google spreadsheet and shows wholesale customers what they can buy and how much of it is available.
The new site and plugin have been helpful for Jones’ own analytical efforts, as well.
“I know who looked at what, when,” he said.
Last, take good care of your email list. Jones gets a 30% open rate on his marketing emails, which is much higher than the typical rate. The list has been meticulously maintained since 2003. Everyone on it is a real customer.
Crash course in culture
Company culture is more than a mission statement. It includes the values that guide your business. Nursery Management Conference attendees learned from two successful growers how their businesses created remarkable company cultures, and how the company benefited.
Mark Leichty, director of business development for Little Prince of Oregon Nursery, and Matt Steinkopf, head grower and manager for Willoway Nurseries, Inc. both gave examples of ways to improve company culture.
Employees unleash their creative juices each year when they develop fun concepts for the Little Prince’s Farwest Show booth. Leichty joined the Nursery Management Conference virtually, and during his presentation, gave a virtual tour of the beach house-like Little Prince office. Rows of Best in Show booth plaques line the staircase. Employees take pride in their role in the company's successes, which improves culture.
Willoway Nurseries is a nearly 1,000-acre growing operation with locations in Avon and Huron, Ohio. Steinkopf discussed how Willoway aimed to harness the wisdom of the crowd. The nursery created “culture teams.” If you have a problem, need a suggestion, are dealing with negativity from your workforce, or don’t know what your employees want, a culture team can help.
The value of culture teams, Steinkopf said, is that people support what they help create. It’s a lesson the Ohio nursery learned from The Great Game of Business, a book espousing a business strategy of open book management and giving employees more of a stake in big picture issues. Company president Tom Demaline implemented The Great Game of Business throughout Willoway and the culture teams are a continuation of those efforts.
If you want to create culture teams at your own business, Steinkopf has a few tips:
The group should represent all departments in the business. Take one leader from each department so everyone’s voice is heard.
Meet at the same time and same place each week to create a rhythm.
Pick employees that have leadership qualities but limited room for advancement.
Planning a succession
What would happen to your business if you were hit by a bus? On Day 2 of the Nursery Management Conference, Gene Redlin and Brian Decker provided several case studies of how to develop a succession plan.
Gene Redlin has a unique background as a nursery owner who also spent time in the corporate world as a CEO of several international companies. He’s been providing valuation services since 1998, specializing in succession, sale and settlement. He led off with the incontrovertible fact that every nursery owner WILL exit their business, eventually. Redlin provides some sobering statistics: While 98% of the green industry believes succession is vital, 80% of industry businesses have no succession plan.
Brian Decker, president of Decker’s Nursery in Groveport, Ohio, described the types of succession plans that happen in the nursery industry.
Liquidation: This option will wind down and liquidate inventory, auction stock and equipment and sell real estate. It’s often the best choice for companies under $2 million range up to about $5 million in value. The downside is that it can turn into a fire sale.
Redlin agrees. He said the average liquidation returns 20% of the actual value of the operation.
Turn-key sale: These are so rare that they can be considered a pipe dream. They are often undervalued out of desperation. Decker considers this a poor exit strategy if you want full value for your business.
ESOP: The employee stock ownership plan works best for companies over $10 million in value, but includes ongoing consulting fees, audits and supervision fees. Also, Decker said the ESOP is not a good fit for some owner’s personalities. Particularly for opinionated owners.
Breed your buyers: this is the option for those with children interested in and capable of taking over the business. If your children have what it takes, and are willing, this can work. However, not all owners have the time to train and prepare them for management.
Redlin said if a nursery owner doesn’t put in the work to prepare the successor, the transition will go poorly.
“If you have an heir, nurture them,” he said. “If you don’t have that person, hire them.”
The last option for succession planning is private stock agreements. Decker detailed the plan he designed at his own nursery.
It came about from asking a few important questions. Are your key employees loyal to the point that you would consider them family? If you consider those key staff members family, would you treat them like heirs? If the answer to this question is yes, trust and reward them as family. If the answer is no, change them out for more qualified leadership.
Decker developed a plan to transfer ownership of his nursery to a “core four” group of key employees. Before you move forward with a stock transfer agreement, make sure you have a frank discussion with all potential owners to gauge their interest and commitment. Discuss the concept with attorneys and accountant, and make sure your bank is on board as well. Hire a consultant to provide a professional evaluation of the company separate from the real estate. Then comes the tricky questions of stock valuation per share. Split stock shares to reach an affordable price per share based on the overall company valuation divided by the number of shares.
Decker’s stock transfer purchase plan provides the current owners with income while purchasing shares over the projected timeline of the buyout. The plan will transfer up to 49% of the shares this way, then have the lender participate in the sale of the last 51%.
In most cases, your employees won’t have the funds to buy the company from you outright. Decker’s plan requires a huge leap of faith by gifting 5-10% of the shares in the company to the selected staff. It’s necessary for them to have the funds to purchase the remaining shares. It also requires continued employment, creating a bit of a velvet cage.
This is only a quick summation of the plan. There are many more stipulations, and Decker suggested any nursery owners considering a similar stock transfer plan contact his attorney, Jim Vonau, at Decker Vonau, LLC in Columbus, Ohio, for advice.
Looking toward the future
Finally, the conference ended with a presentation and roundtable discussion on automation, led by Amy Fulcher, extension specialist and associate professor at the University of Tennessee and Anthony LeBude, research and extension associate professor at North Carolina State University. They are members of LEAP (Labor, Efficiency, Automation and Production) for Nursery Sustainability, a group of faculty from six universities and the USDA-ARS that is conducting research about nursery labor challenges. They shared some of their research into nurseries consideration of, and transition to, automation.
For instance, they found five “persuasion factors” considered during before adopting automation: relative advantage (is it better than what we already have?), compatibility (does it fit with existing equipment/practices?), complexity (how tough is it to use?), observability (are the results visible?) and trialability (can it be tested?). The most important factors according to analysis of their survey were relative advantage and observability. Growers have strong perceptions on whether or not they can see it working and if it will save them money or labor compared to the way they are doing it right now.