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There is a mistaken idea that value for a company relies solely on its operating statement to demonstrate positive cash flow. Certainly, that is essential to show the company has value, but how to determine the multiple of that cash flow is where value is developed.

There are factors in valuing a horticultural business which people cite that have little effect on its value. “We have a long history.” A nursery, greenhouse or landscaper that is 100 or more years old is not going to require a value higher than one that has been in business for 10 years. While the history is impressive, it doesn’t add to nor subtract from the ability for that business to produce a reliable and repeatable cash flow.

“We are known for our quality.” I get this argument frequently. “We are worth more because we produce a high-quality product.” It’s great that a business produces a quality product, but does that product find a market that buys and pays for the premium the quality requires? There are several premium product quality nurseries that are no longer in business. It is expected the business produces and sells a quality product or it will not be able to continue in business. Lack of quality will mean fewer customers. Very high quality at a high price can also mean fewer customers.

“Our forecasts predict that we’ll be making huge money soon.” While the ability to see forward to scalability and increase matters, the capacity to produce based on past performance is where the real value is. A great spreadsheet is no substitute for performance.

When placing a value on a horticulture business, these 10 factors (in no particular order) are useful as a metric in developing cash flow.

1. Marketplace position

The question is always, ‘How positioned is this company to get the first call from a potential customer?’ Are they first on the Rolodex or a last-ditch effort? “We tried everyone else, let’s give them a call.” A company on top is worth more.

2. Pricing position

Relative to the competitive landscape, where does the company stand in the marketplace for price? If a company is successful yet considered very high priced, there is potential for someone to begin to strip away customers. If a company is very low priced, this may mean that a long run there can equal losses, since they have nowhere to go. Loyalty is a function of value.

3. Barrier to entry

What is the potential for someone to come in and duplicate the product mix the company offers in the same market and become a significant competitor? How difficult is that? Many nurseries that are no longer in business didn’t recognize soon enough the emergence of new competition until it was too late. Container growers are often most at risk. It’s relatively easy and fast to start and build a container operation.

4. Depth of management (bench)

If the owner and key manager were to suddenly disappear or be disabled (think accident), who would continue the business? Depending on the talent and ability of one or two key people reduces the value of the business. Depth of bench matters in football and in the horticulture business.

5. Accounting records and practices

If a company doesn’t know all its numbers or if its records are spotty, it is going to be hard to demand value when the information is fragmented. A good set of books, inventories and reviews by an account will go a long way in finding a value. A poor set of books will result in a lower value.

6. Economic conditions

The economy at large and the local economy are key drivers of business value. When things are great in the market, values are higher; when the economy is in the doldrums, values reduce. It is also important to consider the future of the economy when developing value.

7. Competitive threats

This is not about new entrants noted above. The question is, ‘How crowded is the market you are trying to reach?’ If you are a grower of decent B&B trees, in some markets, this means you have no unique factor to add for value. The amount and vigor of the competitive landscape can impact the value one can place on a nursery.

8. Location relative to the market served

How close are you to the market you are trying to serve? Many nurseries try to move production to low-cost areas but rob themselves of the power of proximity. People will go where it is convenient even if it costs more. There are ways around this deficit if you have a vigorous delivery system at reasonable costs. A poor, inaccessible location reduces value.

Be certain the top 10 customers on your list do not represent more than 25% of your total business volume.

9. Key customer concentration

A greenhouse or nursery can have huge margins, great cash flow, solid management, good records and a dozen other dynamics that look great — but with only one or two large customers, your business is worth a fraction of its value. I had a client once that had only ONE large customer, a big-box store. They did massive business with this company until someone else got the bid to supplant their position for the year to come. They were out. Millions of dollars in revenue were gone in a second. They tried to claw back some market from old customers, but without success. Be certain the top 10 customers on your list do not represent more than 25% of your total business volume.

10. Future scalable growth potential

In order to secure a good value for your company, there must be upward potential for growth. A potential buyer wants to believe they can build from the platform you have developed. There must be room to grow other than better marketing and higher prices.

These 10 metrics create a matrix of value that helps people find the price you can or should ask for your company.

Gene is a certified personal property appraiser specializing in nursery business appraisals; generedlin@att.net.

A total of nine tornadoes ripped through the Dallas-Fort Worth area Sunday, Oct. 20. Thankfully, there were no casualties as a result of these storms.

The strongest twister was an EF-3 that devastated much of northwest Dallas and Richardson. It leveled North Haven Gardens, a magnificent garden center that’s been in the neighborhood since 1951. Cody Hoya, general manager of North Haven Gardens, posted this message on social media and the IGC’s website:

“In spite of the severe damage we suffered during the recent North Texas tornado, North Haven Gardens has been in this location since 1951 — almost 69 years. We’ve rebuilt from adversity before, and this time will be no different.

We look forward to welcoming our many friends and patrons back soon for an ever better experience. While we’re rebuilding, please visit us on Facebook — tell us what you love about North Haven Gardens and what you would like to see improved during our renovation.

Thanks for being part of our family for so many years.”

I am so proud of the Pinkus family’s resolve, as well as their treasured employees, to rebuild. Their store is an oasis in the middle of a hurried and crowded city that has enjoyed close community ties across generations.

Even if you’re not in Tornado Alley, you still need to be prepared for a severe weather event, such as tornadoes, straight-line winds, large hail or flooding. Before a disaster strikes, create a preparedness and a continuity plan.

The Insurance Information Institute provides these considerations for small businesses:

Set up an emergency response plan and train employees how to carry it out. Make sure employees know whom to notify about the disaster and what measures to take to preserve life and limit property losses.

Write out each step of the plan and assign responsibilities to employees in clear and simple language. Practice the procedures set out in the emergency response plan with regular, scheduled drills.

Compile a list of important phone numbers and addresses. The list should include local and state emergency management agencies, major clients, contractors, suppliers, financial institutions, insurance agents and insurance company claim representatives.

Decide on a communications strategy to prevent loss of customers. Post notices outside your premises; contact clients by phone, email or regular mail.

Consider the things you may need initially during the emergency. Do you need a back-up source of power? Do you have a back-up communications system?

Keep duplicate records. Back-up computerized data files regularly and store them off-premises. Keep copies of important records and documents in a safe deposit box and make sure they’re up-to-date.

Review your insurance plan. Make sure you have sufficient coverage to pay for the indirect costs of the disaster — the disruption to your business — as well as the cost of repair or rebuilding. New additions or improvements should also be reflected in your policy.

Visit the link here for an excellent list of resources from SCORE.

Everyone who’s ever been involved in horticultural production has dealt with plant pathogens that have made growing difficult or even impossible. Whether it’s boxwood blight, Phytophthora ramorum or any other organism, the management strategies are multi-faceted. While we often want a quick control for diseases, a better solution is to breed plants that are disease resistant.

That’s exactly what Oregon State University has done with the fire blight resistant varieties of Cotoneaster they have developed in Corvallis, Oregon, under the direction of Ryan Contreras, associate professor of ornamental plant breeding at Oregon State University. I toured their research facility and saw two new cultivars, and I’m impressed by not only the disease resistance but by the lovely forms of these new introductions. Cotoneaster × suecicus Emerald Sprite (PPAF) and C. × suecicus Emerald Beauty (PPAF) are both beautiful plants and are highly resistant to Erwinia amylovora, the bacterium responsible for fire blight.

Emerald Sprite is a highly compact cultivar that is a complete departure from other Cotoneaster cultivars.

“It tops out at 12 inches tall with age, and unlike other dwarfs like ‘Tom Thumb’, this is fast in propagation and production. It roots in a month or less and will finish at No. 1 in 12 months but would mainly be sold in smaller containers that finish much quicker,” Contreras says.

Emerald Beauty, on the other hand, is similar to ‘Coral Beauty’, one of its parents, but is more densely branched and has improved resistance to fire blight. Contreras stressed that it’s not completely resistant, but vastly improved over ‘Coral Beauty’. It has a very uniform branching habit which was clear in the trial plants I saw in the landscape.

Watch for both of these plants to appear in the marketplace in 2020. The patent and royalties are managed by Plant Haven.

Why grow these new Cotoneaster cultivars?

• They are resistant to Cotoneaster fire blight.
• They are easy to grow in ornamental plant production.
• They are improvements over traditional forms of Cotoneaster.

Native plants get many of their common names, sometimes even localized, for many different reasons. And there is a long list of natives referred to by names we may have no idea of their origin. When I first set up shop in western North Carolina, my new friends called Mt. laurel (Kalmia latifolia) “ivy” and rhododendron (R. maximum) “laurel.” I was confused then and sometimes I still am. When I talk to folks around the mountains now, I sometimes use “ivy” and “laurel,” too.

Throughout western North Carolina, those names are in many places: Big Laurel, Laurel Park, Laurel Branch, Laurel Creek, Little Laurel Run, Big Ivy, Little Ivy, Little Ivy Creek and more. And I was told that if any patches of these plants were extremely thick, they were called “hells.” If you have ever tried to get through one of those patches you know why.

I have asked and done my research trying to find out a little history of where these names came from. Even the older generation who learned how to cut back, dig, and burlap ivy and laurel from their fathers said it’s always been called by those names. So, it seems that is just what the mountain folk call these plants. And of course, red laurel is catawba rhododendron (R. catawbiense).

Flame azalea (R. calendulaceum) is called honeysuckle. That one took me a while to figure out, too. One of our staff members says it’s because he was taught as a kid to suck on the blossoms of flames like people do for honeysuckle. He also says it doesn’t taste as good. The flowers do resemble that of honeysuckle — a little. Maybe that’s it.

What about doghobble (Leucothoe fontainsiana)? It’s the arching branches that are doghobble’s primary claim to fame. These often root at their tips, creating an extensive and sometimes large tangle that can be all but impenetrable. The story goes that black bears fleeing hunting dogs will intuitively head for a doghobble tangle situated on a steep slope. Going uphill, a bear can easily bound through the patch. But the pursuing dogs and hunters will be severely impeded by the rooted branches and sharp leaves. It is also called fetter bush — fetter is defined as something that confines.

Sweetshrub (Calycanthus floridus) has been found in American gardens since colonial times, including in the gardens of both Jefferson and Washington. It is also known as Carolina allspice, but the best name is sweet bubby bush. Apparently, mountain women used the strongly aromatic flowers as a perfume by first crushing them and then placing them in their bosom which consequently gave rise to the nickname “bubby,” as an old form of the word “boobie.” Telling that story always brings a smile and many older folks know it by that name.

There are many native plants that have nice histories and it’s fun to know. Once you smell the leaves of spicebush (Lindera benzion), you know how it got its name. The fragrance is very distinctive. Aronia arbutifolia got one of its names, choak cherry, from Thomas Jefferson. Now it is referred to as chokeberry. The name sourwood was recorded in 1709 as used by American colonists because of the taste of the leaves. Sourwood shoots were used by Cherokee and Catawba tribes for arrow shafts, as were the branches of arrowwood viburnum (Viburnum dentatum).

The name New Jersey tea (Ceanothus americanus) comes from the American Revolution. The leaves were boiled and used as a substitute for tea. At Carolina Native, we put the seed of New Jersey tea in boiling water as part of its stratification process and it certainly smells like tea, but we don’t know if it tastes like it. Inkberry holly has black berries, but they were not used as ink. It is also known as gallberry. This alternate name derives from the fact that black ink was once made from the galls of oaks. Candles were and still are made from the berries of wax myrtle (Myrica cerifera). You can buy them online today. Washington hawthorn (Crataegus phaenopyrum) is named so because George Washington planted it all over Mount Vernon.

It’s fun to learn some of the more traditional plant names, as well as where and how they came about. Most earned their names one way or another. But then some, like ivy and laurel, may remain a mystery forever.