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Your bookkeeper slowly walks into your office on a cold, rainy Monday morning and announces that YOU are suddenly having a cash flow issue. What?? But we had a record year in terms of sales, right? The bookkeeper says, “Right, but only 90% of our customers have paid their balances in full.” Now we have to chase the other 10% so we can meet our own accounts payable obligations. Sound familiar?

Fortunately, there are some proven tactics that your internal collectors can do to increase their chances of collecting on outstanding debt before having to turn to a professional collection agency or attorney for assistance, which, of course, represents an additional expense for your company.

Reason for non-payment

It is crucial to determine the exact reason for nonpayment as soon as possible. All bad debts typically come down to two things: CAN’T PAY or WON’T PAY. Your job is to determine which one it is and respond accordingly.

CAN’T PAY. Most non-payments result from real or imagined lack of cash flow. Seasoned collection pros recognize when they hear “poor cash flow” it means they will invariably be looking to structure a payment plan with the customer to help them with their cash flow issue. The key here is to first understand ‘can’t pays’ are the easier of the two to deal with. It is very important to come across to your customer as a problem solver and showing empathy is the best way to accomplish this. You need to convey to them that you are partners and want to help them. You can still be fair and firm and make sure the pay plan you come up with works for both parties. Once a pay plan has been agreed to, put it in writing and get your customer to sign it. Even responding to an email will suffice. Document everything.

Then it comes down to monthly follow-up to ensure they honor the plan. Remind them a week before the due date and be prepared to call them the day after the due date if no payment shows up to hold their feet to the fire.

WON’T PAY. If your customer adamantly states they won’t pay, then this is where experience and savvy negotiations come into play. ‘Won’t pays’ typically mean there is a real or imagined dispute of some kind; belief your product/service was not satisfactory, breach of contract, never authorized service, no-shows,or an over-zealous sales rep who oversold them. The key is to listen without interrupting, even if you know they are full of poop. When it’s your turn to speak, if the dispute is valid, you can be the hero and assure them you will fix the problem to their satisfaction as long as they agree to pay in full. Hold them to their promise.

If the dispute is not valid (most aren’t), politely tell them so and why. If you find yourself in a stalemate, you can consider offering them a settlement for less than the full balance as an inducement to save money and resolve the issue without the need for further actions. Settlement negotiations can be a very effective tool, if used properly, and you don’t have to give away the store to do it. Have a number in mind of what you would be willing to live with, and then start with a higher number, which gives you some wiggle room.

And never accept the first offer. This is settlement strategy 101. They can always go a little higher than their opening offer.

Making the call

Identify the customer and the individual you are speaking with. Dealing with the wrong person is a waste of time and potential trouble if the debtor gets upset over improper disclosure of information to parties that should not have this information.

Next, identify your company and yourself, after you are sure you have the correct party. Give the full name of your company and yourself. Speak slowly and distinctly.

Explain the reason for your call such as “Mr. Smith, this is Joe Johnson with ABC Corporation, and our records indicate that you owe $1,543.00. Will you be mailing the full payment to our offices today?” Don’t hedge, but don’t overdo it and try to intimidate. Be business-like and professional.

Use a psychological pause. Give the debtor time to respond, normally 10-20 seconds. Let him/her tell you why they haven’t paid. If it’s a legitimate reason, they certainly won’t hesitate. Don’t interrupt the debtor since it could cause you to lose leverage.

Instead, listen. Let the debtor explain the problem and if he is argumentative or hostile, let him blow off a little steam, within reason.

Next, determine a solution. It’s important not to terminate the conversation until you have reached some agreement on solving the problem, whether it is a payment plan, payment in full, or another solution. It’s important to clarify with the debtor the reason for not paying. You must be convinced the problems have been resolved and the agreement reached is acceptable – date, time, and person you have discussed the past-due account with. Follow up with a letter or email outlining and confirming the conversation of what you expect to happen next.

The broken promise

All debtors break promises. Keep that to a minimum with excellent follow-up.

This is what really separates a professional agency from a credit grantor. If an individual promises payment on a Friday, we send reminders a week prior to the due date. If the payment does not arrive on that date, the debtor is called. The debtor soon learns he has absolutely no leeway with us and finds it is in his/her best interest to pay the creditor who is now like a second shadow. By keeping good notes and a close follow-up system, you can knock your broken promises in half.

Follow-up starts with the closing of the call and a short note to the debtor indicating what you are expecting from him and when.

When you contact the debtor about a broken promise, look on it not as a promise made to your company, but rather a promise made to you directly and personally. Use phrases like “You promised me that payment would be made on last Friday. I have not received the check. It is important to me that we get this matter resolved today.”

The debtor must be educated as to your policies and must understand that you will not accept broken promises and that you expect to be paid in a timely fashion.

Coping with angry or hostile debtors

Here, the debtor takes an aggressive posture, justified or not. The anger could be the by-product of some other recent event and may or may not be a legitimate problem. Railing accusations about poor service, unresponsive sales reps, slow delivery, credits due or harassing collection activity are some of the arguments you may encounter.

Hostile expressions can tempt a caller to respond in kind. At no time should you reciprocate. Always maintain a calm demeanor. Ask specific questions regarding the complaint and assure the customer you will follow up. Be sure to seek a commitment for paying before concluding the call. Remember, the customer could have communicated the alleged problem before your call. Unjustified, angry and hostile complaining may be a ruse to solicit a negative response providing a rationale to further delay payment. Defuse this defense. Maintain a courteous, friendly tone and show concern.

You will, many times, receive rude treatment by the debtor due to pressures and circumstances that certainly are beyond your control. Among them may be marital problems, death in the family, and most obviously, money problems. While an expression of sympathy may be in order, do not be distracted from your purpose. Maintain a serious demeanor and seek recovery. You may have to work out an agreed arrangement; however, by maintaining a serious tone you will deflate any notion that you can be easily manipulated. Neither you nor your customer should perceive or treat this type of defense as routine and acceptable.

Most people do intend to pay their bills, and if he’s struggling to pay you, you certainly can and will be a convenient target. Again, you are not a whipping boy for any debtor, but a little empathy can sometimes go a long, long way.

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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.