Business Transitions And Growing Pains

This is a season of transitions. Being a university professor, the end of the semester brings some degree of reflection regarding the future of these bright minds as they progress onward in their life’s journey to their first career job, summer internship, part-time summer job, etc.

It’s a transition period for school kids as well, as moms and dads look to the summers with both dread and excitement. I am reminded of this, having just returned from my oldest grandson’s eighth grade graduation ceremony. Seriously? A ceremony for graduating from the eighth grade? When I finished the eighth grade, the teachers just said get the heck out of here and on to high school!

All of these circumstances, of course, are examples of evolving from the big fish in a little pond to the little fish in a bigger pond. Businesses experience this phenomenon too, as they grow from small businesses to larger ones. Growing up on a mom-and-pop nursery myself, I remember the growing pains associated with becoming a larger business well — mainly those associated with trying to satisfy the needs of a greater customer base.

Financial And Strategic Growth Requires Added Labor And Capital

When green industry businesses expand, they do so financially, with either retained earnings or by using debt capital, or strategically, by expanding their existing operations, adding another location or engaging in merger or acquisition (M&A) activity. Whichever way they decide to grow, it takes additional labor and capital.

Another interesting point about expansion is that no matter which green industry sector one competes in (grower, landscape service provider or retailer), growth involves what we refer to as lumpy investments. That is, in order to grow to the next level, there is a set of expenditures that are necessary in terms of capital expenditures, labor resources, lines of credit, etc. Using these expenditures, the firm may expand their operation from $1 to $2 million in sales, for example, before another lump of expenditures is needed to grow to the next level of sales.

Invest More In Your Business Than The Bank Does

The reason I am discussing this aspect of company growth is that I have been asked by several firms, who are considering making investments to expand their operations, whether or not it is a good time to be doing so. The answer, as usual, is maybe.

If making an investment to grow your business right now involves securing debt capital to the point where the bank has more skin in the game than you do, then no, it is not a good time to invest. Our industry saw all too well the effects of being over-leveraged in the midst of the last economic downturn. Leverage can be a good thing when times are good. You can grow your business at a faster rate than without it. But when times are bad, it comes back to bite you in the rear big time.

Merge And Acquire Strategically

Another phenomenon I see in our industry, depending on where we are in the business cycle, is merger and acquisition hubris. In other words, when M&A activity starts increasing, like it has in the first half of this year, firms in the industry get a little antsy. Their proverbial trigger fingers start getting a little twitchy, and I’ve seen firms make investments for entirely the wrong reasons. The investments they make are non-strategic.

On the other hand, the recovery periods after recessions are often some of the best times to make investments that are strategic in nature. The
reduced value of assets in the market can translate into some really good bargains. If strategically it makes sense, don’t be swayed by media
rhetoric and pass on good opportunities out of fear. As the saying goes, fear keeps us average.

Account For The Learning Curve And Culture Clash

Recognize, though, that making such investments may make sense strategically, but they are often accompanied with some rather steep learning and experience curve effects. Using my little fish, big pond analogy, it is possible that firms can grow to the point where they start experiencing diseconomies of scale. Then, per-unit costs actually start increasing instead of decreasing as you’d normally expect.

In addition, if M&A is the growth strategy employed, the number one hurdle facing companies becomes combining the corporate cultures of the firms being merged or acquired. I’m completely serious here — it’s the number one hurdle. Combining assets, processes and systems is the easy part. Getting folks that have been motivated and incentivized by differing methods to suddenly act as a cohort is simply an unrealistic expectation. It takes careful, skillful teambuilding to do it right.

Leave a Reply

More From Finance/Operations...

April 17, 2015

Sakata Seed Uses California Spring Trials Display Plants To Give Back

Sakata Seed America is putting its post-CAST (California Spring Trials) plants and flowers to good use to support events in local California communities of Salinas and Morgan Hill. The plants, along with donations through Sakata's Charitable Giving Program, will support three fun-filled community events that promote healthy lifestyles and support the agricultural industry.

Read More
Hakonochloa macra Aureola v

April 17, 2015

Ornamental Grasses — A Few Thoughts

Grasses have been embraced by growers, landscape architects and retailers, and are an important component in wholesale and resale sales. Allan Armitage shares some popular grasses, one to avoid and a few to use with caution.

Read More
PW_CAST15

April 17, 2015

Allan Armitage’s Favorite Plants From Proven Winners, Syngenta And Danziger

Between visiting California Spring Trial giants like Proven Winners, Syngenta and Danziger, Allan Armitage saw a lot of great plants in one day. Despite the size of the challenge, Dr. Armitage finds a few favorites he thinks you should try.

Read More
Latest Stories
Syngenta logo

April 15, 2015

Syngenta Names Chris Freeman Senior Key Account Manager…

Chris Freeman is the new senior key account manager for Syngenta Flowers, Home & Garden's Commercial Sales business in the Americas, effective March 2015. Freeman, who joined Syngenta in 2006, carries more than 25 years of experience in the agriculture and floriculture business.

Read More
Lake Buchanan_LCRA

April 10, 2015

USDA Designates Areas Of West And Southwest As Drought …

The ongoing drought has resulted in disaster area designations in counties across nine Western and Southwestern states, including Texas, where some reservoirs are at or near historically low levels.

Read More

April 9, 2015

Altman Plants’ Online Cactus Shop Shows Strong Sa…

Altman Plants recently opened its new Cactus Shop, an online retail store that sells a variety of cactus and succulents. The store is a take-off of Altman’s original wholesale business, as the company started as a mail order catalog.

Read More
Dummen

April 8, 2015

Dümmen Group Welcomes Jim Devereux And Andrew Konicki T…

Dümmen group recently announced the addition of Jim Devereux and Andrew Konicki to its team. They are the newest members of the Key Account and Broker Support team for Dümmen, and will be responsible for building, developing and maintaining current broker and grower customer relationships.

Read More
Gov._Jerry_Brown_California

April 8, 2015

California Institutes First Ever Statewide Mandatory Wa…

California Gov. Jerry Brown announced April 1 that, for the first time in state history, action will be taken to implement mandatory water restrictions, with the ultimate goal of reducing water usage by 25 percent. As Californians are pushed to conserve more, growers will need to think about how demand for products will be affected.

Read More
DNA-logo

March 31, 2015

DNA Green Group Will Acquire Rijnplant

DNA Green Group and Riknplant have finalized DNA Green Group's acquisition of Rijnplant, meaning that the breeding and propagation activities in pot and cut anthurium, bougainvillea and heliconia will transfer to DNA Green Group.

Read More
AFE scholarship_Ryan Dickson

March 25, 2015

AFE Educational Grant And Scholarship Application Deadl…

Apply now for American Floral Endowment (AFE) scholarships or educational grants. Applications can be found online. For educational grants for 2015-2016, applications must be submitted no later than June 1. Scholarship applications are due May 1. AFE will award $40,000 in scholarships for 2015.

Read More

March 23, 2015

UF/IFAS Appoints Joseph Albano As Director Of Mid-Flori…

The University of Florida's Institute of Food and Agricultural Sciences (UF/IFAS) has a new directors for its Mid-Florida Research and Education Center (REC) on Apopka, Fla. The role has been filled by Joseph Albano, a research horticulturist from the U.S. Department of Agriculture with more than 25 years of experience.

Read More

March 17, 2015

Pike Nurseries Implements Employee Stock Ownership Plan

Independent garden retailer Pike Nurseries has announced it will become an employee-owned company. Pike Nurseries management has combined with its sister corporation in California, Armstrong Garden Centers, to operate under an established Employee Stock Ownership Plan (ESOP).

Read More
GrowIt! App Wins Gold At Design100 2014 US Mobile & App Design Awards

March 10, 2015

GrowIt! Mobile App Now Available For Android

The mobile app GrowIt! Garden Socially can now be used by gardeners with Android-based smartphones. Now available on the Google Play Market, GrowIt! helps users find plants to fit their lifestyle and connect them with other local gardeners.

Read More

March 4, 2015

Second Annual GreenhouseConnect Will Bring Growers and …

Following a successful inaugural event in Tampa last fall, Greenhouse Grower has announced the dates of its second annual GreenhouseConnect: October 26-29, 2015. Representatives of an expected two dozen leading greenhouse operations from across the U.S. will join senior-level suppliers at Rancho Bernardo Inn in San Diego for several days of one-on-one strategic meetings, a growers-only roundtable, informational sessions and a variety of networking events.

Read More

March 4, 2015

Maryland Green Industry Associations Unite

The Maryland Nursery and Landscape Association recently announced that it is expanding its reach to include the greenhouse industry, meaning it has become The Maryland Nursery, Landscape and Greenhouse Association (MNLGA). The change comes as a result of the planned dissolution of the former Maryland Greenhouse Growers Association and the invitation for those members to join the existing and renamed association.

Read More
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Ann…

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
myers industries Lawn and Garden Logo

February 24, 2015

Myers Industries, Inc. Lawn And Garden Business Sold, N…

The management of Myers Lawn and Garden Group, along with Wingate Partners V, L.P. have recently acquired the Myers Industries, Inc. Lawn and Garden business. The new company is named The HC Companies, and will continue as a North American leading provider of horticulture containers supplying the greenhouse, nursery and retail markets.

Read More
american-hort-logo

February 17, 2015

AmericanHort Announces New Board Members

AmericanHort recently announced the election of new officers and members to the board of directors. Each will assume their positions on the board during Cultivate’15, July 11 to 14 in Columbus, Ohio.

Read More
All American Selections

February 17, 2015

All-America Selections Elects New Officers, Names New J…

While meeting during the Flower and Vegetable Seed Conference in Tampa, Fla., hosted by the American Seed Trade Association, All-America Selections elected new officers for a two-year term. Read on to learn about the new officers, as well as all of the new judges that were added in 2014.

Read More
Greenhouse Grower.com on your desktop, on your phone, on your tablet

February 11, 2015

GreenhouseGrower.com Relaunches With Responsive Design …

Greenhouse Grower magazine, the nation’s leader in profits, production and education for greenhouse growers, announces the launch of its completely redesigned website, GreenhouseGrower.com. The new design is the product of direct user feedback and GreenhouseGrower.com analytics, and includes responsive design for ease of mobile use.

Read More
Andy Higgins

February 3, 2015

MasterTag Names Andy Higgins As Its New President

Former CEO and president of Ecke Ranch, Andy Higgins, joins MasterTag as its new president. He brings more than two decades of industry experience to the position.

Read More