Improve Your Bottom Line In Tough Times

Improve Your Bottom Line In Tough Times

Rob SteinbergThe nursery industry has been hit with a 1-2-3 punch over the last five years. First, the advent of pay-by-scan, in which growers got paid when the consumer bought instead of when the store bought, created immediate losses on plants that died in the stores. Then the recession hit, driving down consumer demand for plants and shrubs. Finally, the weather this year created one of the most challenging growing seasons ever.

Each of these events has forced growers to focus more intently on controlling cash and inventory. For many growers, techniques to increase top-line revenue have also become a central focus. In this article, we will focus on the key opportunity areas for growers to increase revenue and control expenses and inventory.

Increasing Revenue

The adage that it is easier to keep and expand an existing customer than create a new customer has never been more relevant than it is today. However, with the expectation that a significant number of growers may not survive the post-growing season, there will be opportunities for new accounts. Sales-force management will be critical to maintaining and expanding a grower’s customer base.

There are a number of key questions that must be answered as a foundation for a successful sales effort.

1 Do your salespeople know what you consider A-level performance? It is frequently the case that the expectations for and responsibilities of a salesperson are not well defined. Salespeople know they are supposed to keep the customer happy and keep sales at least at current levels, but activity expectations and precise targets are nebulous. If there is no goal set, it is frequently the case that far less is accomplished.

2 Do you have a sales plan that defines targets for each salesperson? In most industries, sales forces are guided by sales pipelines, which identify prospects, targets, hot targets and wins/losses for each salesperson. Because many salespeople in our industry are also account managers, pipelines are rarely used. However, sales pipelines are a valuable mechanism to drive new sales, even for existing customers.

3 Do you have a sales plan that defines and targets product sales based on margin, surplus inventory concerns and other factors? Again, while most industries target the sales the sales force makes based on optimal profitability, our industry traditionally has had a “pull” rather than “push” mentality. While it is vital to listen to customers and let them dictate what product they want (the customer “pull”), salespeople need to push product that optimizes profitability, particularly with pay-by-scan and the challenging economic environment. For example, the store may favor some products that tend to “die on the shelves,” but the salesperson is paid to sell product that brings the optimal profitability to the grower while keeping the customer happy.

4 Are your managers and salespeople getting enough face time with the customer? Salespeople do not always give the buyer the attention they deserve, and managers can also be guilty of forgetting the fact that store management really does want to have open and frequent access to and attention from them. Many customers have been lost simply due to an assumption that ”everything is fine” when problems can be nipped in the bud through more face time with the customer.

5 Can outside professionals help? There are consultants who can help, in particular, with access to the big box stores. Retention of such professionals may be useful for certain growers.

In general, however, sales management techniques are simple to teach. Assistance can be easily provided to growers who want to learn how to improve their sales.

Controlling Expenses

There has never been a greater need for growers to have their arms strongly around cash and keep them that way. If cash is particularly tight, the standard 13-week cash flow should be used in a highly disciplined manner. A 13-week cash flow analysis projects expected “cash in” (i.e. payment on invoices and other receipts), as well as expected “cash out” (invoices and other payments that need to be made). When the analysis is tied to expected available cash on a line of credit as well as “float,” it allows a business owner or manager to know in advance when there will be a cash shortfall or excess cash.

Knowing when there will be a cash shortfall is, of course, critical. Equally important is knowing how to manage cash in the short term or increase cash in the longer term. Every grower should be focused on how the company is doing on a cash basis and concerned about EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) or earnings at this time.

There are several keys to increasing cash:

1 Connecting the sales plan to the production plan. In most industries, this connection is solid and unbreakable, but among growers there is often a disconnect between the two plans – if either of them exist at all. A grower does not need some fancy software to create and connect these plans. Templates can be created on Excel spreadsheets.
These plans need to be connected so the company grows the right product to meet its needs to optimize profitability and the store-level needs based on its customers’ demands. The grower must really begin to think and act like a retailer – what are sales per square foot, turns, product generating excess inventory, etc.? The production plan must be based on real sales data, not what a manager “likes to grow.”

2 Transportation costs. Obviously, in this era of high fuel prices, significant attention must be paid to transportation costs. Is this function centralized? How are shipping efficiencies being measured? Is there a plan to decrease transportation costs and how are you monitoring that it is being carried out? Often, the mere act of setting a goal and then understanding why it is not met can mean significant improvement to the bottom-line.

3 Raw Materials. Growers do not use a lot of raw material, but recycling materials and limiting use of soils, fertilizers and pots can make a big difference in profitability. For example, if the size of a pot can be reduced 10 percent, the savings can be significant on soils, fertilizers and plastic. In addition, centralization of the buying function and the leverage it creates can result in significant cost savings. At times, in-sourcing certain functions, such as soil mixing or propagation can result in savings.

4 Labor. Labor is the most significant cost for most growers, and controlling labor costs can have a great impact on profitability. There are several keys to decreasing labor costs. The starting point for reducing labor cost is a focus on creating a culture of continuous improvement that will vastly reduce labor needs. That culture is created by a respect for the worker and his knowledge of how jobs may be done more efficiently. This type of open culture creates more energized, efficient workers, which decreases needs for additional labor.

Once performance improvement techniques are identified, a clear map of the roles and responsibilities of each worker is needed. We are always amazed at how many workers are doing what they like to do the way they like to do it instead of what the company needs them to do.

Finally, once efficiencies are gained – and only when efficiencies are gained – should the company look at overtime and headcount reduction goals.

Controlling Inventory

Virtually every grower is faced with a frustrating amount of excess inventory. With unexpected reductions in sales volumes, growers naturally have too much product and have the daunting task to avoid getting overwhelmed with slow-moving and obsolete inventory.

One of the best ways to reduce inventory is a weekly supply and demand report. This report shows how inventory will be drawn down each week and informs the production plan, as well as a specific selling plan, for aging inventory. After all, if you have not clearly identified the problem (i.e. what you need to sell) it is awfully difficult to fix it.

On a proactive basis, potential future excess inventory needs to be managed. What types of plants and shrubs are ending up in excess inventory? Why? What can be changed in production planning so that excess inventory is minimized?

Takeaways

The challenges on growers in today’s market are enormous. There is not one magic bullet to fix the problem. However, a growers’ cash position and profitability can be improved very quickly if he is given the tools and processes that will allow improvement in expense reductions and sales increases.

By addressing the issues set out in this article and ensuring blocking and tackling every day to achieve key company objectives, a grower can move from a position of distress to an industry leader who will benefit, instead of suffer, from the difficult economic climate.

Leave a Reply

More From Finance/Operations...
Medal of Excellence Award

July 6, 2015

Get To Know The 9 Variety Finalists For Editor’s Choice And Industry’s Choice Awards

Greenhouse Grower‘s Evening Of Excellence reception is rapidly approaching. Here, you can learn more about the varieties that are finalists for the Medal Of Excellence Editor’s Choice and Industry’s Choice Breeding Awards. Thank you to the 2015 sponsors of Greenhouse Grower‘s Medal Of Excellence Awards, Landmark Plastic, Nufarm and Stockosorb. Editor’s Choice Asclepias ‘Monarch Promise’ (Hort Couture) Basil ‘Balsamic Blooms’ (EuroAmerican Propagators) Celosia ‘Dragon’s Breath’ (Sakata Seed) Dianthus Jolt Series (PanAmerican Seed) Salvia Grandstand Series (Green Fuse Botanicals) Scabiosa ‘Kudos Pink’ (Hishtil Nurseries) Industry’s Choice Basil ‘Balsamic Blooms’ (EuroAmerican Propagators) Bidens BeeDance Series (Suntory Flowers) Celosia ‘Dragon’s Breath’ (Sakata Seed) Dianthus Jolt Series (PanAmerican Seed) Lobelia ‘Starship Deep Rose’ (Kieft Seed) Vinca Valiant Series (PanAmerican Seed)     Join us Monday, July 13 in Ballroom 2 at the Columbus Convention Center to find out which varieties will receive the coveted awards. The reception begins at 5:15 p.m. and the ceremony […]

Read More
crider-rd2-internal_Rough-Brothers_featured

July 1, 2015

Rough Brothers Is Acquired By Gibraltar Industries

RBI Solar Inc., Rough Brothers Manufacturing Inc. and affiliates have been acquired by Gibraltar Industries, a manufacturer and distributor of products for residential and industrial markets, for $130 million. Capitalizing on its 80 years of design-build experience and leadership as the largest greenhouse manufacturer in North America, Ohio-based RBI has established itself during the past five years as North America’s fastest-growing provider of photovoltaic (PV) solar racking solutions. The transaction will enable Gibraltar to leverage its expertise in structural metals manufacturing and materials sourcing to meet global demand for solar racking solutions. The company also announced that it anticipates its second-quarter 2015 financial results will be in line with its previous expectations. “Acquiring RBI is an important step in the transformation of Gibraltar into a company with a higher rate of growth and best-in-class financial metrics,” says Gibraltar CEO Frank Heard. “This acquisition directly aligns with key end markets and product platforms […]

Read More

June 30, 2015

Opportunities Abound For Women In Horticulture, Says Dosatron International’s Lela Kelly

My love for horticulture goes back to my grandparents who were farmers in upstate New York. My family’s involvement in agriculture left a lasting impression that has spanned decades, and still drives my passion for our industry today. I started my career in horticulture when I owned a greenhouse, nursery and garden center in Sayville, Long Island, N.Y. We specialized in ground cover production, later branching out to producing perennials and bedding plants.     I then went onto wholesale hard goods distribution. In the 1980s, I was the first woman salesperson on Long Island. What an eye opener that was! New York is a very special place, different from anywhere else in the country. You cannot imagine how difficult it was walking into greenhouses and nurseries as a woman, in a man’s world. Luckily, I grew up in New York City in an Italian family, who taught me great […]

Read More
Latest Stories
thermoflor

June 16, 2015

Philip Schaafsma To Represent Thermoflor In The U.S.

Philip Schaafsma is a new sales representative for Thermoflor, a company with a lot of experience building garden centers worldwide. The history of the Dutch construction company Thermoflor goes all the way back to 1877. Since then, the company has been through a lot of changes, from simple conservatories to complex glass and steel turnkey projects. With a new sales representative, Thermoflor is well equipped to service the American market. Previously, Petitti Garden Center (Avon, Ohio), Chuck Hafner (Syracuse, N.Y.), Jacob’s Garden (Ottowa Lake, Mich.), Hicks Nurseries (Westbury, N.Y.) and Holes (Alberta, Ca.) were all built by Thermoflor. After a period of absence, the company is now  represented in the U.S. and Canada by Schaafsma, who has more than 40 years of experience in retail lawn and garden, greenhouse growing and the floral industry, and is a former board member of the Garden Centers of America. Schaafsma is the former owner […]

Read More

June 15, 2015

Hortica Insurance To Become Member Of Sentry Insurance …

Upon completion and approval of an affiliation agreement, Hortica Insurance (Florists' Mutual Insurance Company) will become a member of the Sentry Insurance Group, based in Stevens Point, Wis. As a member of the Sentry Insurance Group, Hortica keeps its name and brand and will continue doing business from its current headquarters in Edwardsville, Ill.

Read More
Cal-Poly fields

June 2, 2015

Cal-Poly Students Seek Continued Industry Support To Sa…

Agriculture students and faculty at California Polytechnic State University, San Luis Obispo, want industry members to continue to stand with them in their effort to preserve Class 1 agricultural land from being repurposed. The university recently released an update to its Master Plan that indicates that almost all of its orchards, horticulture facilities and field sites could be repurposed for buildings, including residential and/or recreational space. According to Joel Leonard of Students For Agriculture, an organization of Cal-Poly students in favor of saving the land, the Master Planning Committee will be meeting over the summer to form a final version of its plan and present it once more to the public in the fall, before it is submitted for final approval to the California Board of Trustees. Students For Agriculture’s goal in the meantime is to increase awareness and rally industry supporters to continue to send their input to the planning committee. Visit studentsforag.com to see more […]

Read More
Cal-Poly fields

May 27, 2015

Cal-Poly Students And Faculty Ask Industry To Help Save…

California Polytechnic State University, San Luis Obispo, has released an update to its Master Plan that indicates that almost all of its orchards, horticulture facilities and field sites could be repurposed for buildings, including residential, and/or recreational space. According to a letter from Scott Steinmaus, the horticulture and crop science department head, the proposed changes directly affect the current orchard plantings and other long term plans for the department. The department is committed to making sure that its facilities remain invaluable teaching environments that enable its students to learn about crop, fruit and horticulture production, food safety and pest protection, in addition to providing sites for externally funded research projects that benefit the industry. Industry members are invited to submit comments to the university. According to Steinmaus, a recent eMail to the Cal-Poly community from the university president indicates that all of the input gathered through the end of May will be studied by the planning […]

Read More
people-of-Battlefield

May 13, 2015

Battlefield Farms Receives MPS-A Qualification

Battlefield Farms, Inc., in Rapidan, Va., has been awarded the MPS-A qualification after becoming a participant for MPS-ABC in 2010. After four years of showing effort and improvement, the company has been awarded the qualification.

Read More
Barry_Sturdivant_columnpic

May 8, 2015

How To Survive Succession Planning And Resolve Conflic…

If you work in agriculture, you most likely work with family-owned businesses. This is especially true within the greenhouse industry. I’m fortunate to work for a company that specializes in financing and supporting such businesses. Family-owned businesses often have a level of commitment and support that helps during lean times. This is important for a company exposed to seasonality and events that are sometimes beyond management’s control. Business owners and management are constantly looking for solutions to the unique issues faced by these small but complex businesses. Specifically, how these issues affect the transition from one generation to the next. There are many family enterprise success stories, cases of harmony, health and longevity. Yet it’s no secret that family businesses can struggle with governance, leadership transitions and even survival. According to the Family Business Institute, only 30 percent of family businesses last into the second generation, 12 percent remain viable […]

Read More

April 30, 2015

North Creek Nurseries Welcomes Nikki Drake As New Finan…

Nikki Drake will fill the role of new financial administrator at North Creek Nurseries, with responsibility for the accounting department. She will also serve on the strategic planning committee.

Read More
Andy Huntington Pleasant View

April 29, 2015

Pleasant View Gardens Promotes Andy Huntington to Natio…

Pleasant View Gardens recently announced that Andy Huntington will be the company’s National Sales Manager. Huntington, who has years of horticulture industry experience, will oversee national territory and inside sales departments, while fostering strong partnerships with customers. “Our relationships with customers are central to all that we do at Pleasant View,” Huntington says. “In my new role, I am excited to work with a broader base of broker, grower and retail partners to understand their business needs. Pleasant View’s goal is to be so in tune with our customers that we are able to anticipate their problems before they arise.” Huntington has a history of growing sales and forming long-lasting relationships with a diverse customer base. For the past two years, he has been working as a territory account manager for Pleasant View Gardens, responsible for young plant liner sales in New England and New York. Prior to that, Huntington was […]

Read More
PittMoss on Shark Tank

April 22, 2015

PittMoss Wins On Shark Tank

Mont Handley, president and CEO of PittMoss, appeared on ABC’s Shark Tank on April 17 to try to get the “sharks” to invest in his peat moss alternative. Three investors from the TV show contributed $600,000 to PittMoss for a 35 percent stake in the company. Check out this clip from ABC’s website in which Mark Cuban, Kevin O’Leary and Robert Herjavec discuss getting on board with the product. PittMoss is an alternative to sphagnum peat moss, made up of a mix of proprietary additives and recycled paper rescued from landfill space. Handley founded the Pittsburgh-based company in 1994. What started as a small experiment grew into a full-fledged business with the help of funding provided by an EPA SBIR grant and Pittsburgh’s Idea Foundry. Today, PittMoss is available to commercial greenhouses and nurseries from Michigan to Maine to North Carolina, with plans to grow. To learn more, visit PittMoss’ website, or check it […]

Read More
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