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...
Cannabis In Greenhouse

July 27, 2016

The Top 5 Myths About Cannabis Production Cleared Up

There is a lot of misleading information going around about growing cannabis. Industry insider James Lowe makes sure you know the truth about cannabis production.

Read More
Joe Bischoff

July 26, 2016

SAF Partners With Cornerstone Government Affairs To Advance Industry’s Policy Priorities In Washington

A new partnership between the Society of American Florists (SAF) and Cornerstone Government Affairs ensures that SAF will continue its highly effective work advocating for issues that affect the floriculture industry. “SAF and Cornerstone together provide experienced voices on Capitol Hill to protect our growers’ interests,” says SAF CEO Peter Moran. “We’ll continue to move major policy priorities forward on behalf of small business and agriculture.” Cornerstone is a public affairs firm specializing in government relations, strategic consulting, and advocacy. Its team of more than 50 senior professionals includes former senior professional staff from both authorization and appropriations committees and the U.S. Department of Agriculture (USDA), as well as veterans of the horticulture industry. Agricultural and horticultural issues of primary concern to SAF members include access to labor, immigration, crop protection, international trade and other matters related to the day-to-day operations of growers. Before she retired this year, SAF lobbyist Lin […]

Read More

July 26, 2016

AFE Releases New Videos Highlighting Industry Successes

The American Floral Endowment (AFE) recently released five new videos, created to highlight floriculture successes through industry collaboration, support, and participation. “Each video shares real stories from industry members on career development through scholarships and internships, and true examples of research solutions that have shaped how the industry operates today,” says Laura Shinall, President of Syndicate Sales, Inc., and AFE Public Relations and Development Chair. “We’re excited to be able to share some great success stories in an effort to increase industry participation.” The introductory video “Heard of the American Floral Endowment?” helps educate those who aren’t currently aware of AFE’s programs, while other segmented videos (retail, wholesale, grower) share how Endowment programs complement each group and why it’s so important that everyone in the industry participates: Retail Florists Share Why They Turn to AFE New Resources for Floral Wholesalers and Suppliers AFE Helping Growers Profit Ready for a Career in Floriculture or Horticulture? […]

Read More
Latest Stories
Cannabis In Greenhouse

July 27, 2016

The Top 5 Myths About Cannabis Production Cleared Up

There is a lot of misleading information going around about growing cannabis. Industry insider James Lowe makes sure you know the truth about cannabis production.

Read More
Joe Bischoff

July 26, 2016

SAF Partners With Cornerstone Government Affairs To Adv…

A new partnership between the Society of American Florists (SAF) and Cornerstone Government Affairs ensures that SAF will continue its highly effective work advocating for issues that affect the floriculture industry. “SAF and Cornerstone together provide experienced voices on Capitol Hill to protect our growers’ interests,” says SAF CEO Peter Moran. “We’ll continue to move major policy priorities forward on behalf of small business and agriculture.” Cornerstone is a public affairs firm specializing in government relations, strategic consulting, and advocacy. Its team of more than 50 senior professionals includes former senior professional staff from both authorization and appropriations committees and the U.S. Department of Agriculture (USDA), as well as veterans of the horticulture industry. Agricultural and horticultural issues of primary concern to SAF members include access to labor, immigration, crop protection, international trade and other matters related to the day-to-day operations of growers. Before she retired this year, SAF lobbyist Lin […]

Read More

July 26, 2016

AFE Releases New Videos Highlighting Industry Successes

The American Floral Endowment (AFE) recently released five new videos, created to highlight floriculture successes through industry collaboration, support, and participation. “Each video shares real stories from industry members on career development through scholarships and internships, and true examples of research solutions that have shaped how the industry operates today,” says Laura Shinall, President of Syndicate Sales, Inc., and AFE Public Relations and Development Chair. “We’re excited to be able to share some great success stories in an effort to increase industry participation.” The introductory video “Heard of the American Floral Endowment?” helps educate those who aren’t currently aware of AFE’s programs, while other segmented videos (retail, wholesale, grower) share how Endowment programs complement each group and why it’s so important that everyone in the industry participates: Retail Florists Share Why They Turn to AFE New Resources for Floral Wholesalers and Suppliers AFE Helping Growers Profit Ready for a Career in Floriculture or Horticulture? […]

Read More
Briscoe White, Growers Exchange

July 6, 2016

The Grower’s Exchange Unlocks The Secret to E-Commerce

In the Internet era, Briscoe and Kenan White knew they had to adapt or die and specialize to survive. Here’s how they took The Grower’s Exchange online.

Read More
Brie Arthur

July 6, 2016

5 Can’t-Miss Events To Watch For At Farwest 2016

Whether it’s classes on biocontrols and gardening trends, or networking opportunities in and around the trade show floor, there’s plenty happening at Farwest 2016 in Portland, OR, in August.

Read More
Cannabis states 2016

July 1, 2016

Adult Use Of Cannabis On The Ballot In 2016

25 states have legalized cannabis and public opinion is increasingly positive. Here’s where things may be headed as we move toward the fall elections.

Read More
Practical Software Grower Vertical

June 18, 2016

Practical Software Solutions Increases Accessibility, E…

Practical Software will demonstrate Grower Vertical, its customizable and scalable enterprise management system for the horticulture industry, at Cultivate’16 in July.

Read More
Battlefield Farms Company shot

June 14, 2016

Battlefield Farms Is A Finalist For 2016 Operation Of T…

Battlefield Farms in Rapidan, VA, is one of three finalists for Greenhouse Grower’s 2016 Operation Of The Year award and winner of the Excellence In Innovation award for 2016.

Read More

June 7, 2016

Ball Seed Offers Full Mobile Ordering Capabilities With…

The latest update for Ball Seed’s WebTrack To Go mobile app now includes full ordering capabilities for the industry’s largest assortment of seeds and plants. App users can also complete order fulfillment via seed count or package size, find product substitutions, get personalized “contact us” information, request plant tags, and more. “Upgrading WebTrack To Go to the full suite of ordering and management tools is where we’ve always wanted to be,” says Mark Morris, Director of IT for Ball Seed. “With this new roll-out, we’re keeping up with our customers on-the-go and providing them the information and access they need –- even while away from their desks.” The Ball Seed WebTrack To Go app lets customers: Check order status and shipment tracking 24-7 Access up-to-the-minute product inventory from hundreds of suppliers Place orders by seed count, packet size, and more Find product info, culture and photos when and where they […]

Read More
Gotham Greens Atrium Style Greenhouse Chicago

May 23, 2016

What’s Good For The Environment Is Good For Business [O…

Investing in technology to become more sustainable “always goes hand in hand,” says Abe VanWingerden, co-CEO of Metrolina Greenhouses. “If it is good for the environment, it normally is good for business over the long term.” That connection was abundantly clear in the responses we received to this year’s Top 100 Growers Survey. VanWingerden points to three investments Metrolina has made as good examples of how technology can reduce an operation’s carbon footprint and pay dividends financially. Its biomass system burns locally sourced waste wood — a renewable resource; its ozone water treatment system cleans irrigation water, reducing the need for fertilizers and pesticides, and improving plant quality and precision growing; and electrostatic sprayers reduce water and chemical use, and provide more targeted chemical applications. Other Top 100 Growers have found VanWingerden’s theory to be true, as well. Costa Farms’ investment in solar energy panels on three buildings at its […]

Read More
Petunia 'Supertunia Violet Star Charm' (2015 University of Georgia Field Trials)

May 10, 2016

New Southern-Centric Ornamental Production Conference T…

The 2016 Academy of Crop Production is dedicated exclusively to sharing information on advanced ornamental crop production and business management techniques for ornamental producers.

Read More
University of Florida Online Greenhouse Training Courses

April 25, 2016

University of Florida Offering Online Training Courses …

There will be five courses offered, with the first starting on May 30. Courses are available in both English and Spanish and range from beginner level to advanced education.

Read More
Sanitation programs are essential to preventing and removing food safety concerns.

April 7, 2016

USDA Launches GroupGAP Program For Fruit And Vegetable …

The new certification program is designed to help small and mid-size growers, including greenhouse vegetable producers, comply with new food safety regulations.

Read More
Young Plants Farm North Carolina

March 15, 2016

Young’s Plant Farm Obtains MPS-A Qualification

MPS, an organization that develops and manages certification for companies in the horticulture industry, has awarded MPS-A certification to Young’s Plant Farm in North Carolina and Alabama.

Read More
Charlie Hall Feature Image

March 14, 2016

Dr. Charlie Hall Will Offer Keynote Address At Farwest …

The Texas A&M economist will discuss factors affecting short- and long-term demand driving the future of the green industry.

Read More
Seed Your Future Logo

March 8, 2016

Longwood Gardens And American Society For Horticultural…

Under the direction of co-chairs Paul B. Redman of Longwood Gardens and Anna Ball of Ball Horticultural Company, the “Seed Your Future” initiative is designed to combat declining awareness of horticulture while promoting it as a viable career choice.

Read More
Florida Green Industry

March 4, 2016

University Of Florida Study Shows Green Industry Genera…

According to the study, the rise of large retail chain stores with garden departments has made plants and other horticultural products more readily available to consumers than ever before.

Read More
Great Lakes Growers Expansion

February 22, 2016

Great Lakes Growers Expands Its Production Capacity For…

The Burton, OH-based grower has added 25,000 square feet to its operation, helping it to keep up with rising consumer demand.

Read More
[gravityform id="35" title="false" description="false"]