Nursery Production Exam One

A business or facility where plants (hardy trees, shrubs, ground covers, vines, and herbaceous plants) are grown to a desired size

Plant Nursery

Any place that produces and sells $10,000 or more in a calendar year

Horticultural Specialty Operation

includes all “farms” which produce and sell $1,000 or more agricultural products

USDA

Who and where had the first major nursery?
What was the name of the nursery?

Robert & William Prince in New York
Linnaean Botanic Garden and Nurseries

Who is the founding father of the nursery industry?

William Prince

Where and what is the oldest nursery still in operation today?

Mosty Brothers Nursery - Kerrville Texas 1897

Plants grown by nurseries which contribute to the well-being of those purchasing/planting/enjoying them

Sociohorticulture

Benefits:
Concentration & memory
Learning
Educational programs
Happiness
Stress reduction
Health & recreation

Healing
Mental health & more

Plants grown by nurseries which contribute to the well-being of the environment

Ecological

Benefits:
Carbon sequestion
Wildlife attraction/support
Energy savings
Reduce noise pollution
Reduce soil erosion
Reduce stormwater runoff
Form windbreaks

What are issues we are trying to solve in the nursery industry?

Labor, mechanism & automation, efficiency

Why is labor an issue?

Labor costs could be over 50% of the total cost of goods sold, finding skilled workers is hard with increasing labor costs, ornamentals require more labor per acre than any other type

Why is mechanization & automation an issue?

New technology is changing how nurseries run, this is from moving plants, transplanting them, propagating them etc.

Why is efficiency an issue? Shipping.

There can be damage to plants when they are stuffed into trailers, lots of plastic waste, lots of labor intensive, loss of plants

What are environmental issues mentioned in class?

Water, eutrophication (excessive N + P), recollection on pond sites, plastics, recycling, invasive species, herbicide drift

Why is water an environmental issue?

Finding water is hard, a small volume of media holds plants, over-irrigation leads to high water loss

Solution: increase efficiency of irrigation systems

What is eutrophication?

Loose N & P into body of waters which lead algae bloom to grow when exposed to air and sunlight

Why/what is herbicide drift?

When herbicides drift onto nurseries from nearby farms

What are the steps to starting a nursery?

Planning, financing, site selection, preparation of site, meeting regulations, product preparation, marketing, and selling

What goes into the planning portion of nursery businesses?

Developing a business plan
What type of business are you building - the type of business determines everything

What are the four classifications of nurseries?

Ownership, function, production system, and the product

The four functions of nurseries talked about in class?

Wholesale, retail, re-wholesale, and mail-order

Growing and selling in large quantities to be retailed by others ~85-90% nursery sales

Wholesale

The sale of good to the public in relatively small quantities for use or consumption rather than for resale ~10-15% nursery sales

Retail

A combination of wholesale and retail, dependent on wholesales

Re-Wholesale

Receiving product orders via mail or the internet and shipping them to consumers, the product is generally grown by the seller

Mail/Online orders

• grow limited varieties but produces a lot

• tend to have more technological advancements but still lacking

• mostly large establishments

• business to business model

• high volume of limited products

  • sell their plants in wholesale units

  • may specialize in a particular type of plant materials

Wholesale

What do you need for wholesale nurseries?

Large plots of land (tons of acres)

Large workforce (skilled employees for propagating, movement, loading and unloading, hand fertilization, and transplanting)

Distribution channels

Accessible locations (semi’s can get in and out)

Low overhead (do not have to worry about the public only the employees)

Name the different type of wholesales

Container

• most in Texas

• grows plants in containers

• it is easier for the climate/weather conditions and easy transportation

Balled & burlapped

• hand dug

• sell trees which are grown in ground then need to be dug up

• lots of work

• dig root ball in tact then wrap a burlap sack

Bareroot

• root ball or sack

Advantages:

• less interaction with the public

• high efficiency

• greater potential for revenue

Disadvantages

• sensitive to economic downturns/changes

• higher startup costs

• more risk

Wholesale

• generally small in size

• sell product directly to the consumer

• greater diversity of plants

• rare for them to produce their own crops b/c of limited space and/or high costs

Retail

What do you need for retail nurseries?

Location location location

Smaller/more skilled workforce

Relatively small plots of land

Parking requirements

Advantages:

• more interaction with the public

• utilize social media

• greater diversity of plants

• charge a premium

• can provide horticultural & decorative products

Disadvantages:

• requires more consumers to make more money

• less efficient

• less knowledgeable clientele

• competition from “big box” stores

Retail

• purchase large orders of various plants from wholesale producers and resell the plants to landscapers requiring diverse but smaller orders

• function is to locate, purchase, and assemble in a convenient location

  • 5-6 days wholesale

  • 1-2 days retail

• main focus on wholesale

• greater diversity of plants compare to wholesale

Re-wholesale

What do you need for re-wholesales?

Large plots of land (but smaller than wholesale, plants set up for display purposes)

Smaller workforce than wholesale

Distribution channels

Highly accessible location (be closer to consumer, little outside of cities and must be accessible by the road)

Very low overhead (not in production, only maintenance of plants, land is the biggest overhead cost or office space)

Advantages:

• less technical knowledge

  • not directly with public, but should have knowledge about plants

• easy to change product mix

  • change in trend = easy change

Disadvantages

• profit margin is small

  • profit is high turnover, open to public to reduce shrinkage

• must find an ideal location

  • closer to clients than wholesales

• highly dependent on the housing market

Re-wholesales

• sell directly to end customer

• plants are shipped directly to the customer rather than sold at retail outlet

  • sent straight to the doorstep

• a great option for nurseries that produce specialty plants and whose customers are located across the country/globe

• sell bare root or small container-grown plants, larger plants sold if highly valuable

  • cannot/won’t ship plants with media because of regulations or high shipping costs

Mail/online order

What do online/mail order nurseries need?

Cheap land

Small/skilled workforce (no face-to-face but needs to have good marketing

Small plots of land

Access dependable on shipping

Marketing

Advantages

• not bound by traditional business hours

• highly diversible product mix

• no need for land or retail space

• work when you want

• high profit margins

  • click buy or individuals who want specific products and won’t care about the price

• excited customer base

Disadvantages

• shipping can be difficult

  • how plant is delivered

  • 3rd person shipping company

• no built-in customer base

  • need to have good marketing

• more regulation

  • out-of-state or international

Re-wholesale

The two production systems?

Container or field nursery

Three types of container nurseries?

Traditional (above ground) containers

Wooden boxes (above ground)

Pot in pot (above or belowground)

Three types of field nurseries?

Bare-root

Balled & burlapped

Field grown then potted

Which is more dominant, container or field nurseries?

container

What does container production rely on?

Location & environment

Match the terms:

• plastic containers on weed barriers or rocks

• trees mostly utilize this

• convenient and stability or temp control

Choices: wooden boxes, pot-in-pot or traditional

Traditional

Wooden box

Pot-in-pot

plants are dug and have the soil removed from their roots as they are harvested

bare-root

plants are dug with an intact soil/root ball, the ball is wrapped in burlap

balled and burlapped

Advantages of ___:

• year round sales

• ease of transport

• can ship on the same day as ordered

• containers relocated to suit cultural requirements

Disadvantages of ___:

• cost more to produce

• can lead to poor quality root systems (depends on the knowledge of the planter)

• requires more maintenance/inputs

• large-sized materials can be cumbersome

Container nursery (container, pot-in-pot, wooden boxes)

Advantages to __:

• often higher quality of plant material

• maintenance/inputs reduced

• generally cheaper to produce

Disadvantages to __:

• specialized equipment for harvest

• highly seasonal

• can be difficult to ship (higher density = more shipping costs)

• advanced notice needed for purchase

Field nursery (bare root, B&B, grow bags)

owned and run by one individual

no distinction between owner and the business (entitled to all profits, but responsible for all losses, debts, and liabilities)

no action is necessary to form (must obtain proper permits and licenses)

taxes for yourself and your business are one and the same

any type of risk, missing payments, legal trouble, getting sued = they take everything house, car, etc.

sole proprietorship

Advantages of __:

• formation is easy and inexpensive

• complete control over the business

• simplified tax preparation (single-tax)

Disadvantages of __:

• unlimited personal liability

• difficult to raise money (may not get enough funding)

• complete responsibility

• not the best option for nurseries

sole proprietorship

business owned by two or more people

partners share equally in all aspects of business (equal or 50/50 or however is legally documented)

decisions are made jointly

profits and losses “pass through” to individual owners (tax purposes)

4 types of partnerships

• general partnership - equal distribution

• limited partnership - limits liability and input of certain partners (ideal for short-term projects) one main and one lesser

• limited liability partnership - protects each owner from liability (more protection over liabilities used to start small businesses, more paperwork)

• joint venture - temporary general partnership (limits duration

may also be a silent partnership - one will not have a say in the day-to-day but will control the money

partnership

advantages of a __:

• relatively easy and inexpensive to start

• shared financial responsibilities

• mutliple skill-sets

• potential partnership incentives

  • find a partner who is an expert in something you do not know

disadvantages of a __:

• joint and individual liability

• potential personality conflicts

• sharing profits

Partnership

“independent legal entity owned by shareholders”

can make profit, be taxed, and held legally liable

generally advantageous for large, established companies

offers the opportunity to take your company public (IPO)

laws for incorporating are different in each state

profits and losses stay with the company, taxes are paid by the corporation (sometimes twice, profits and dividends)

business managed by Board of Directors

corporation

advantages of __:

• limited liability

• “public option” makes generation of capital easier

• corporate tax rate

• alluring to potential employees

• shareholders do not suffer when sued

disadvantages of __:

• start-up costs and time

• corporate tax rates (2025 is 21%)

• possible double taxing

• not great for nurseries

• increased paperwork

corporation

what are the two types of corporations?

S-corporation

• S corp

• single taxed

  • all taxation and business expenses paid for by the shareholders

• limited to 100 shareholders

C-corporation

• C-corp

• double-taxed

  • corporation pays taxes as well as the shareholders

  • unlimited shareholders

can avoid double taxation

unlike other corporations, profits and losses can “pass through” to personal tax returns

similar to LLC’s but more stable

tax credits are available

way more likely to be regulated (required shareholders meetings)

required compensation towards shareholders

S-corporation

advantages of a ___:

• limited liability but with less paperwork

• profits and losses can pass through personal income without paying corporate taxes

• profit sharing can be done much more freely

• cross between a corporation and a partnership

disadvantages of a __:

• fragile - when a member leaves it must be dissolved and reorganized

• members of it must pay self employment, Medicare, social security taxes

• profits and losses are passed onto members

limited liability company

businesses which are closely allied to nursery production

• landscape contractors

• nursery brokers

• garden centers

• mass merchandizers

• landscape management firms

allied areas

the national association for the green industry

founded on Jan 1st 2014

through the consolidation of the American nursery and landscape association (ANLA) and the association of horticultural professionals (OFA)

annual event is cultivate

AmericanHort

represents Texas green industry

Texas Nursery and Landscape Association (TNLA)

what are the necessities for ALL types of nurseries?

quality and quantity of water

good drainage (or ability to provide drainage)

appropriate topography

survery of previous use

proper zoning (industrial, commercial, residential, or the preferred agriculture)

environmental:

• water - quality and quantity

• climate

• topography - flat and good drainage

• soil - nutrients and quality

• air

economic:

• land - costs, acres of land, how much land, zoning, proximity to water

• labor - higher level positions, close to big cities

• facilities

• competition - other nurseries or big box stores

socio-political:

• population

• income distribution

• movement of other industries

factors when choosing a site

a mild __ with a long growing season and an even distribution of rainfall

Texas:

• very diverse environmental conditions

  • hardiness zones 10-6

• diverse soil types and rainfall distribution

• extreme weather conditions

climate

desired __ if leveled or flat for efficient nursery operations

topography

must know the history of the field (pesticides on __, previous crops, cultural practices)

appropriate __ physical and chemical properties

minimum 8-10” of well drained media - 3’ preferred

visual inspection can give an indication of suitability

soil

what is the best source for soil physical properties, topography, and the basic chemicals/nutrients?

Web of soil survey

located near a water source, minimum two but as many as possible, water quality + water treatment

important to prevent soil erosion

• < 5% slope

• green strips

located near a surface water source (can lead to a good source of quality water if you can tap in)

some field nurseries are not irrigated

adequate drainage necessary to prevent waterlogged soils

field production

soil physical properties are still important due to drainage

soil chemical properties are much less of an issue

container production

two potting areas (propagation to liner, liner to container

storage segmented for supplies needed for activity

container pads adjacent to shipping area

shipping adjacent to office

LONG time to get from one space to another

not efficient but “perfect”

one directional flow

LINEAR nursery layout

one potting area services both linear production and containers

one storage area for all activities

some of the container pads at a distance from shipping

office is centrally located but requires clients to traverse container pads

container pads are around everything

CONCENTRIC nursery layout

one potting area which services both linear production and containers

propagation prep separated from mist area

one storage area for all activities

some container pads at a distance from shipping

office centrally located but requires clients to traverse container pads

CURVILINEAR nursery layout

container pads

shade houses/lath houses

greenhouses

cold frames/hoop houses

potting sheds

propagation houses

all wholesale container nurseries will have either greenhouse structures or cold frames

structures nurseries will have

banks + investors want to see the __ projections

financial

3, 5, 10 year projections

shows profitability, still look at future projections after business is established

market study results

organizational structure

marketing plan - market research

management plan

sourcing labor

mitigation of environmental concerns

compliance with regulatory issues

the business plan

organization type

project capital requirements/cash flow

what is needed to start?

meet governmental requirements

miscellaneous (attorney, insurance, bank account, record keeping)

Initial financing

what do you need cash for starting up?

equipment

inventory

working costs

rent, utilities, salaries

marketing

legal fees

personal expenses

total startup costs + losses until break even

total capital

what are the two traditional sources of capital?

owners and creditors (bank, SBA, etc.)

profit = costs

break even

enlisting the services of a good attorney is essential

attorneys can:

• help with business structure decisions

• save you money on taxes

• foresee potential problems

• draw up helpful binding contracts

legal assistance

you need the following to manage __:

• adequate records

• financial statements

• balance sheet (net worth statement)

• income statement

• cash flow statement

finances

a statement of assets, liabilities, and capital

at least the last day of every fiscal year

balance sheet (net worth statements)

reports company’s performance over a specified period

how the business incurs its revenue and expenses

net profit or loss

income statement

shows how changes in the previous two statements affect cash and cash equivalents

cash flow statement

a ___ statement tells you how much cash is entering and leaving your business in a given period

cash flow 

a clean, methodical way of gauging your business

4 main types:

• liquidity ratio

• leverage ratio

• activity ratio

• profitability ratio

ratio analysis

match the following terms:

ability to meet short term debt

what portion of the business is financed by debt

how efficient is the business

returns on sales and investments

terms: liquidity ratio, activity ratio, profitability ratio, leverage ratio

liquidity ratio ability to meet short term debt

leverage ratio what portion of the business is financed by debt

activity ratio how efficient is the business

profitability ratio returns on sales and investments

“the degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. __ is characterized by a high level of trading activity. Assets that can easily be bought or sold are known as liquid assets.”

liquidity

“the ability of a company to meet its long-term financial obligations”

solvency

current assets / current liabilities

general test of solvency

should be around 1.25 to 2

if high you are holding onto too many assets

high liquidity ratio reduces risk but poor investment in current assets

current ratio

current assets-inventory / current liabilities

does not include inventory which is less liquid

should be around 1 to 2

if high you are holding onto cash you are not using

trade-off between “strong” and “fat”

quick ratio

current liabilities / net worth

shows debt relative to net worth

most common gauge of overall risk

shows the extent financed by debt

most industries average around 0.3

< 1 low risk

> > 1 high risk

debt to equity

net profit + interest / interest

measures ability to meet interest payments

bankers prefer this ratio to be around 8 times

times interest earned

accounts receivable / average daily credit sales

average daily credit sales = credit sales/# of days in period

related to credit policy “trade off”

should not exceed 1 to 3 times the credit period

fastest payment, should be low

average collection period

sales / inventory

shows how fast inventory is turning

some use COGS instead of sales if inventories are carried at cost

using inventory quality to raise funds

average inventory may be more appropriate

inventory turnover

sales / total assets

measures turnover of all firm’s assets

most industries average around 2 times

total assets turnover

net profit / sales

gives profit per dollar of sales

reflects pricing strategies, volume, level of expenses

used for pricing strategies

net profit margin

measures profit per dollar assets

to lender high return indicates safety

to owner high return indicates efficiency

keep checking level of asset base

return on assets

net profit / net worth = ROI x leverage factor

reflects to owner’s equity

should return > prime rate after 5 years

return on investment

return on equity

a cost that does not change with an increase or decrease in the amount of goods or services produced

must be paid, regardless of production time and quantity

depreciation, insurance, interest expense, property taxes, rent

fixed costs

an expense that varies with production output

increase as production increases, decrease as production decreases

production supplies, billable staff wages/commission, direct materials (substrates, containers, seeds, liners)

variable costs