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Business analysis of container nurseries in Florida
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 Material Information
Title: Business analysis of container nurseries in Florida
Series Title: Economic information report
Portion of title: Container nurseries in Florida
Physical Description: v. : ; 28 cm.
Language: English
Creator: Perkins, George R
Almeter, Carolyn A
Dasse, Frank A ( Frank Arthur ), 1933-
Gunter, Dan L
Strain, J. Robert
University of Florida -- Food and Resource Economics Dept
Publisher: Food and Resource Economics Dept., Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville Fla
Creation Date: 1984
Publication Date: 1975-
Frequency: annual
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Subjects / Keywords: Nurseries (Horticulture) -- Economic aspects -- Periodicals -- Florida   ( lcsh )
Potted plant industry -- Economic aspects -- Periodicals -- Florida   ( lcsh )
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statistics   ( marcgt )
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Dates or Sequential Designation: 1973-
General Note: Title from cover.
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Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000408267
oclc - 08153546
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System ID: UF00026136:00010

Table of Contents
    Front Cover
        Front Cover
    Abstract
        Page i
    Acknowledgement
        Page i
    Table of Contents
        Page ii
        Page iii
    Main
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
Full Text
fp6

J. Robert Strain
Alan W. Hodges


Economic Information
Report 218


Business Analysis of Container
Nurseries in Florida, 1984




HUME L1BRA~ Rf


I.F.A.S. Univ. of Florida


Food & Resource Economics Department
Cooperative Extension Service
Institute of Food and Agricultural Sciences
University of Florida, Gainesville 32611


December 1985

















ABSTRACT


Average sales, costs and returns information are presented for 25 wholesale
woody ornamental container plant nurseries in Florida for the tax year of 1984.
Average value of plant sales was $323,468. Cash costs including a return to the
operator averaged $292,260. Non-cash costs and allowances including a 12 per-
cent return on investment amounted to another $78,905. When the return to the
operator and return on investment were deducted, remaining costs totaled
$276,860. After adjustments for change in plant inventory value and additions
for miscellaneous income, net nursery income averaged $99,038, and return to
capital averaged $64,697 for a 13.0 percent return on investment. Comparable
information is presented also for the average of the eight largest and eight
smallest nurseries in the study.

KEY WORDS: Woody ornamental container nursery business analysis, income,
costs, investment, efficiency measures, Florida.













ACKNOWLEDGEMENTS

This report was made possible by the cooperating 25 woody ornamental con-
tainer plant nursery operators who made available their production and accoun-
ting records on a confidential basis for analysis and averaging. In addition,
assistance and encouragement were supplied by Extension Ornamental Horticultural
Agents DeArmand Hull, Peter Larsen, Loretta Hodyss, Cathy Neal, Roger Newton,
Sylvester Rose, LaRue Robinson, Victor Yingst, Charles Lowery, Jerry Southwell,
and Jim Ward. Acknowledgement and appreciation of the help received, however,
does not alter the fact that errors in the data or in the interpretation of the
information presented herin are the sole responsibility of the authors.

















ABSTRACT


Average sales, costs and returns information are presented for 25 wholesale
woody ornamental container plant nurseries in Florida for the tax year of 1984.
Average value of plant sales was $323,468. Cash costs including a return to the
operator averaged $292,260. Non-cash costs and allowances including a 12 per-
cent return on investment amounted to another $78,905. When the return to the
operator and return on investment were deducted, remaining costs totaled
$276,860. After adjustments for change in plant inventory value and additions
for miscellaneous income, net nursery income averaged $99,038, and return to
capital averaged $64,697 for a 13.0 percent return on investment. Comparable
information is presented also for the average of the eight largest and eight
smallest nurseries in the study.

KEY WORDS: Woody ornamental container nursery business analysis, income,
costs, investment, efficiency measures, Florida.













ACKNOWLEDGEMENTS

This report was made possible by the cooperating 25 woody ornamental con-
tainer plant nursery operators who made available their production and accoun-
ting records on a confidential basis for analysis and averaging. In addition,
assistance and encouragement were supplied by Extension Ornamental Horticultural
Agents DeArmand Hull, Peter Larsen, Loretta Hodyss, Cathy Neal, Roger Newton,
Sylvester Rose, LaRue Robinson, Victor Yingst, Charles Lowery, Jerry Southwell,
and Jim Ward. Acknowledgement and appreciation of the help received, however,
does not alter the fact that errors in the data or in the interpretation of the
information presented herin are the sole responsibility of the authors.












TABLE OF CONTENTS


ABSTRACT . . . . . . . . .
ACKNOWLEDGEMENTS . . . . . . . .
LIST OF TABLES . . . . . . . .


INTRODUCTION . . . . .


PROCEDURE . . . . . . . .
DEFINITIONS . . . . . . . .


DATA AND RESULTS . . . . .


Size of Business . . . .
Rates of Production . . .
Labor Efficiency . . . .
Efficiency in the Use of Capital . .
Dollar Costs by Expense Category* . .
Percent of Total Costs by Expense Category*.
Cost Per Square Foot of Production area* .
Cost Per Dollar of Sales Adjusted for Invento
Cost Per Dollar of Sales* . . .


>ry Change* .


Income Summary . . . . . . .
Total Gain . . . . . . .
Net Nursery Income . . . . . .
Return on Capital. . . . . . .
Factors Associated With Level of Profits . . . .


Size of Business . .
Production Rate . .
Labor Efficiency . .
Use of Capital . .
Level of Costs . .
Cost Efficiency . .
Growth in the Business .


Range of Figures . . . . . . .
CONCLUDING COMMENTS . . . . . . .


*These sections also contain the
Salaries and Wages
Production Supplies
Other Production Costs
Administrative and Overhead
Total Cash Costs
Non-Cash Costs
Total All Costs


following subcategories:


. .


4


















LIST OF TABLES


Table Page
1 Size of business, 25 wholesale woody prnamental container nurseries
in Florida, 1984 . . . . . 5

2 Rates of production, 25 wholesale woody ornamental container
nurseries in Florida, 1984 . . . . . 6

3 Labor efficiency, 25 wholesale woody ornamental container nurseries
in Florida, 1984 . .. . . .. . . 7

4 Efficiency in the use of capital, 25 wholesale woody ornamental
container nurseries in Florida, 1984. . . . . 9

5 Dollar costs by expense category, 25 wholesale woody ornamental
container nurseries in Florida, 1984. . . . ... 11

6 Percent of total costs by expense category, 25 wholesale woody
ornamental container nurseries in Florida, 1984 . . .. 13

7 Costs per square foot of production area, 25 wholesale woody
ornamental container nurseries in Florida, 1984 . .... 15

8 Costs per dollar of sales adjusted for change in plant inventory,
25 wholesale woody ornamental container nurseries in Florida, 1984. 17

9 Cost per dollar of sales (no adjustment for change in plant inventory)
25 wholesale woody ornamental container nurseries in Florida, 1984 .19

10 Income summary, 25 wholesale woody ornamental container nurseries
in Florida, 1984 . . . . ... ... .. .21

11 Factors associated with level of profit, 25 wholesale woody ornamental
container nurseries in Florida, 1984. . . ..... 23

12 Range of figures on factors associated with level of profit,
25 wholesale woody ornamental container nurseries in Florida, 1984. 27















BUSINESS ANALYSIS OF CONTAINER NURSERIES IN FLORIDA, 1984


J. Robert Strain and Alan Hodges


INTRODUCTION


This publication contains information on sales, costs, returns and produc-
tion efficiency for woody ornamental container nurseries in Florida for 1984.
Other publications in this series includes reports on Dade County Florida foli-
age plant nurseries, South Florida foliage plant nurseries, and Central Florida
foliage plant nurseries.
Purposes of the nursery business analysis series include:
1) Furnishing nursery operators with various physical and economic measures
that may be used in evaluating the efficiency of individual nurseries;
2) Supplying cooperating nursery operators with data so that they may make
more informed management decisions;
3) Providing individuals considering entering the wholesale plant production
business with an estimate of the input requirement and revenue potential; and
4) Providing Florida Extension personnel with data for conducting education-
al programs with nursery operators.


PROCEDURE


The information and averages presented in this report are based on data sup-
plied by 25 nursery operators in the form of confidential production and ac-
counting records. They participated in the program voluntarily and do not rep-
resent a statistically selected sample. In fact, the nursery operators partici-
pating in the Florida Nursery Business Analysis Program are thought to represent
some of the more efficient woody ornamental container nurseries in Florida,
rather than being typical of the woody ornamental container nursery industry.


J. ROBERT STRAIN is an extension economist and professor, ALAN HODGES is a
research assistant, both in IFAS Food and Resource Economics Department.






2



Data were collected for the 1984 tax year. In some cases, data were receiv-
ed for a fiscal year that did not coincide with the 1984 calendar year. Data
for fiscal years ending after July 1, 1983 and before July 1, 1985 were included
with the 1984 calendar year data.
Not all nursery operators drew a regular salary from their operation. In
these instances, an estimate of the value of the time of the operator was col-
lected and used in the analysis in order to provide a more equitable basis for
comparing data. For the same reason, interest expense paid by the individual
nursery operator was excluded from the costs listed in this report. Instead, an
interest charge for the total owned investment was calculated at the rate of 12
percent per year and included as a non-cash cost.
The owned capital investment reflects the depreciated book value of build-
ings, improvements, machinery and equipment. Growing plants also are included
as a part of the owned capital investment, but at a value lower than the regular
wholesale price. This is because, in a normal growing operation, most of the
plants in inventory are not of a salable size. Some will barely be started,
some ready to sell, and others scattered in between. A common practice is to
value all plants, whether just started or almost finished at 50 percent of their
wholesale price if finished. However, some nursery operators use other methods.
For this report, the values received from the nursery operators were the values
used. Land included in owned capital investment was valued at the original pur-
chase price. While this may not represent the investment of a nursery operator
is he or she were to buy the land in 1984, it does represent the investment ac-
tually involved in the operation.
The data from individual nurseries are averaged and presented in tabular
form. The tables present average values for all 25 nurseries, for the eight
"largest" nurseries, and for the eight "smallest" nurseries. The largest nurs-
eries had plant sales valued at $500,000 or more. The smallest nurseries had
$100,000 or less in sales.
Nurseries participating in the program were located in the counties of Bre-
vard, Broward, Collier, Dade, Hardee, Hillsborough, Lake, Lee, Palm Beach,
Pinellas and Polk. Nursery operators received an analysis for their own opera-
tion shortly after they supplied their data. Their analysis followed the same
format used in this report.











DEFINITIONS


In general, the terms used in this report are thought to be self explani-
tory. However, experience indicates that some of the terms used here are less
familiar than others. They are defined as follows, and again later where they
are used:

Value of own plants sold: the value of total plant sales minus the cost of
plants purchased for immediate resale. The cost of plants purchased for grow-
ing-on are not deducted.

Fulltime equivalent employee: the equivalent of one person working 40 hours
a week for 52 weeks a year (2080 hours a year). The most common method for ob-
taining the number of fulltime employees for this report was to divide the total
annual payroll hours for the nursery by 2080, and then add on the number of fam-
ily and management people not paid on an hourly basis.

Capital owned: the current value (cost after adjusting for depreciation
taken in prior years) of capital assets, or current investment in the nursery
operation. Related debt is not deducted in this determination of the value of
capital owned.

Capital managed: the sum of capital owned plus the value of additional cap-
ital items used and under the control of the manager. Rented land and leased
buildings, equipment, etc., would be added to capital owned to obtain the value
of capital managed in the nursery operation.

Annual turnover of capital: the percentage that results from dividing the
value of own plants sold by the value of capital (either owned or managed). It
is annual plant sales stated in terms of percent of the capital involved.

Total gain: the sum of plant sales, changes in plant and supply inventor-
ies, and miscellaneous cash income. It represents the total effect of the
year's operation, be it in the form of cash received of in the form of change in
values of inventories.

Net nursery income: the net effect of the year's operation. To obtain it,
all cash costs (except operator's salary), and all non-cash costs (except the 12
percent non-cash interest allowance on capital) are subtracted from total gain.
The result is the return for the time and managerial skills of the operator, and
for the use of the capital invested in the operation.

Return to capital: the portion of net nursery income that is left after
subtracting the salary or time value of the operator. It is what the owned cap-
ital earned.

Rate of return on capital: return to capital divided by the value of owned
capital. It is the rate earned on the capital invested.










DATA AND RESULTS


The data in the first nine tables present various size and efficiency mea-
sures. Data in Tables 10 through 12 relate to the profitability of woody orna-
mental nurseries. In the first four tables, more than one measure of efficiency
could be used. The first item in each table has traditionally been presented as
"The one best measure." It is followed by other measures that also are useful
for certain purposes or are meaningful to many growers. Where information in
the tables is presented to the nearest whole number, arithmetic inconsistencies
from rounding may be noted.


Size of business (Table 1)


Size of business data in Table 1 is basic. When combined with cost data in
Table 5, it provides most of the data required for developing the remaining
tables in this report.
For size of business, the one best measure selected was "Value of own plants
sold" (Table 1 item A). In other words, this is income from the sale of the
plants grown in the nursery. It averaged $323,468 for the 25 nurseries. For
the eight largest nurseries, it was $608,736, or about double the average. The
smallest ones had $61,304, or about 20 percent of the average. Adjusting sales
for change in value of plant inventory (Table 1 item B) did not alter materially
these relationships.
Production area (Table 1C & ID) averaged 7.6 acres (330,028 square feet) for
the 25 nurseries. For the eight largest nurseries, it was 13.7 acres (598,725
square feet). The eight smallest nurseries had 2.1 acres (89,677 square feet),
or about a fourth of the average.
Employee numbers (Table 1E) for the 25 nurseries averaged 10.4 people. For
the largest nurseries, it was 18.7 persons, not quite double the average. The
eight smallest nurseries averaged 2.8 people, or about a fourth of the average.
Capital owned (Table 1K) averaged $499,698 for the 25 nurseries. For the
eight largest nurseries, it was $775,442, or 1.6 times the average. The eight
smallest nurseries had $189,076, or 37 percent of the average.
Capital managed (Table 1Q) averaged $542,094. For the largest nurseries, it
was $874,181. Smallest nurseries had the same amount of capital managed as cap-
ital owned.














Table l.--Size of business, 25 wholesale woody ornamental container nurseries in
Florida, 1984.

Average Average Average
Item Unit all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
The one best measure
A Value of own plants sold(a) $ 323,468 608,736 61,304
Other useful indicators of size
Value of own plants sold
B adjusted for change in $ 361,261 682,440 76,763
plant inventory value

C Plant production area. sq ft 330,238 598,725 89,677
D Plant production area. acres 7.6 13.7 2.1

E Average fulltime
equivalent employees(b). number 10.4 18.7 2.8

Capital owned(c) in:
F Growing plants ...... $ 309,704 460,593 85,333
G Land .. . $ 57,964 71,718 61,106
H Machinery & equipment. $ 46,752 78,593 16,191
I Buildings & improvements $ 69,634 144,508 15,134
J Supplies . . $ 15,644 20,031 11,312
K Total owned capital $ 499,6.98 775,442 189,076

Capital managed(d) in:
L Growing plants ...... $ 309,704 460,593 85,333
M Land . . $ 100,240 170,457 61,106
N Machinery & equipment. $ 46,872 78,593 16,191
0 Buildings & improvements $ 69,634 144,508 15,134
P Supplies . . $ 15,644 20,031 11,312
Q Total managed capital $ 542,094 874,181 189,076


(a) Value of own plants sold--is the value
cost of plants purchased for immediate resale.
growing-on is not deducted.


of total plant sales minus the
The cost of plant purchased for


(b) Fulltime equivalent employee--is the equivalent of one person working 40
hours a week for 52 weeks a year (2080 hours).

(c) Capital owned--is the current value (original cost less depreciation taken)
of capital assets in the nursery operation. Related debt is not deducted in
this determination of the value of capital owned.

(d) Capital managed--is the sum of capital owned plus the value of addition-
al capital items used and under the control of the manager (e.g., rented land).










Rates of Production (Table 2)


"Value of own plants sold per square foot of area in production" (Table 1
item A divided by item C) was selected as the one best measure of nursery pro-
duction rate. The average value for the 25 nurseries was 98.0 cents. For the
eight largest nurseries, it was 101.7 cents per square foot. The eight smallest
nurseries had 68.4 cents per square foot, or two thirds of the average sales per
square foot of production area.
When sales were adjusted for change in inventory value (Table 1B divided by
1C), the rate increased 11 cents per square foot, to 109.4 for all 25 nurseries.
Largest nurseries increased 12 cents to 114.0, and smallest nurseries increased
17 cents to 85.6 cents per square foot.
Production rate per square foot was given preference because of the ease in
comparing it with costs per square foot as presented later. However, these data
are also shown in terms of dollars per acre in production for those who are more
accustomed to thinking in these terms.
Plant inventory values per acre in production (Table 1F divided by ID) a-
veraged $40,851. For the largest nurseries, it was $33,510, about 82 percent of
the average. The average per acre for the smallest nurseries was $41,450.

Table 2.--Rates of production, 25 wholesale woody ornamental container nurseries
in Florida, 1984.

Average Average Average
Item Unit all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per
sq ft in prod. (Table IA/1C) cents 98.0 101.7 68.4
Other useful indicators
Value of own plants sold per
sq ft adjusted for inventory
change - (Table 1B/1C) cents 109.4 114.0 85.6

Value of own plants sold per
acre in prod. (Table IA/ID) $ 42,667 44,288 29,778
--- adjusted for inventory
change - (Table 1B/1D) $ 47,652 49,651 37,287

Plant inventory value per
acre in prod. (Table 1F/1D) $ 40,851 33,510 41,450










Labor Efficiency (Table 3)


"Value of own plants sold per employee" (Table 1 item A divided by item E)
was selected as the one best measure of labor efficiency. This averaged $31,253
per employee for the 25 nurseries. For the eight largest nurseries, sales aver-
aged $32,605, or four percent more than the average. The eight smallest nur-
series had $22,292 per employee. This was about three quarters of the average
sales per employee.
Adjusting for change in inventory value (Table IB divided by lE) increased
the average by $3,651 to $34,904. For the eight largest nurseries, the increase
was $3,948 per person to $36,553, nearly five percent more than the average.
The smallest nurseries were up $5,622 per person to $27,914, about 80 percent of
the average sales per employee..
Production area per employee (Table 1C divided by 1E) averaged 31,907 square
feet. For the largest and smallest nurseries, it was approximately the same,
32,069 and 32,610 square feet, respectively.









Table 3.--Labor efficiency, 25 wholesale woody ornamental container nurseries in
Florida, 1984.

Average Average Average
Item Unit all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per
employee (Table 1A/1E) $ 31,253 32,605 22,292
Other useful indicators
Value of own plants sold per
employee adjusted for change
in inventory (Table 1B/1E) $ 34,904 36,553 27,914

Average area in production
per employee (Table IC/1E) sq ft 31,907 32,069 32,610










Efficiency in Use of Capital (Table 4)


A number of possibilities exist for measuring efficiency in the use of cap-
ital. The one selected as the best single indicator was "Annual turnover of
owned capital value." This is the percentage that results from dividing the
value of own plants sold by the value of capital owned (Table 1A divided by 1K).
Annual turnover averaged 64.7 percent for the 25 nurseries. This means that
sales for the year equaled about two thirds of the capital invested. For the
eight largest nurseries, it was 78.5, which was a 14 percent faster turnover
rate than the average. The eight smallest nurseries had 32.4, which was but half
of the average turnover rate.
Capital invested per employee (Table 1K divided by 1E) averaged $48,280 for
the 25 nurseries. For the eight largest nurseries, it was $41,534, or about 86
percent of the average, indicating more efficient use of owned capital. The
eight smallest nurseries had $68,755 which was 42 percent higher than the
average.
Average capital investment per acre of nursery area (Table 1K divided by 1D)
was $65,913 for the 25 nurseries. For the eight largest nurseries, it was
$56,417, or 14 percent lower than the average. The eight smallest nurseries had
$91,843, or 39 percent more than the average.
Growing plants represented 57.1 percent of the capital managed by the 25
nurseries (Table 1L divided by 1Q). For the eight largest nurseries, 52.7 per-
cent. The smallest nurseries had 45.1 percent of their capital tied up in
plants.
Managed capital invested in land (Table 1M divided by 1Q) represented 18.5
percent of the average. For the largest nurseries, it was about the same, 19.5
percent. The smallest nurseries had 32.3 percent, or 14 percent more of their
capital in land.
Machinery and equipment (Table IN divided by 1Q) averages 8.7 percent of the
total capital for the 25 nurseries. For the largest nurseries, it was 9.0 per-
cent, about the same. It represented 8.6 percent of the total capital managed
in the smallest nurseries, also about the same.
Buildings and installations (Table 10 divided by 1Q) averaged 12.8 percent
for all 25 nurseries. The eight largest nur-series had 16.5 percent of their
capital in buildings. It represented 8.0 percent of the total for the eight
smallest nurseries.










Supply inventories (Table IP divided by 1Q) averaged 2.9 percent for all 25
nurseries. For the largest nurseries, the figure was only 2.3 percent. The
smallest nurseries encumbered 6.0 percent of the managed capital of the busi-
ness.


Table 4.--Efficiency in use of capital, 25 wholesale woody
nurseries in Florida, 1984.


ornamental container


Average Average Average
Item Unit all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
The one best measure
Annual turnover(e) of owned
capital value (Table 1A/IK) % 64.7 78.5 32.4
Other useful indicators


Annual turnover(e) of managed
capital value (Table 1A/1Q)

Per employee:
Capital owned (Table IK/lE)
Capital managed (Table 1Q/1D)

Per acre:
Capital owned (Table 1K/1D)
Capital managed (Table 1Q/ID)

Managed capital/employee in:
Plants- - (Table IL/1E)
Land- - (Table 1M/1E)
Mach & equip- (Table IN/IE)
Buildings (Table 10/1E)

Managed capital per acre in:
Plants- - (Table 1L/1D)
Land- - (Table IM/ID)
Mach & equip- (Table 1N/1D)
Buildings (Table 10/1D)

Percent of capital managed in:
Plants- - (Table IL/1Q)
Land- - (Table 1M/IQ)
Mach & equip- (Table 10/1Q)
Buildings (Table 1P/1Q)
Supplies- (Table 1Q/1Q)
Total nursery- (Table IQ/1Q)


59.7


48,280
52,376


65,913
71,505


29,923
9,685
4,529
6,729


40,851
13,222
6,183
9,187


57.1
18.5
8.7
12.8
2.9
100.0


69.6


41,534
46,823


56,417
63,601


24,670
9,130
4,210
7,740


33,510
12,402
5,718
10,517


52.7
19.5
9.0
16.5
2.3
100.0


32.4


68,755
68,755


91,843
91,843


31,030
22,220
5,888
5,503


41,450
29,682
7,865
7,347


45.1
32.3
8.6
8.0
6.0
100.0


(e) Annual turnover of capital value--is the
dividing the value of own plants sold (Table 1A)
1K or 1Q).


percentage that results from
by the value of capital (Table











Dollar Costs by Expense Category (Table 5)


Dollar costs by expense category were obtained from the annual profit and
loss statement or tax records of the participating nurseries. The cash cost
categories were grouped into wages and salaries, production supplies, other pro-
duction costs, and administrative and overhead expense. Dollar costs should be
useful for comparing the relative magnitude of the various cost items, and as a
guide to persons interested in Florida woody ornamental container nurseries as
an investment, either as buyers, sellers or lenders.
Salaries and Wages
The salary and wage group includes operator salary or time value. For the 25
nurseries, they averaged $137,357. For the largest nurseries, they were
$263,823. The smallest nurseries had $39,097, or one seventh that of the larg-
est nurseries.
Production Supplies
Production supplies include the group starting with "plants and seeds"
through "other production supplies." They averaged $88,894 for the 25 nurs-
eries. For the largest nurseries, they were $157,503, or 1.8 times the average.
The smallest nurseries had $19,165, or 22 percent of the average.
Other Production Costs
Other production costs include "repairs" and "equipment operating costs."
They averaged $24,179 for the 25 nurseries. For the eight largest nurseries,
they were $34,823, or half again the average. The smallest nurseries had
$10,064, or less than half of the average.
Administrative and Overhead
Administrative and overhead expenses usually cannot be assigned to any par-
ticular crop or growing activity, yet must be covered in order to remain in bus-
iness. They include the group starting with "travel and entertainment" through
"other cash expenses." They averaged $41,827 for the 25 nurseries. For the
largest nurseries, they were $75,272, or almost 1.8 times the average. The
smallest nurseries had $13,068, about a third of the average.
Total Cash Costs
Total cash costs averaged $292,260. Largest nurseries averaged $541,424,
again, about 1.8 times the average. Smallest ones had $81,953, or a quarter of
the average.










Non-Cash Costs
Non-cash costs include depreciation allowances, decreases in the supply in-
ventory (using supplies purchased during a previous time period), and an inter-
est charge for the use of the capital invested in the nursery. These costs av-
eraged $78,905. For the largest nurseries, they were $124,140, about one and a
half times the average. The smallest ones had $30,811, or 39 percent of average.
Total All Costs
Total costs averaged $371,165. Largest nurseries averaged $665,561 (1.8
times the average), and smallest ones had $112,764 (30 percent of the average).

Table 5.--Dollar costs by expense category, 25 wholesale woody ornamental
container nurseries in Florida, 1984.

Average Average Average
Item all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
- - -Dollars- - - -


Cash Costs
Operator's salary . . .
Other wages & salaries . .

Plants & seeds to grow on . .
Growing containers . .
Peat, soil, shavings, etc . .
Fertilizer & lime . . .
Pesticides & other chemicals .
Other production supplies . .

Repairs & maintenance . .
Equipment operating costs . .

Travel & entertainment . .
Insurance . . . .
Telephone . . . .
Electricity . . .
Taxes, licenses, bonds . .
Advertising . . .
Rent: land and/or buildings .
Other cash expenses . .
Total cash costs . .

Non-Cash Costs
Depreciation: mach & equip .
Depreciation: bldgs, fences, wells.
Inventory decrease in supplies. .
Interest on capital, 12% . .
Total non-cash costs . .


34,341
103,016

30,990
19,350
14,292
7,469
5,910
10,883

10,684
13,495

3,186
5,616
2,337
3,386
2,575
2,999
7,099
14,629
292,260


8,993
9,948
0
59,964
78,905


Total All Costs. . . ... 371,165


54,399
209,424

57,254
34,477
25,234
14,251
9,457
16,830

9,414
25,409

2,812
9,913
3,478
6,872
3,678
5,637
17,809
25,073
541,421


12,513
18,574
0
93,053
124,140

665,561


21,050
18,047

4,307
4,861
4,381
2,020
818
2,778

5,456
5,168


1,005
1,933
1,284
712
934
549
0
6,650
81,953


5,007
3,115
0
22,689
30,811

112,764












Percent of Total Cost by Expense Category (Table 6)


While expenditures in the form of dollars show the magnitude of expenses for
various cost categories, they are not very helpful for comparing cost relation-
ships between different sizes of nurseries. But costs as a percent of the total
are useful for this purpose. These are obtained by dividing each of the dollar
expense items in Table 5 by the corresponding "Total all costs" figure at the
bottom of the table.
Salaries and Wages
Salaries and wages (includes operator) averaged 37.0 percent of all costs
for the 25 nurseries. For the eight largest ones, they were 39.7 percent, or
more than two percent greater than the average. The eight smallest nurseries
had 34.8 percent, or 2.2 percent less than the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 24.0 percent for the 25 nurseries. For the largest nurseries, they
were 23.6 percent. The smallest nurseries averaged 17.0 percent of total costs.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
6.5 percent for the 25 nurseries. For the eight largest ones, they were 6.7
percent. The eight smallest nurseries had 9.4 percent, or almost 3 percent high-
er than the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 11.2 percent of
all costs for the 25 nurseries. For the eight largest ones, they were near the
same, 11.3 percent. The smallest nurseries had 11.5 percent.
Total Cash Costs
Total cash costs represented 78.7 percent of all costs and allowances for
the 25 nurseries. For the largest ones, it was 81.3 percent. The smallest ones
had 72.7 percent, or six percent less than the average expense in the form of
cash costs.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") are the addi-
tional costs that need to be covered eventually, though not necessarily with
cash during this accounting period. They averaged 21.3 percent of total costs











for the 25 nurseries. For the eight largest ones, they were 18.7, or 2.6 per-
cent less than the average. Hence, the largest nurseries had a higher percent
of their total operating expense in the form of cash costs. The five smallest
nurseries had 27.3 percent of their total as non-cash costs. This was six per-
cent more than the average, and almost one and a half times the rate of the
largest nurseries. The largest differences were in the percentages of total
costs represented by interest on capital.



Table 6.--Percent of total costs by expense category, 25 wholesale woody
ornamental plant nurseries in Florida, 1984.

Average Average Average
Item all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
- - -Percent- - - -


Cash Costs
Operator's salary . .
Other wages & salaries .

Plants & seeds to grow on .
Growing containers . .
Peat, soil, shavings, etc .
Fertilizer & lime . .
Pesticides & other chemicals..
Other production supplies .

Repairs & maintenance . .
Equipment operating costs .

Travel & entertainment .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes, licenses, bonds .
Advertising . . .
Rent: land and/or buildings .
Other cash expenses . .
Total cash costs . .


Non-Cash Costs
Depreciation: mach & equip.


Depreciation: bldgs, fences, wells.
Inventory decrease in supplies. .
Interest on capital, 12% . .
Total non-cash costs . .

Total All Costs . . .


9.2
27.8


8.4
5.2
3.9
2.0
1.6
2.9

2.9
3.6

0.9
1.5
0.6
0.9
0.7
0.8
1.9
3.9
78.7


. 2.4


2.7
0.0
16.2
21.3


8.2
31.5


8.6
5.2
3.8
2.1
1.4
2.5

2.9
3.8

0.4
1.5
0.5
1.0
0.6
0.8
2.7
3.8
81.3


1.9
2.8
0.0
14.0
18-.7


18.8
16.0


3.8
4.3
3.9
1.8
0.7
2.5


0.9
1.7
1.1
0.6
0.8
0.5
0.0
5.9
72.7


2.8
0.0
20.1
27.3


100,.0 100.0


100.0












Costs Per Square Foot of Production Area (Table 7)


While expenses as a percent of total costs facilitate comparing operating
statements, they do not allow easy comparison of relative growing costs between
nurseries. But costs per square foot of growing area do. These were obtained
by dividing each of the dollar cost figures in Table 5 by the area in production
figure from Table 1C, "Plant production area." This growing area only. It does
not include drives or roadways
Salaries and Wages
Salaries and wages (includes operator) per square foot of production area
averaged 41.6 cents for the 25 nurseries. For the largest ones, they were 44.1
cents, or 2.5 cents more than the average. The smallest nurseries had 43.6
cents, or 2 cents above the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 27.0 cents. For the eight largest nurseries, they were 26.4 cents.
Smallest nurseries had 21.3 cents, or five and one-half cents under the average.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
7.3 cents in the 25 nurseries. For the largest ones, they were about the same,
7.4 cents. The smallest nurseries had 11.9 cents, or over four cents higher.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 12.6 cents per
square foot of growing area in the 25 nurseries. For the largest ones, they
were about the same, 12.6 cents. The smallest ones had 14.5 cents, or about two
cents higher.
Total Cash Costs
Total out-of-pocket costs per square foot of production area averaged 88.5
cents. For the eight largest nurseries, they were 90.5 cents, or 2 cents above
the average. The smallest ones had 91.3 cents, or 3 cents more than the
average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") amounted to
23.9 cents in the 25 nurseries. For the largest ones, they were 20.7 cents, or











about 5 cents lower than the average. The smallest nurseries had 34.4 cents, or
11.5 cents greater than the average.
Total All Costs
The total for all costs and allowances averaged 112.4 cents ($1.12) in the
25 nurseries. For the eight largest ones, they were 111.2 cents, or 1.2 cents
below the average. The smallest nurseries had 125.7 cents, or 13.3 cents over
the average cost per square foot of production area.



Table 7.--Costs per square foot of production area, 25 wholesale woody ornamen-
tal container nurseries in Florida, 1984.

Average Average Average
Item all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
- - Cents - - -


Cash Costs
Operator's salary . .
Other wages & salaries .

Plants & seeds to grow on .
Growing containers . .
Peat, soil, shavings, etc .
Fertilizer & lime . .
Pesticides & other chemicals..
Other production supplies .

Repairs & maintenance .. ...
Equipment operating costs .

Travel & entertainment .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes, licenses, bonds .
Advertising . . .
Rent: land and/or buildings .
Other cash expenses . .
Total cash costs . .


Non-Cash Costs
Depreciation: mach & equip.


Depreciation: bldgs, fences, wells.
Inventory decrease in supplies. .
Interest on capital, 12% . .
Total non-cash costs . .


Total All Costs . . .


10.4
31.2


9.4
5.9
4.3
2.3
1.8
3.3

3.2
4.1

1.0
1.7
0.7
1.0
0.8
0.9
2.1
4.4
88.5


. 2.7


3.0
0.0
18.2
23.9

112.4


9.1
35.0


9.6
5.8
4.2
2.4
1.6
2.8

3.2
4.2


0.5
1.7
0.6
1.2
0.6
0.9
3.0
4.2
90.5


2.1
3.1
0.0
15.5
20.7

111.2


23.5
20.1


4.8
5.4
4.9
2.3
0.9
3.1

6.1
5.8


1.1
2.2
1.4
0.8
1.0
0.6
0.0
7.4
91.3


5.6
3.5
0.0
25.3
34.4


125.7











Costs Per Dollar of Sales Adjusted for Inventory Change (Table 8)


Costs per square foot of growing area are important for comparing relative
costs between nurseries, and for estimating individual plant growing costs.
However, they do not indicate the profit potential of a nursery operation as
well as do costs per dollar of sales. Adjusting sales for changes in inventory
value shows how the business is doing in total, not just cash-wise. These fig-
ures were developed by dividing the dollar costs shown in Table 5 by the appro-
priate figure from Table 1B, "Value of own plants sold adjusted for change in
plant inventory value."
Salaries and Wages
Salaries and Wages (includes operator) averaged 38.0 cents per dollar of
sales after adjusting for changes in inventory. For the eight largest nurs-
eries, they were 38.7 cents. The smallest nurseries had 50.9 cents, or almost 13
cents above the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 24.7 cents. For the eight largest nurseries, they were 23.2 cents, or
one and a half cent less than the average. The smallest nurseries had 25.0
cents.
Other Productin Supplies
Other production costs ("repairs" and "equipment operating costs") averaged
6.7 cents per dollar of adjusted sales. For the eight largest nurseries, they
were 6.5 cents, about the same as the average. The smallest nurseries had 13.8
cents, or more than seven cents over the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") amounted to 11.5 cents
per dollar of adjusted sales. For the eight largest nurseries, they were 10.9
cents, or 0.6 cents below the average. The smallest nurseries had almost six
and one half cents higher than the average, or 17.0 cents.
Total Cash Costs
Total cash costs per dollar of adjusted sales averaged 80.9 cents. For the
eight largest nurseries, they were 79.3 cents. For smallest nurseries, they were
106.7, almost 26 cents above the average per dollar of adjusted sales.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") averaged 21.8








17


cents. For the eight largest nurseries, they were 18.2 cents, or near two and a
half cents below average. Smallest ones had 40.2 cents, nearly double the
average.
Total All Costs
Total costs per dollar of adjusted sales averaged 102.7 cents. For the
largest nurseries, they were 97.5 cents. The smallest ones had 146.9 cents, thus
falling short of breaking even by 46.9 cents per dollar of sales adjusted for
changes in plant inventory.

Table 8.--Costs per dollar of sales adjusted for change in plant inventory,
25 woody ornamental container nurseries in Florida, 1984.

Average Average Average
Item all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
- - Cents - - -


Cash Costs
Operator's salary . .
Other wages & salaries .

Plants & seeds to grow on .
Growing containers . .
Peat, soil, shavings, etc .
Fertilizer & lime . .
Pesticides & other chemicals.
Other production supplies .

Repairs & maintenance . .
Equipment operating costs .

Travel & entertainment .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes, licenses, bonds .
Advertising . . .
Rent: land and/or buildings .
Other cash expenses . .
Total cash costs . .


Non-Cash Costs
Depreciation: mach & equip.


Depreciation: bldgs, fences, wells.
Inventory decrease in supplies. .
Interest on capital, 12% . .
Total non-cash costs . .

Total All Costs . . .


9.5
28.5


8.6
5.4
4.0
2.1
1.6
3.0

3.0
3.7

0.9
1.6
0.6
0.9
0.7
0.8
2.0
4.0
80.9


. 2.5


2.7
0.0
16.6
21.8


8.0 27.4
30.7 23.5


8.4
5.1
3.7
2.1
1.4
2.5

2.8
3.7


0.4
1.4
0.5
1.0
0.5
0.8
2.6
3.7
79.3


1.8
2.7
0.0
13.7
18.2


102.7 97.5


5.6
6.3
5.7
2.7
1.1
3.6

7.1
6.7


1.3
2.5
1.7
0.9
1.2
0.7
0.0
8.7
106.7


6.5
4.1
0.0
29.6
140.2

146.9










Costs Per Doiiar of Sales (Table 9)


While total business position is indicated by costs per dollar of sales ad-
justed for changes in inventory value, bill paying ability depends upon costs
relative to cash received. These figures were developed by dividing the dollar
costs shown in Table 5 by the appropriate figure from Table 1A, "Value of own
plants sold."
Salaries and Wages
Salaries and wages (includes operator) amounted to 42.4 cents per dollar of
cash received. For the eight largest nurseries, they were 43.3 cents, or almost
a cent more than the average. The smallest nurseries had 63.7 cents, or more
than 21 cents above average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 27.5 cents per dollar of cash sales. For the eight largest nurseries,
they were 25.9 cents. The smallest nurseries had 31.2 cents, or 3.7 cents above
average.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
7.5 cents per dollar of cash received. For the eight largest nurseries, they
were 7.4 cents, or five and a half cents lower. The smallest nurseries had 17.3
cents, almost 10 cents above the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 12.9 cents per
dollar of sales. For the eight largest nurseries, they were 12.3 cents, or a
half cent lower. The smallest nurseries had 21.5 cents, or 8.6 cents above
average.
Total Cash Costs
Total cash costs averaged 90.3 cents per dollar of cash received. For larg-
est nurseries, they were 88.9 cents, or 1.4 cents lower than average. The
smallest ones had 133.7 cents, over 43 cents above the average, and falling
short of meeting current bills by almost 34 cents per dollar of sales.
Non-Cash Costs
Non-cash costs averaged 24.4 cents. For largest nurseries, they were 20.4
cents, four cents lower than the average. The smallest nurseries had 50.3
cents, or double the average cost per dollar of sales.










Total all Costs
The 25 nursery average covered the cash costs, but lacked 14.7 cents of
covering total costs. Non-cash costs were 24.4 cents, but funds left after pay-
ing cash costs were only 9.6 cents per dollar of sales. Larger nurseries met
cash costs with 11.1 cents to spare, but lacked 9.3 cents per dollar of sales of
covering all cost and allowances. For smallest nurseries, the deficit was
almost 84 cents.



Table 9.--Costs per dollar of sales (no adjustment for change in plant inven-
tory), 25 woody ornamental container nurseries in Florida, 1984.


I tern


Average
all 25
nurseries


Cash Costs
Operator's salary . . .
Other wages & salaries . .

Plants & seeds to grow on . .
Growing containers . .
Peat, soil, shavings, etc . .
Fertilizer & lime . . .
Pesticides & other chemicals. .
Other production supplies . .

Repairs & maintenance . ..
Equipment operating costs .


Travel & entertainment .
Insurance . . .
Telephone . . .
Electricity . .
Taxes, licenses, bonds. .
Advertising . .
Rent: land and/or buildings
Other cash expenses .
Total cash costs .

Non-Cash Costs
Depreciation: mach & equip.


Depreciation: bldgs, fences, wells.
Inventory decrease in supplies. .
Interest on capital, 12% . .
Total non-cash costs . .

Total All Costs . . .


10.6
31.8

9.6
6.0
4.4
2.3
1.8
3.4

3.3
4.2


1.0
1.7
0.7
1.1
0.8
0.9
2.2
4.5
90.3


. 2.8


3.1
0.0
18.5
24T4.


Average Average
8 large 8 small Your
nurseries nurseries nursery
- Cents - - -


8.9
34.4

9.4
5.6
4.2
2.3
1.6
2.8


0.5
1.6
0.6
1.1
0.6
0.9
2.9
4.1



2.1
3.0
0.0
15.3
20.4


114.7 109.3


34.3
29.4


7.0
7.9
7.2
3.3
1.3
4.5

8.9
8.4


1.7
3.2
2.1
1.2
1.5
0.9
0.0
10.9
133.7


8.2
5.1
0.0
37.0
50.3

183.9












Income Summary (Table 10)


This section concentrates on developing net nursery income and allocating it
between the time and effort of the owner-operator and a return on the money in-
vested in the operation. After all is said and done, it is for a payment on his
or her time that a nursery operator works, and it is for a return to capital
that nursery operators and lending institutions invest funds in nursery opera-
tions.
Total Gain
Total gain refers to the total effect of the year's operation. It is the
sum of plant sales, changes in plant and supply inventory values, and miscella-
neous income. Miscellaneous income refers Io income received from sources other
than plant sales. It would include rent income, interest income, delivery in-
come, boxing charges, and income from the sale of fertilizer and supplies.
Total gain for the 25 nurseries averaged $375,898. Larger nurseries aver-
aged almost double that amount, or $724,818. Smallest nurseries had 21 percent
of the average, or $77,982.
Net Nursery Income
Net nursery income is the total return for the year for the time and manage-
rial skills of the operator plus the capital invested in the operation. To ob-
tain it, all cash costs from Table 5 except the operator's salary, and all non-
cash costs shown there except interest on capital, are subtracted from total
gain. The result is net nursery income, or income for all the time and capital
investment supplied by the owner-operator.
For the 25 nurseries, it averaged $99,038. For the eight largest nurseries,
it was $206,709, or about two times the average. Smallest nurseries had $8,959,
or 9 percent of the average.
Return to Capital
From net nursery income is subtracted the salary or time value of the owner-
operator to obtain that part of net nursery income attributable to capital.
This is the earnings of the money invested in the nursery. Dividing it by the
value of capital invested gives the rate of return earned by the investment.
When the owner and operator are the same person, dividing net nursery income
between the operator and return to capital may not seem important. But when the
owners are outside investors, then accurate division is important. In either










case, rate of return is a common indicator for evaluating an investment or for
selecting between alternative investment alternatives.
Return to capital for the 25 nurseries amounted to $64,697 for a return of


13.0 percent.


For the eight largest nurseries, it was $152,310 for a 19.6 per-


cent return on the capital investment. The smallest nurseries averaged -$12,091
for a -6.4 percent return on the capital invested. In other words, the smallest
nurseries did not realize as much nursery income as was being allowed for
operator's salery.



Table 10.--Income summary, 25 wholesale woody ornamental container nurseries in
Florida, 1984.


I tem


Value of own plants sold -
Plant inventory change - -
Supply inventory change- -
Miscellaneous cash income- -
Total gain(f) - -


Average
Unit all 25
nurseries

$ 323,468
$ 37,793
$ 2,657
$ 11,981
$ 375,898


Average Average
8 large 8 small
nurseries nurseries
- -Dollars- -
608,736 61,304
73,704 15,459
7,807 460
34,571 759
724,818 77,982


Deduct cash costs less op salary
Deduct non-cash costs less int -
Total deductions - -

Net nursery income(g)- - -
Deduct op salary or time value -

Return to capital(h) - -
Rate of return to capital(i) -


$( 257,919)
$( 18,941)
$( 276,860)

$ 99,038
$( 34,341)


64,697
13.0


( 487,023)
( 31,087)
( 518,110)


( 60,901)
( 8,122)
( 69,024)


( -- )


206,709 8,959
( 54,399) ( 21,050)(


152,310
19.6


-12,091
-6.4


(f) Total gain--the sum of plant sales, change in plant and supply invento-
ries, and miscellaneous income. It represents the total effect of the year's
operation, be it in the form of cash or change in inventory value.

(g) Net nursery income--the net effect of the year's operation. To obtain
it, subtract all cash costs (except operator's salary), and all non-cash allow-
ances (except interest on capital) from total gain. The result is the return
for the time and managerial skills of the operator, and for the use of the capi-
tal invested in the operation.

(h) Return to capital--the portion of net income that is left after subtrac-
ting the salary or time value of the operator. It is what the owned capital
earned.

(i) Rate of return to capital--return to capital divided by the value of
owned capital. It is the rate of return earned on the capital invested.


Your
nursery












Factors Associated With Level of Profit (Table 11)


In this section,information presented earlier is re-grouped to concentrate
attention on factors that are generally deemed related to level of profit in a
woody ornamental nursery. The factors are presented in the same sequence that
they appeared before. But here, the average for all 25 nurseries is compared
with the average for the five most profitable and the five least profitable of
the nurseries participating in the program. As will be seen, profit or lack of
profit does not depend upon performance in any single area, but, rather, on the
balance of performance in all areas. Nevertheless, nursery operators analyzing
their own operations may find this section especially valuable for indicating
the general area of their business needing additional study and analysis.
"Net nursery income" from Table 10 was selected as the indicator for level
of profit. Average for all 25 nurseries was $99,038. The most profitable third
of the nurseries averaged 2.5 times this amount, or $240,585. The least profit-
able third averaged -$9,770. The following compares the average for these three
groupings of woody ornamental nurseries using one indicator from most of the
proceeding tables. A more complete analysis would use all indicators listed for
each table. For in most cases, each indicator measures things from a little
different angle.
Size of Business
The indicator of size of business selected from Table 1 was "Value of own
plants sold." The 25 nurseries averaged $323,468. The most profitable third
had $449,096 in sales, or 39 percent more. The least profitable group averaged
$169,319, or about half of the average. This does not mean that small business-
es cannot be profitable, but it does indicate that largest profits tend to be
associated with higher dollar volumes of business.
Production Rate
The indicator of rate of production selected from Table 2 was "Value of own
plants sold per square foot of total bed and bench space." In general, other
things being equal, increasing sales per square foot of total bed and bench
space should increase the profitability of a nursery operation, hence is desir-
able. The average for all 25 nurseries was 98 cents per square foot. The most
profitable third had 115.4, or 18 percent more, and the least profitable third
had 59.5, or 61 percent of the average.











Lower sales per square foot of total bed and bench space can result from a
number of things, such as letting plants continue to grow after reaching salable
size, letting space sit vacant too long between the time a plant is sold and
another is put in place to start growing again, selecting varieties that grow
slower or are priced low relative to their growing time and space requirements,
and having disease and quality problems that reduce yields of salable plants.
In addition, nursery layout and fertilizing and growing techniques can alter the
time and space used for the same crop in two different nurseries. Also, markets
and marketing programs can alter the returns received by two different nurseries
for the same crop.



Table 11.--Factors associated with level of profit, 25 wholesale woody
ornamental container nurseries in Florida, 1984.

Average Average Average
Item Unit all 25 8 large 8 small Your
nurseries nurseries nurseries nursery
Level of profit
Net nursery income (Table 12) $ 99,038 240,585 -9,770
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $ 323,468 449,096 169,319

Production rate (Table 2)
Sales/sq ft of area in prod cents 98.0 115.4 59.5

Labor efficiency (Table 3)
Own plant sales/employee $ 31,253 35,671 25,811

Use of capital (Table 4)
Annual turnover of owned
capital value - - % 64.7 68.1 64.3

Level of costs (Table 7)
Cost/sq ft of total prod area- cents 112.4 125.9 72.6

Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in inventory value $ 102.7 86.1 149.8

Growth in the business
Increase in sales and plant
inventory over last year $ 87,042 178,547 13,457










Labor Efficiency
The indicator of efficiency in the management and use of labor selected from
Table 3 was "value of own plants sold per employee." If all other things are
equal, then higher sales per person involved is desirable. Average for all 25
nurseries was $31,253 per person. Sales were 14 percent higher than average at
$35,671 for the most profitable third, and around 83 percent of the average at
$25,811 for the least profitable third of the nurseries. Higher sales per em-
ployee viewed alone at this point in time might seem to indicate true efficien-
cy. On the other hand, if viewed together with other indicators, it might in-
stead show less than optimum number of employees for volume of plants being
handled. This could result in tardy or untimely plant care, hence, slower
growth and lower quality plus a failure to restock empty space promptly. In
this case, other indicators such as production rate, space use intensity, capi-
tal turnover, and costs per square foot would not support the labor efficiency
indicator.
Lower sales per employee can result during periods of rapid expansion when
extra help is needed to care for largest numbers of plants before they begin
reaching salable size. Or it can also be the result of difficult economic times
when sales are slow, but plant care must go on. Differences between nurseries
can be the result of differences in investment in labor saving capital items,
the result of any or all of the factors noted above that lower production rate,
or the result of poor management practices in the planning and utilization of
labor.
Use of Capital
The indicator for efficiency in the use of capital selected from Table 5 was
"Annual turnover of owned capital value." This is expressed in percent. In
general, Larger percentage turnover numbers are desirable, for they indicate
greater sales per dollar of investment in the nursery.
Annual turnover of owned capital averaged 64.7 percent, meaning that the
value of own plants sold during the year amounted to two thirds the capital in-
vested. For the most profitable third, it was 68.1. The rate for the least
profitable third was 64.3 percent, almost the same as the average.
Problems that lower turnover rate include any of the items already mentioned
that lower production rate hence sales volume for a given nursery investment.
Low capital turnover is particularly common in nurseries just getting started,
or in nurseries that are expanding rapidly. Excessive investments in land, labor











saving machinery and equipment, or expensive (though maybe unnecessary) niceties
will also tend to lower captial turnover rate.
Level of Costs
The indicator of level of costs selected was "Costs per square foot of pro-
duction area" from Table 7. This is a traditional indicator for comparing costs
between nurseries. Other things being equal, a lower cost per square foot is
desirable.
Costs for total production area averaged 112.4 cents, or 14.4 cents higher
than sales per square foot before adjusting for changes in plant inventory val-
ue. This means that sales did not cover all cash costs plus all non-cash allow-
ances noted in Table 7. For the most profitable third, costs were 125.9 cents
per square foot or, which were 10.5 cents less than sales per square foot. The
least profitable third averaged 72.6 cents, which was 13.1 cents per square foot
more than sales.
Problems that cause costs per square foot to increase include inefficient
planning and utilization of labor, insufficient investment in labor saving capi-
tal items, destruction or theft of supplies and plants, not checking for best
price before purchasing needs, and not carefully managing the nursery operation.
Other causes of increased costs may not be a problem if they result in increased
revenue. One example might be increased costs for sleeves and packaging in or-
der to satisfy the requirements of a premium market.
Cost Efficiency
The indicator of cost efficiency selected was "Cost per dollar of sales ad-
justed for change in plant inventory" (Table 8). This shows how well the nurs-
ery did in total, cash plus change in inventory values. In general, lower costs
per dollar of sales are desirable.
Average for all 25 nurseries was 102.7 cents per dollar of sales after ad-
justing for changes in inventory values. Thus, on the average, costs exceeded
sales by 2.7 cents. For the more profitable third of the nurseries, the cost
was 86.1 cents, leaving a margin of 13.9 cents per dollar of sales after adjust-
ing for changes in inventory. For the least profitable third, costs were 149.8
cents. Thus, this group lacked about 50 cents per dollar of sales after
adjusting for changes in inventory value of being able to cover all cash costs
plus non-cash costs and allowances.
Rising costs per dollar of sales are very common during periods of rapid
expansion, because extra costs of a largest operation are incurred before the











nursery can experience accompanying extra sales. During inflationary times,
failure to get price increases as fast as costs are going up will also cause it.
While prices received are not always under the direct control of the nurseryman,
other things mentioned earlier are under his direction. These include things
that affect rates of production, level of costs, and labor efficiency. Examples
include letting plants continue to grow after reaching salable size without get-
ting much if any more money for them, letting space sit vacant too long between
the time a plant is sold and another is put in its place to start growing again,
selecting varieties that grow slower or are priced low relative to their growing
time and space requirements, having disease and quality problems that reduce the
yield of salable plants, failing to plan and manage for efficient utilization of
labor, ignoring needed investments in labor saving equipment and facilities, not
checking for the best price before purchasing needs, experiencing theft or de-
struction of plants or supplies, practicing less than optimum fertilizing and
growing techniques, and pursuing less desirable markets and marketing programs.
Growth in the Business
The indicator used for measuring growth in the business is the sum of the
increase in plant sales and the increase in plant inventory value over the last
year. In general, a steady growth in the business is desirable.
On the average, growth was valued $87,042. This was about 39 percent of the
annual sales volume of $323,468. The most profitable third increased $178,547
or almost 40 percent of annual sales. The least profitable third of the nur-
series increased $13,457, or about eight percent of sales.
Growth in sales of a business can, of course, be due in part to inflationary
price increases. It can also be the result of all the things already mentioned
that increase sales volume or plant inventory for a given operation. To stay
healthy, businesses do need to grow, at least enough to keep up with inflation.
But at the same time, growth should to be planned and orderly so that it con-
tributes to the profitability of an operation. By way of contrast, too rapid an
expansion program can result in excessive increases in costs and strong needs
for cash before the new plants have reached salable size. The growth indicator
may look good on paper. But tomorrow's potential sales (plant inventory) may
not be satisfactory for paying today's bills. Growth, though desirable in an
economic sense, needs to be carefully planned and executed.










Range of Figures (Table 12)


In this section, the average for all 25 nurseries is repeated for ease of
comparison. The remainder of the table differs from the previous section in
that the three best and three worst numbers for each factor were averaged to
provide the range of high-low figures shown. In the previous section, figures
for all factors were for the same groups of high profit and low profit nurs-
eries. This section shows the average for the best three and worst three num-
bers regardless of the nursery or profit level to which they belong.
As can be seen in Table 12, quite a range of figures was found for most of
the factors. Nursery operators analyzing their own operation should be suspi-
cious about any of their figures that fall outside these ranges. The discussion
of things that contribute to variations in the figures in the previous section
also apply here.

Table 12--Range of figures on factors associated with level of profit,
wholesale woody ornamental container nurseries in Florida, 1984

Average 3 best 3 poorest
Item Unit all 25 factor factor Your
nurseries average average nursery
Level of profit
Net nursery income (Table 12) $ 99,038 373,365 38,816
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $ 323,468 916,696 22,339

Production rate (Table 2)
Sales/sq ft of area in prod- cents 98.0 431.0 28.0

Labor efficiency (Table 3)
Own plant sale/employee- $ 31,253 55,362 8,156

Use of capital (Table 4)
Annual turnover of owned
capital value - - % 64.7 124.0 6.0

Level of costs (Table 7)
Cost/sq ft of prod area- cents 112.4 50.0 641.0

Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in inventory value cents 102.7 69.0 396.0

Growth in the business
Increase in sales and plant
inventory over last year- $ 87,042 412,014 -7,727














CONCLUDING COMMENTS


Nursery operators who are interested in seeing how they compare with those
participating in the Florida Nursery Business Analysis Program may calculate
their own numbers as shown and write them on the lines of each table provided
for this purpose. Doing so should provide some valuable insight into the busi-
ness side of operating a woody ornamental nursery. It should improve manage-
ment decisions concerning things that affect the profitability of the nursery
operation.
Nursery operators who find this kind of information useful, but have diffi-
culty finding the time or energy to engage in the tedium of doing their own cal-
culation may wish to consider becoming a participant in the program. If you
would like to do so, contact your ornamental agent in your nearby county Exten-
sion office, or contact the authors in Gainesville.