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(~0


-6.37/
J. Robert Strain
Alan W. Hodges


Economic Information
Report 238


Business Analysis of Container
Nurseries in Florida, 1986


-I


C,. 1 Science
Librar/


VC


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


November, 1987













ABSTRACT


Average sales, costs and returns information are presented for 36 wholesale
woody ornamental container plant nurseries in Florida for the tax year of 1986.
Average value of plant sales was $477,374. Cash costs including a return to the
operator averaged $401,098. Non-cash costs and allowances including a 12
percent return on investment amounted to another $161,633. When the return to
the operator and return on investment were deducted, remaining costs totaled
$394,376. After adjustments for change in plant inventory value and additions
for miscellaneous income, net nursery income averaged $278,300, and return to
capital averaged $245,061 for a 21.76 percent return on investment. Comparable
information is presented also for the average of the thirteen largest and
sixteen 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 36 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 Gary Brinen, Terry Delvalle, Larry Halsey, Loretta Hodyss, Michael
Holsinger, DeArmand Hull, Linda Landrum, Peter Mitchell, Cathy Neal, Roger
Newton, Bill Phillips, LaRue Robinson, Robert Whittey, Uday Yadav, and Victor
Yingst. 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 herein are the sole responsibility of the authors.













ABSTRACT


Average sales, costs and returns information are presented for 36 wholesale
woody ornamental container plant nurseries in Florida for the tax year of 1986.
Average value of plant sales was $477,374. Cash costs including a return to the
operator averaged $401,098. Non-cash costs and allowances including a 12
percent return on investment amounted to another $161,633. When the return to
the operator and return on investment were deducted, remaining costs totaled
$394,376. After adjustments for change in plant inventory value and additions
for miscellaneous income, net nursery income averaged $278,300, and return to
capital averaged $245,061 for a 21.76 percent return on investment. Comparable
information is presented also for the average of the thirteen largest and
sixteen 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 36 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 Gary Brinen, Terry Delvalle, Larry Halsey, Loretta Hodyss, Michael
Holsinger, DeArmand Hull, Linda Landrum, Peter Mitchell, Cathy Neal, Roger
Newton, Bill Phillips, LaRue Robinson, Robert Whittey, Uday Yadav, and Victor
Yingst. 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 herein are the sole responsibility of the authors.






TABLE OF CONTENTS

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


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 Inventory Change*
Cost Per Dollar of Sales* . . . .
Income Summary . . . . . .


Total Gain . . .
Net Nursery Income . .
Return on Capital . .

Balance Sheet . . .

Current Assets . .
Long Term Assets . .
Total Assets . .
Liabilities . .
Net Worth . . .


Profitability Model . . .


Margin Management . .
Asset Management . .
Leverage Management .
Factors Associated With Level of
Size of Business . .
Production Rate . .
Labor Efficiency . .
Use of Capital . .
Level of Costs . .
Cost Efficiency . .
Growth in the Business .

Range of Figures . .
Seasonality of sales . .

CONCLUDING COMMENTS . .
*These sections also contain the
Salaries and Wages
Production Supplies
Other Production Costs
Administrative and Overhead


Profits .
. .
* .
. .
. .
* .
* .
. .


. . . . o o


following subcategories:

Total Cash Costs
Non-Cash Costs
Total All Costs








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LIST OF TABLES


Table Page
1 Size of business, 36 wholesale woody ornamental container nurseries
in Florida, 1986 ...... . . . 5

2 Rates of production, 36 wholesale woody ornamental container
nurseries in Florida, 1986 . . . 6

3 Labor efficiency, 36 wholesale woody ornamental container nurseries
in Florida, 1986 . . .... . . . 7

4 Efficiency in the use of capital, 36 wholesale woody ornamental
container nurseries in Florida, 1986 . ... . 9

5 Dollar costs by expense category, 36 wholesale woody ornamental
container nurseries in Florida, 1986 . .... . . 11

6 Percent of total costs by expense category, 36 wholesale woody
ornamental container nurseries in Florida, 1986 . ... 13

7 Costs per square foot of production area, 36 wholesale woody
ornamental container nurseries in Florida, 1986 ......... .. 15

8 Costs per dollar of sales adjusted for change in plant inventory,
36 wholesale woody ornamental container nurseries in Florida, 1986. 17

9 Cost per dollar of sales (no adjustment for change in plant inventory)
36 wholesale woody ornamental container nurseries in Florida, 1986 19

10 Income summary, 36 wholesale woody ornamental container nurseries
in Florida, 1986 . . . . . . 21

11 Balance sheet, 36 wholesale woody ornamental container nurseries
in Florida, 1986 . . . . . 23

12 Factors associated with level of profit, 36 wholesale woody
ornamental container nurseries in Florida, 1986 . ... 27

13 Range of figures on factors associated with level of profit,
36 wholesale woody ornamental container nurseries in Florida, 1986. 31


LIST OF FIGURES
Figure Page
1 Total profitability model, 36 wholesale woody ornamental container
nurseries in Florida, 1986 . . . .. . 25

2 Monthly sales compared to average monthly costs, 36 wholesale
woody ornamental container nurseries in Florida, 1986 ...... 33









BUSINESS ANALYSIS OF CONTAINER NURSERIES IN FLORIDA, 1986


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 1986.
Other publications in this series includes reports on Florida woody ornamental
field nurseries, Central Florida foliage plant nurseries, South Florida foliage
plant nurseries, Dade County foliage plant nurseries and Florida flowering 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 produc-
tion business with an estimate of the input requirement and revenue potential;
4) and Providing Florida Extension personnel with data for conducting edu-
cational programs with nursery operators.


PROCEDURE


The information and averages presented in this report are based on data
supplied by 36 nursery operators in the form of confidential production and
accounting records. They participated in the program voluntarily and do not
represent a statistically selected sample. In fact, the nursery operators par-
ticipating 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 (Institute of Food and Agricultural Sciences),
Food and Resource Economics Department, University of Florida, Gainesville.









Data were collected for the 1986 tax year. In some cases, data were
received for a fiscal year that did not coincide with the 1986 calendar year.
Data for fiscal years ending after July 1, 1985 and before July 1, 1987 were
included with the 1986 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 regu-
lar 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 start-
ed, some ready to sell, and others distributed 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 purchase price. While this may not represent the investment of a nur-
sery operator if he or she were to buy the land in 1986, it does represent the
investment actually involved in the operation.
The data from individual nurseries are averaged and presented in tabular
form. The tables present average values for all 36 nurseries, for the thirteen
"largest" nurseries, and for the sixteen "smallest" nurseries. The largest
nurseries 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
Alachua, Dade, Duval, Hillsborough, Jefferson, Lake, Lee, Manatee, Marion,
Martin, Orange, Palm Beach, Pinellas, Sarasota and Volusia. Nursery operators
received an analysis for their own operation 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 obtaining 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 family 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 value of capital owned plus the value of additional
capital items used and under the control of the manager. Rented land and
leased buildings, equipment, etc., would be added to the value of 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 oper-
ator, 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
capital 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 13 relate to the profitability of woody orna-
mental nurseries. In the first four tables, more than one measure of efficien-
cy is shown. The first item in each table has traditionally been presented as
"The one best measure." It is followed by other measures that also are deemed
to be useful. Throughout the manuscript where information is presented in the
tables is presented to the nearest whole number, arithmetic incon-sistancies
from rounding may be present.


Size of business (Table 1)


Size of business data in Table 1 is basic information. 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 $477,374 for the 36 nurseries. For
the thirteen largest nurseries, it was $1,064,322, or almost two and a quarter
times the average. The smallest ones had $64,818, or about 14 percent of the
average. Adjusting sales for change in value of plant inventory between the
beginning and the end of the year (Table 1 item B), increased the value of
nursery output 40 percent to $668,511. For largest nurseries, it was 43 percent
($1,526,397). The smallest nurseries had $94,117, up 45 percent.
Production area (Table 1C & 1D) averaged 954,442 square feet (21.91 acres)
for the 36 nurseries. For the thirteen largest nurseries, it was 2,284,921
square feet (52.45 acres). The sixteen smallest nurseries had 106,046 square
feet (2.43 acres), or about 11 percent of the average.
Employee numbers (Table IE) for the 36 nurseries averaged 15.45 people. For
the largest nurseries, it was 31.49 persons, over double the average. The six-
teen smallest nurseries averaged 3.36 people, or about a fifth of the average.
Capital owned (Table 1M) averaged $1,125,967 for the 36 nurseries. For the
thirteen largest nurseries, it was $2,533,764, or 2.25 times the average. The
sixteen smallest nurseries had $239,826, or 21 percent of the average.








Capital managed (Table 1U) averaged $1,199,676 (6.5 percent more than cap-
ital owned). For the largest nurseries, it was $2,689,610. Smallest nurseries
had $259,201 in managed capital. Most of the difference was in land value.

Table 1.--Size of business, 36 wholesale woody ornamental container nurseries in
Florida, 1986.

Item Unit Average Average Average Your
all 36 13 largest 16 smallest nursery
The one best measure
A Value of own plants sold(a) $ 477,374 1,064,322 64,818
Other useful indicators of size
B adjusted for change in $ 668,511 1,526,397 94,117
plant inventory value

C Plant production area. sq ft 954,442 2,284,921 106,046
D Plant production area. acres 21.91 52.45 2.43

E Average fulltime
* equivalent employees(b). number 15.45 31.49 3.36

Capital owned(c) in:
F Growing plants ...... $ 757,773 1,743,648 145,609
G Land ........... $ 129,745 269,038 45,545
H Machinery & equipment $ 62,316 123,633 20,852
I Buildings & Improvements $ 47,508 84,756 16,903
J Supplies ......... $ 21,252 47,237 4,271
K Accounts receivable $ 47,454 112,884 2,224
L Cash/checkbook balance $ 59,918 152,568 4,422
M Total owned capital $ 1,125,966 2,533,764 239,826

Capital managed(d) in:
N Growing plants ...... $ 757,773 1,743,648 145,609
0 Land ........... $ 200,578 418,345 64,920
P Machinery & equipment. .. $ 62,775 123,633 20,852
Q Buildings & improvements $ 49,925 91,294 16,903
R Supplies ......... $ 21,252 47,237 4,271
S Accounts receivable $ 47,454 112,884 2,224
T Cash/checkbook balance $ 59,918 152,568 4,422
U Total managed capital $ 1,199,675 2,689,610 259,201


(a) Value of own plants sold--is


the value of total plant sales minus the


cost of plants purchased for immediate resale. The cost of plant purchased for
growing-on is not deducted.
(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 value of capital owned plus the value of addi-
tional 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 36 nurseries was 50.0 cents per square
foot. For the thirteen largest nurseries, it was 46.6 cents per square foot.
The sixteen smallest nurseries had 61.1 cents per square foot, or twenty two
percent more than 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 20 cents per square foot, to 70.0 for all 36 nurseries.
Largest nurseries increased 20.2 cents to 66.8, and smallest nurseries increas-
ed 27.6 cents to 88.8 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 1D)
averaged $34,584. For the largest nurseries, it was $33,241, about 96 percent
of the average. Smallest nurseries averaged 73 percent more, $59,811.



Table 2.--Rates of production, 36 wholesale woody ornamental container nurseries
in Florida, 1986.

Item Unit Average Average Average Your
all 36 13 largest 16 smallest nursery
The one best measure
Value of own plants sold per
sq ft in prod. (Table 1A/1C) cents 50.0 46.6 61.1
Other useful Indicators
sq ft adjusted for inventory
change - (Table 1B/1C) cents 70.0 66.8 88.8

Value of own plants sold per
acre in prod. (Table 1A/1D) $ 21,787 20,290 26,625
--- adjusted for inventory
change - (Table 1B/1D) $ 30,510 29,099 38,660

Plant inventory value per
acre in prod. (Table 1F/1D) $ 34,584 33,241 59,811










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 $30,908
per employee for the 36 woody ornamental container nurseries. For the thirteen
largest container nurseries, sales averaged $33,801, or 9 percent more than the
average. The sixteen smallest container nurseries had $19,301 per employee.
This was close to two-thirds of the average sales per employee.
Adjusting for change in inventory value between the beginning and the end of
the year (Table 1B divided by 1E) increased the average value of own plants
grown by $12,375 to $43,283, a 40 percent increase. For the thirteen largest
container nurseries, the increase was $14,675 per person to $48,476 a 43 percent
increase, 12 percent more than the average. The sixteen smallest container
nurseries were up $8,724 per person to $28,025, a 45 percent increase. This was
a five percent greater increase, percentagewise, in sales adjusted for inventory
change than the average for all nurseries.
Production area per employee (Table 1C divided by 1E) averaged $61,795
square feet. For the thirteen largest container nurseries, it was 72,565 square
feet, or 17 percent greater than average. The sixteen smallest container
nurseries had 31,577 square feet per employee, or about half of the average.




Table 3.--Labor efficiency, 36 wholesale woody ornamental container nurseries in
Florida, 1986.

Item Unit Average Average Average Your
all 36 13 largest 16 smallest nursery
The one best measure
Value of own plants sold per
employee (Table 1A/1E) $ 30,908 33,801 19,301
Other useful indicators
employee adjusted for change
in inventory (Table 1B/1E) $ 43,283 48,476 28,025

Average area in production
per employee (Table 1C/1E) sq ft 61,795 72,565 31,577







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 1M).
Annual turnover averaged 42.4 percent for the 36 nurseries. This means that
sales for the year equaled less than half of the capital invested in the nursery
operation. For the thirteen largest nurseries, it was 42.0, which was a about
the same as the turnover rate of the average. The sixteen smallest nurseries
had 27.0, which was less than two thirds of the average turnover rate.
Capital invested per employee (Table 1M divided by 1E) averaged $72,901 for
the 36 nurseries. For the thirteen largest nurseries, it was $80,468, or about
13 percent above the average, Indicating a higher investment per person than the
average. Smallest nurseries had 12 percent less than the average, $71,412.
Average capital investment per acre of nursery area (Table 1M divided by 1D)
was $51,388 for the 36 nurseries. For the thirteen largest nurseries, it was
$48,304, or four percent less than the average. The sixteen smallest nurseries
had $98,512, or 92 percent more than the average.
Growing plants represented 63.2 percent of the capital managed by the 36
nurseries (Table 1N divided by 1U). For the thirteen largest nurseries, 64.8
percent. The smallest nurseries had 56.2 percent of their capital in plants.
Managed capital invested in land (Table 10 divided by 1U) averaged 16.72
percent of the total. Largest nurseries had about the same, 15.6 percent.
Smallest ones had 25.0 percent, or 8 percent more than the average in land.
Machinery and equipment (Table 1P divided by 1U) averaged 5.2 percent of the
total capital for the 36 nurseries. For the largest nurseries, it was 4.6
percent, a little less. In the smallest nurseries, it represented 8.0 percent
of the total capital managed, about half again as much as the average.
Buildings and improvements (Table 1Q divided by 1U) averaged 4.2 percent of
all capital. The thirteen largest nurseries had 3.4 percent of their capital in
buildings. For smallest nurseries, it was 6.5 percent of the total.
Supply inventories (Table 1R divided by 1U) averaged 1.8 percent for all 36
nurseries. Largest nurseries averaged about the same, 1.8 percent, and smallest
nurseries encumbered only 1.6 percent of the managed capital in supply
inventory.








Accounts receivable (Table 1S divided by 1U) averaged 4.0 percent. For the
largest nurseries, this figure was 4.2 percent. The smallest nurseries had but
0.9 percent of their funds invested this way.
Cash/checkbook balances (Table IT divided by 1U) averaged 5.0 percent of the
total capital. Largest averaged 5.7 percent, smallest 1.7 percent.

Table 4.--Efficiency in use of capital, 36 wholesale woody ornamental container
nurseries in Florida, 1986.

Item Unit Average Average Average Your
all 36 13 largest 16 smallest nursery
The one best measure
Annual turnover(e) of owned
capital value (Table 1A/1M) % 42.4 42.0 27.0
Other useful indicators
Annual turnover(e) of managed
capital value (Table 1A/1U) % 39.8 39.6 25.0

Per employee:
Capital owned (Table 1M/1E) $ 72,901 80,468 71,412
Capital managed (Table 1U/1E) $ 77,673 85,417 77,181

Per acre:
Capital owned (Table 1M/1D) $ 51,388 48,304 98,512
Capital managed (Table 1U/1D) $ 54,752 51,275 106,471

Managed capital/employee in:
Plants - (Table 1N/1E) $ 49,062 55,375 43,357
Land ----- -(Table 10/1E) $ 12,986 13,286 19,331
Mach/equip (Table 1P/1E) $ 4,064 3,926 6,209
Buildings/wells (Table 1Q/1E) $ 3,232 2,899 5,033
A/R - (Table 1S/1E) $ 1,376 1,500 1,272

Managed capital per acre in
Plants - (Table IN/ID) $ 34,584 33,241 59,811
Land - (Table 10/1D) $ 9,154 7,975 26,667
Mach/equip (Table IP/1D) $ 2,865 2,357 8,565
Buildings/wells (Table 1Q/1D) $ 2,279 1,740 6,943
A/R - (Table 1S/1D) $ 970 901 1,754

Percent of capital managed in:
Plants - (Table 1N/IU) % 63.2 64.8 56.2
Land - (Table 10/1U) % 16.7 15.6 25.0
Mach/equip (Table 1P/1U) % 5.2 4.6 8.0
Buildings/wells (Table 1Q/1U) % 4.2 3.4 6.5
Supply inv (Table 1R/1U) % 1.8 1.8 1.6
A/R - (Table 1S/1U) % 4.0 4.2 0.9
Cash/checkbook- (Table 1T/1U) % 5.0 5.7 1.7
Total nursery- (Table 1U/1U) % 100.0 100.0 100.0

(e) Annual turnover of capital value--the percentage received from dividing
the value of own plants sold by the value of capital (Table 1A/1M or 1U).







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
production 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
36 nurseries, they averaged $195,224. For the largest nurseries, they were
$379,816. Smallest ones had $42,880, or one fifth that of the average.
Production Supplies
Production supplies include the group starting with "plants and seeds"
through "other production supplies." They averaged $124,892 for the 36 nurs-
eries. For the largest nurseries, they were $245,716, or almost twice the
average. The smallest nurseries had $42,602, or 34 percent of the average.
Other Production Costs
Other production costs include "facility repairs/maintenance" and "equip-
ment operating costs." They averaged $28,147 for the 36 nurseries. For the
thirteen largest nurseries, they were $58,979, more than double the average.
The smallest nurseries had $4,406, or only 16 percent 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
business. They include the group starting with "travel/trade shows" through
"other cash expenses." They averaged $52,835 for the 36 nurseries. For the
largest nurseries, they were $109,801, more than twice the average. The
smallest nurseries had $13,367, about 25 percent of the average.
Total Cash Costs
Total cash costs averaged $401,098. Largest nurseries averaged twice this,
or $794,312. Smallest ones had $103,254, or 26 percent 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 $161,633. Largest nurseries had $353,391, a little more than twice the
average. The smallest ones had $39,395, or 24 percent of average.
jTotal All Costs
Total costs averaged $562,730. Largest nurseries averaged $1,147,703 (twice
the average), and smallest ones had $142,649 (25 percent of the average).

Table 5.--Dollar costs by expense category, 36 wholesale woody ornamental
container nurseries in Florida, 1986.

Item Average Average Average Your
all 36 13 largest 16 smallest nursery
- - dollars - - -


Cash Costs
Operator's salary . .
Other wages/salaries . .
Salaries and wages . .

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

Facility repairs/maintenance .
Equipment operating costs .
Other production costs .

Travel/trade shows . .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes/licenses/bonds . .
Advertising . . .
Rent: land and/or buildings .
Other cash expenses . .
Administrative and overhead .
TOTAL CASH COSTS . ..

Non-Cash Costs
Depreciation: mach/equipment. .
Depreciation: bldgs/fences/wells.
Inventory decrease in supplies.
Interest on capital, 12 .
NON-CASH COSTS . .

TOTAL ALL COSTS . .


33,239
161 985
195,224

38,638
25,873
22,445
12,981
8,284
16,671
124,892

8,001
20,146
28,147

3,251
8,312
3,759
4,950
4,288
5,209
4,991
18,076
52,835
401,098


18,024
8,283
210
135,116
161,633

562,730


55,121
324,695
379,816

73,338
53,088
40,704
23,216
17,859
37,510
245,716

14,840
44,139
58,979

6,269
14,809
7,139
10,300
8,524
11,547
11,717
39,496
109,801
794,312


32,830
15,246
1,263
304,052
353,391

1,147,703


15,249
27,631
42,880

15,794
7,984
8,719
4,981
1,986
3,138
42,602

776
3 630
4,406

1,119
3,936
1,231
1,593
1,266
904
890
2 428
13,367
103,254


7,114
3,502
0
28,779
39,395

142,649









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 rela-
tionships 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 34.7 percent of all costs
for the 36 nurseries. For the thirteen largest ones, they were 33.1 percent, or
one and a half percent less than the average. The sixteen smallest nurseries
had 30.1 percent, or 4.6 percent less than the average.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 22.2 percent for the 36 nurseries. For the largest nurseries,
they were 21.4 percent. The smallest nurseries averaged 29.9 percent of total
costs.
Other Production Costs
Other production costs ("facility repairs" and "equipment operation") aver-
aged 5.0 percent for the 36 nurseries. For the thirteen largest ones, they were
also 5.1 percent. The sixteen smallest nurseries had 3.1 percent, or two per-
cent lower than the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 9.4 percent of
all costs for the 36 nurseries. For the thirteen largest ones, they were 9.6
percent. The smallest nurseries had the same as the average, 9.4 percent.
Total Cash Costs
Total cash costs represented 71.3 percent of all costs and allowances for
the 36 nurseries. For the largest ones, it was 69.2 percent. The smallest ones
had 72.4 percent, a percent more 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




13



cash during this accounting period. They averaged 28.7 percent of total costs
for the 36 nurseries. For the thirteen largest ones, they were 30.8 percent.
The five smallest nurseries had 27.6 percent of their total as non-cash costs.
This was one percent less than the average. The largest differences were in the
percentages of total costs represented by interest on capital.


Table 6.--Percent of total costs by expense category, 36 wholesale woody
ornamental plant nurseries in Florida, 1986.

Item Average Average Average Your
all 36 13 largest 16 smallest nursery
S- Parr nt- -


Cash Costs
Operator's salary . .
Other wages/salaries . .
Salaries and wages . .

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

Facility repairs/maintenance .
Equipment operating costs .
Other production costs .

Travel/trade shows . .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes/licenses/bonds . .
Advertising . . .
Rent: land and/or buildings .
Other cash.expenses . .
Administrative & overhead .
TOTAL CASH COSTS . .

Non-Cash Costs
Depreciation: mach/equipment .
Depreciation: bldgs/fences/wells
Inventory decrease in supplies
Interest on capital, 12 .
NON-CASH COSTS . .


TOTAL ALL COSTS . .


5.9
28.8
34.7

6.9
4.6
4.0
2.3
1.5
3.0
22.2

1.4
3.6
5.0

0.6
1.5
0.7
0.9
0.8
0.9
0.9
3.2
79.4
71.3


3.2


1.5
0.04
24.0
28.7

100.0


4.8
28.3
33.1


6.4
4.6
3.6
2.0
1.6
3.3
21.4

1.3
3.8
5.1

0.6
1.3
0.6
0.9
0.7
1.0
1.0
3.4
9.6
69.2


2.9
1.3
0.1
26.5
30.8

100.0


10.7
19.4
30.1

11.1
5.6
6.1
3.5
1.4
2.2
29.9

0.5
2.5
3.1

0.8
2.8
0.9
1.1
0.9
0.6
0.6
1.7
9.4
72.4


5.0
2.5
0.0
20.2
27.6

100.0


P~~~e~~~l~er~eePI=~i~~~iPIIII~C~PD~i~E~P









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 produc-
tion figure from Table IC, "Plant production area." This is growing area only.
It does not include drive, roadway, parking lot, office or packing shed areas.
Salaries and Wages
Salaries and wages (includes operator) per square foot of production area
averaged 20.45 cents for the 36 nurseries. For the largest ones, they were
16.62 cents, or almost four cents less than the average. The smallest nurseries
had 40.43 cents, or almost double the average.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 13.09 cents. For the thirteen largest nurseries, they were
10.75 cents. Smallest nurseries had 40.17 cents, more than double the average.
Other Production Costs
Other production costs ("facility repairs" and "equipment operation") aver-
aged 2.95 cents in the 36 nurseries. For the largest ones, they were slightly
lower, 2.58 cents. The smallest nurseries had 4.15 cents, or 1.2 cents higher.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 5.54 cents per
square foot of growing area in the 36 nurseries. Largest nurseries were a
little lower at 4.81 cents. The smallest ones had 12.60 cents, over 7 cents
above average.
Total Cash Costs
Total out-of-pocket costs per square foot of production area averaged 42.02
cents. For the eleven largest nurseries, they were 34.76 cents, or seven cents
less than the average. The smallest ones had 97.37 cents, or two and a third
times the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") amounted to
16.93 cents in the 36 nurseries. For the largest ones, they were 15.47 cents,
one and a half cents less than the average. The smallest nurseries had 37.15
cents, twenty cents greater than the average.







Total All Costs
The total for all costs and allowances was 58.96 cents ($0.59) in the 36
nurseries. For the thirteen largest ones, they were 50.23 cents, or almost nine
cents below the average. The smallest nurseries had 134.52 cents, or 75.5
cents, two and a quarter times the average.cost per square foot of production
area.


Table 7.--Costs per square foot of production area, 36 wholesale woody ornamen-
tal container nurseries in Florida, 1986.

Item Average Average Average Your
all 36 13 largest 16 smallest nursery
- - Cents - - -
Cash Costs
Operator's salary ......... 3.48 2.41 14.38
Other wages/salaries ....... 16.97 14.21 26.06
Salaries and wages ....... 20.45 16.62 40.43

Plants & seeds to grow on ..... 4.05 3.21 14.89
Growing containers. ......... 2.71 2.32 7.53
Peat/soil/shavings, etc ...... 2.35 1.78 8.22
Fertilizer/lime .......... 1.36 1.02 4.70
Pesticides/other chemicals .. 0.87 0.78 1.87
Other production supplies ..... 1.75 1.64 2.96
Production supplies ....... 13.09 10.75 40.17

Facility repairs/maintenance 0.84 0.65 0.73
Equipment operating costs ..... 2.11 1.93 3.42
Other production costs ..... 2.95 2.58 4.15

Travel/trade shows ........ 0.34 0.27 1.06
Insurance ............. 0.87 0.65 3.71
Telephone . ........ 0.39 0.31 1.16
Electricity ............ 0.52 0.45 1.50
Taxes/licenses/bonds ....... 0.45 0.37 1.19
Advertising ......... 0.55 0.51 0.85
Rent: land and/or buildings .... 0.52 0.51 0.84
Other cash expenses ....... 1.89 1.73 2.29
Administrative and overhead 5.54 4.81 12.60
TOTAL CASH COSTS. ....... 42.02 34.76 97.37

Non-Cash Costs
Depreciation: mach/equipment 1.89 1.44 6.71
Depreciation: bidgs/fences/wells 0.87 0.67 3.30
Inventory decrease in supplies. 0.02 0.06 0.00
Interest on capital, 12% ..... 14.16 13.31 27.14
NON-CASH COSTS ....... 16.93 15.47 37.15

TOTAL ALL COSTS ..... . 58.96 50.23 134.52







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 between the beginning and the end of the year 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 29.2 cents per dollar of
sales after adjusting for changes in plant inventory. For the thirteen largest
nurs-eries, they were almost five cents less at 24.88 cents. The smallest
nurseries had 45.56 cents, or 16 cents above the average.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 18.68 cents. Largest nurseries averaged 16.10 cents, two and a
half cents less than the average. The smallest ones had 45.26 cents, a third
more than the average.
Other Production Supplies
Other production costs ("facility repairs" and "equipment operation") aver-
aged 4.2 cents per dollar of adjusted sales. For the thirteen largest
nurseries, they were 3.86 cents, slightly below the average. The smallest
nurseries had 4.68 cents, or a half cent over the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") amounted to 7.90 cents
per dollar of adjusted sales. Largest nurseries had 7.19 cents, a half cent
less than the average. Smallest ones were much higher at 14.20 cents.
Total Cash Costs
Total cash costs per dollar of adjusted sales averaged 60.0 cents. Largest
nurseries were eight cents lower at 52.04 cents. Smallest ones had 109.71,
fifty cents above the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") averaged 24.18
cents. For the thirteen largest nurseries, they were 23.15 cents, or a cent








below average. Smallest ones had 41.86 cents, 17.68 cents above the average.
Total All Costs
Total costs per dollar of adjusted sales averaged 84.18 cents. For the
largest nurseries, they were 75.19 cents. The smallest ones had 151.57 cents,
over 67 cents above the average.


Table 8.--Costs per dollar of sales adjusted for change in plant inventory,
36 woody ornamental container nurseries in Florida, 1986.

Item Average Average Average Your
all 36 13 largest 16 smallest nursery
- - Cents - - -
Cash Costs
Operator's salary ......... 4.97 3.61 16.20
Other wages/salaries ....... 24.23 21.27 29.36
Salaries and wages ....... 29.20 24.88 45.56

Plants & seeds to grow on ..... 5.78 4.80 16.78
Growing containers. ........ 3.87 3.48 8.48
Peat/soil/shavings, etc ...... 3.36 2.67 9.26
Fertilizer/lime .......... 1.94 1.52 5.29
Pesticides/other chemicals .... 1.24 1.17 2.11
Other production supplies ..... 2.49 2.46 3.33
Production supplies ...... 18.68 16.10 45.26

Facility repairs/maintenance 1.20 0.97 0.82
Equipment operating costs ..... 3.01 2.89 3.86
Other production costs ..... 4.21 3.86 4.68

Travel/trade shows ........ 0.49 0.41 1.19
Insurance ............. 1.24 0.97 4.18
Telephone ............. 0.56 0.47 1.31
Electricity ............ 0.74 0.67 1.69
Taxes/licenses/bonds ....... 0.64 0.56 1.35
Advertising ............ 0.78 0.76 0.96
Rent: land and/or buildings .... 0.75 0.77 0.95
Other cash expenses . .... 2.70 2.59 2.58
Administrative and overhead 7.90 7.19 14.20
TOTAL CASH COSTS ....... 60.00 52.04 109.71

Non-Cash Costs
Depreciation: mach/equipment 2.70 2.15 7.56
Depreciation: bldgs/fences/wells 1.24 1.00 3.72
Inventory decrease In supplies. .. 0.03 0.08 0.00
Interest on capital, 12% ... 20.21 19.92 30.58
NON-CASH COSTS ...... 24.18 23.15 41.86

TOTAL ALL COSTS . . 84.18 75.19 151.57









Costs Per Dollar of Sales (Table 9)


While total business position is indicated by costs per dollar of sales ad-
justed for changes in plant 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 40.90 cents per dollar of
cash received. For the thirteen largest nurseries, they were 35.69 cents, or
near five cents less than the average. The smallest nurseries had 66.15 cents,
or over a quarter above average.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 26.16 cents per dollar of cash sales. For the thirteen largest
nurseries, they were 23.09 cents. The smallest nurseries had 65.72 cents, or
almost forty cents above average.
Other Production Costs
Other production costs ("facility repairs" and "equipment operation") aver-
aged 5.90 cents per dollar of cash received. For the thirteen largest
nurseries, they were 5.54 cents, or nearly a half cent lower. The smallest
nurseries had 6.80 cents, or a cent above the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 11.07 cents per
dollar of sales. For the thirteen largest nurseries, they were 10.32 cents, or
0.75 cents lower. Smallest ones had 20.62 cents, or ten cents above average.
Total Cash Costs
Total cash costs averaged 84.02 cents per dollar of cash received. For
largest nurseries, they were 74.63 cents, or near ten cents below average. The
smallest ones had 159.30 cents, over 75 cents above the average, and falling
short of meeting current bills by more than 59 cents per dollar of sales.
Non-Cash Costs
Non-cash costs averaged 33.86 cents. For largest nurseries, they were 33.20
cents, nearly the same. The smallest nurseries had 60.78 cents, or close to
double the average cost per dollar of sales.







Total all Costs
The 36 nursery average covered the cash costs, but lacked 17.88 cents of
covering total costs. Non-cash costs were 33.86 cents, but funds left after
paying cash costs were about 16 cents per dollar of sales. Largest nurseries
.met cash costs with a quarter to spare, but lacked 7.83 cents in meeting all
cost and allowances. For smallest nurseries, the deficit was $1.20.


Table 9.--Costs per dollar of sales (no adjustment for change in plant inven-
tory), 36 woody ornamental container nurseries in Florida, 1986.

Item Average Average Average Your
all 36 13 largest 16 smallest nursery
- - Cents - - -
Cash Costs
Operator's salary ......... 6.96 5.18 23.53
Other wages/salaries ....... 33.93 30.51 42.63
Salaries and wages ....... 40.90 35.69 66.15

Plants & seeds to grow on ..... 8.09 6.89 24.37
Growing containers ....... 5.42 4.99 12.32
Peat/soil/shavings, etc ...... 4.70 3.82 13.45
Fertilizer/lime .......... 2.72 2.18 7.68
Pesticides/other chemicals .... 1.74 1.68 3.06
Other production supplies .... 3.49 3.52 4.84
Production supplies ...... 26.16 23.09 65.72

Facility repairs/maintenance 1.68 1.39 1.20
Equipment operating costs .... 4.22 4.15 5.60
Other production costs ..... 5.90 5.54 6.80

Travel/trade shows ........ 0.68 0.59 1.73
Insurance ............. 1.74 1.39 6.07
Telephone ............. 0.79 0.67 1.90
Electricity ............ 1.04 0.97 2.46
Taxes/licenses/bonds ....... 0.90 0.80 1.95
Advertising ............ 1.09 1.08 1.39
Rent: land and/or buildings .... 1.05 1.10 1.37
Other cash expenses ........ 3.79 3.71 3.75
Administrative and overhead 11.07 10.32 20.62
TOTAL CASH COSTS ....... 84.02 74.63 159.30 ___

Non-Cash Costs
Depreciation: mach/equipment 3.78 3.08 10.98
Depreciation: bldgs/fences/wells 1.74 1.43 5.40
Inventory decrease in supplies. 0.04 0.12 0.00
Interest on capital, 12 ... 28.30 28.57 44.40
NON-CASH COSTS ........ 33.86 33.20 60.78_

TOTAL ALL COSTS ........ 117.88 107.83 220.08









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
invested 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 capi-
tal that nursery operators and lending institutions invest funds in nursery
operations.
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 to income received from sources other
than plant sales. It includes rent income, interest income, packaging and/or
delivery charges and income from the sale of fertilizer and supplies.
Total gain for the 36 nurseries averaged $672,676. Largest nurseries aver-
aged 2.28 times that amount, or $1,535,617. Smallest nurseries had only
fourteen percent of the average, or $94,408.
Net Nursery Income
Net nursery income is the total return for the year for the time and man-
agerial skills of the operator plus the capital invested in the operation. To
calculate net nursery income, 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 36 nurseries, net nursery income averaged $278,300. For the
thirteen largest nur-series, it was $747,086, or 2.68 times the average.
Smallest nurseries averaged a loss of $4,213.
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 (Table 1M) 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 36 nurseries amounted to $245,061 for a return of
21.76 percent. For the thirteen largest nurseries, it was $691,966 for a 27.31
percent return on the capital investment. The smallest nurseries averaged a
loss of $19,462.



Table 10.--Income summary, 36 wholesale woody ornamental container nurseries in
Florida, 1986.


I tern


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


Unit Average
all 36

$ 477,374
$ 191,137
$ 0
$ 4.165
$ 672,676


Average Average
13 largest 16 smallest
- -Dollars- - -
1,064,322 64,818
462,076 29,298
0 93
9,220 199
1,535,617 94,408


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) -


$( 367,859)
$( 26,517)
$( 394,376)

$ 278,300
$( 33,239)

$ 245,061
% 21.76


( 739,191)
( 49340)
( 788531)

747,086
( 55,120)

691,966
27.31


( 88,005)( )
( 10,616)( )
( 98,621)( )

( 4,213)
( 15,249) ()

( 19,462)
8.12


(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


I







Balance Sheet (Table 11)


This section is a relatively new addition to the Florida Nursery Business
Analysis series. It was made possible by the additional fiscal information
provided by the participants in the program. last year. These balance sheet
figures represent the mid-year financial sltua-tion of the firms. They were
derived as an average of year-beginning and year-end figures.
Current Assets
Current assets consist of cash, accounts receivable, and inventory values.
'They are cash, or items deemed convertible to cash within a year's time. Cash
on hand includes funds in checking accounts, savings accounts, and money market
funds. Average cash on hand was $58,918. Largest nurseries had 2.54 times this
amount ($152,568). Smallest ones had seven percent of the average ($4,422).
Accounts receivable include uncollected payments from all sources; the majority
of these are trade accounts for plants sold. Generally, this figure should be
minimized. Uncollected funds pay no bills and earn no interest. They averaged
$47,454. Largest nurseries had 2.41 times this amount, or $112,884. The smal-
lest nurseries had $2,224, or 4.7 percent of the average. Inventory values are
the investments in growing plants and supplies presented previously in Table 1.
They averaged $779,025. Largest nurseries averaged 2.2 times this ($1,790,885).
Smallest had 19 percent of the average ($149,880). Total current assets
averaged $886,397. For largest nurseries, they were $2,056,338 (2.32 times the
average). Smallest had $156,526 (18 percent of the average)
Long Term Assets
Long term assets are investments in buildings, machinery and land that nor-
mally would not be converted to cash within a year. Current values of invest-
ments are the original cost less accumulated depreciation. Comparing original
cost with the value remaining after subtracting accumulated depreciation pro-
vides an idea of the degree to which capital assets have been depleted. Origi-
nal investments averaged $347,190. Subtracting accumulated depreciation of
$107,621 leaves a current value of $239,569 (69 percent of original cost).
Largest nursery original cost was $710,850. Subtracting accumulated deprecia-
tion of $233,424 gives a remaining value of $477,426 (67 percent of original
cost). Smallest nursery original investment was only 30 percent of the average,
or $105,594. Subtracting accumulated depreciation of $22,295 makes the current
value $83,300 (79 percent of the original cost).







Total Assets
Total assets averaged $1,125,966. Largest nurseries had two and a quarter
times this amount ($2,533,764). Smallest nurseries had 21 percent of the
average ($239,826).
-Liabilities
Liabilities may be "current" (payable during the current year) or "long
term" (payable at some time after the current year). Current liabilities aver-
aged $28,319. Largest nurseries had 2.33 times this amount ($65,922). Smallest
ones had 15 percent of average ($4,144). Long term liabilities may be notes or
mortgages. They averaged $269,728. Largest nurseries had 2.4 times this amount
($657,635). Smallest ones had 14 percent of the industry average ($38,939).
Total Liabilities represent that part of the nursery that belongs to someone
else. They averaged $298,047, or 26 percent of the assets. Largest nurseries
had 2.4 times this amount, or $723,557 (29 percent of the assets). Smallest

Table 11.--Balance Sheet, 36 wholesale woody ornamental container nurseries in
Florida, 1986

Item Average Average Average Your
all 36 13 largest 16 smallest nursery
- - Dollars - - -
Assets
Current Assets
Cash on hand .......... 59,918 152,568 4,422
Accounts receivable. ...... 47,454 112,884 2.224
Inventories: Plants ...... 757,773 1,743,648 145,609
Supplies . 21,252 47,237 4,271
TOTAL CURRENT ASSETS . 886,397 2,056,338 156,526

Long Term Assets
Machinery & equipment ..... 115,326 233,914 31,825
Buildings & fixtures ...... 102,119 207,899 28,225
Land ............. 129,745 269.037 45,545
Sub-total (original cost). .. 347,190 710,850 105,595
Less accumulated depreciation. ( 107621) ( 233,424) ( 22,295)( --
TOTAL LONG TERM ASSETS . 239,569 477,426 83,300

TOTAL ASSETS .......... 1,125,966 2,533,764 239,828

Liabilities and Net worth
Liabilities
Current liabilities. ...... 28,319 65,922 4,144
Long-term liabilities. 269,728 657,635 38,939
TOTAL LIABILITIES ...... 298,047 723,557 43,082

NET WORTH .......... 827,919 1,810,207 196,744

TOTAL LIABILITIES $ NET WORTH 1,125,966 2,533,764 239,826









ones had a seventh of the industry average, or $43,082 (18 percent of the
assets).
Net worth
Net worth is the difference between "total assets" and "total liabili-
ties". This is what the owner owns. The average net worth of all 36 nurseries
was $827,919 (74 percent of the assets). Largest nurseries had $1,810,207 (71
percent). Smallest nurseries averaged $196,744 (82 percent of the assets).


Total Profitability Model


The Total Profitability Model combines operating statement and balance sheet
figures in three sections: margin management, asset management and leverage
management. Together, they indicate the firm's return on net worth.
Margin Management
Figures for this section come from Table 12. From nursery total gain
($672,676) are subtracted total deductions ($394,376) plus operator's salary
($33,239) to give return to capital ($245,061). This divided by total gain
($672,676) yields an average net profit margin of 36.43 percent. Largest nur-
series averaged a net profit margin of 45.06 percent. Smallest nurseries aver-
aged a negative profit margin of 20.61 percent.
Asset Management
Figures for this section come from the asset portion of Table 13. Current
assets ($886,397) plus long term assets ($239,569) make total assets of
$1,125,966. This divided into total gain ($672,676) gives an asset turnover
figure of 0.5974. Asset turnover times net profit margin (36.43 percent) result
in an average return to capital of 21.76 percent. Largest nurseries averaged
27.31 percent return to capital. Smallest ones averaged -8.12.
Leverage Management
Figures for this section come from the liabilities and net worth portion of
Table 13. Current liabilities ($28,319) plus long term liabilities ($269,728)
gives average total liabilities of $298,047. This subtracted from total assets
($1,125,966) yields average net worth of $827,919. Total liabilities and net
worth divided by net worth gives a leverage factor of 1.36. Leverage times re-
turn to capital (21.76 percent) gives a return on net worth of 29.60 percent.
Largest nurseries had 38.23 percent. Smallest nureries lost 9.89 percent.










MARGIN MANAGEMENT


NET PROFIT
MARGIN


LONG TERM ASSETS


LEVERAGE


Figure 1.--Total profitability model, 36 wholesale woody ornamental container
nurseries in Florida, 1986


RATE OF
RETURN TO
CAPITAL


RETURN ON










Factors Associated With Level of Profit (Table 12)


: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 36 nurseries is compared
with the average for the thirteen most profitable and the thirteen least prof-
itable 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 valu-
able 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 36 nurseries was $278,300. The most profitable
third of the nurseries averaged 2.9 times this amount, or $814,816. The least
profitable third averaged -$75,618. The Following compares the average for
these three groupings of woody ornamental nurseries using "The one best measure"
indicator from most of the proceeding tables..
Size of Business
The indicator of size of business selected from Table 1 was "Value of own
plants sold." The 36 nurseries averaged $477,374. The most profitable third
had $1,024,203 in sales, or 2.15 times more. The least profitable group aver-
aged $108,622, or 23 percent of the average. This does not mean that small
businesses 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 36 nurseries was 50.0 cents per square foot. The
most profitable third had 44.2, or 12 percent less, and the least profitable










third had 78.7, or 57 percent above the average. Thus, higher sales per square
foot do not necessarily predict high profitability.
Nevertheless, given a certain amount of growing space, a higher sales volume
per square foot is desirable. Lower sales per square foot of total bed and
bench space can result from a number of things, such as letting plants con-
tinue 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 fertil-
izing 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 12.--Factors associated with level of profit, 36 wholesale woody
ornamental container nurseries in Florida, 1986.

Item Unit Average Average 12 Average 12 Your
all 36 most profit least profit nursery
Level of profit
Net nursery income (Table 12) $ 278,300 814,816 ( 75,618)
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $ 477,374 1,024,203 108,622

Production rate (Table 2)
Sales/sq ft of area in prod cents 50.0 44.2 78.7

Labor efficiency (Table 3)
Own plant sales/employee $ 30,908 34,587 21,264

Use of capital (Table 4)
Annual turnover of owned
capital value - - $ 42.4 42.0 38.4

Level of costs (Table 7)
Cost/sq ft of total prod area- cents 59.0 46.3 170.8

Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in inventory value $ 84.2 69.9 219.5










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 36
nurseries was $30,908 per person. For the most profitable third of the
nurseries, sales were 12 percent higher than average at $34,587. For the least
profitable third, they were around 69 percent of the average at $21,264. Higher
sales per employee viewed alone at this point in time might seem to indicate
true efficiency. On the other hand, if viewed together with other indicators,
it might instead 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 a larger 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/utilizing 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 42.4 percent, meaning that the
value of own plants sold during the year amounted to about four tenths the
capital invested. For the most profitable third, turnover near the same at
42.0. For the least profitable third, turnover was 38.4 percent, four percent
below average.








Problems that lower turnover rate include any of the items already men-
tioned 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 invest-
ments 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 59.0 cents, or nine cents greater
than sales per square foot before adjusting for changes in plant inventory
value. This means that sales did not cover all cash costs and non-cash allow-
ances. For the most profitable third, costs were 46.3 cents per square foot,
which was two cents less than sales per square foot. The least profitable third
averaged 170.8 cents ($1.71), which was. 92 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 cap-
ital items, destruction or theft of supplies and plants, not checking for best
price before purchasing needs, and not carefully managing the nursery opera-
tion. Other causes of increased costs may not be a problem if they result in
increased revenue. One example might be increased costs for waxed shipping
cartons in order 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 36 nurseries was 84.2 cents per dollar of sales after ad-
justing for changes in inventory values. Thus, on the average, the margin of
profit per dollar of sales was 16 cents. For the more profitable third of the
nurseries, the cost was 69.9 cents, leaving a margin of 30.1 cents per dollar of
sales after adjusting for changes in inventory. For the least profitable third,










costs were 219.5 cents. Thus, this group lacked about $1.20 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 larger operation are incurred before the
nursery can experience accompanying extra sales. During inflationary times,
this can occur from a failure to get price increases as fast as costs are going
up. While prices received are not always under the direct control of the nur-
seryman, 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 getting 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 prob-
lems 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 destruction of plants or supplies, practicing less
than optimum fertilizing and growing techniques, and pursuing less desirable
markets and marketing programs.
Growth in the Business
Growth in sales of a business is normally considered to be a healthy sign.
It can be the result of all the things already mentioned that increase sales
volume or plant inventory for a given operation. To stay healthy, busi-nesses
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 contributes 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 13)


In this section, the average for all 36 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
series. 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 13, 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 to this table.


Table 13-~Range of figures on factors associated with level of profit,
woody ornamental container nurseries in Florida, 1985


wholesale


Average 3 best 3 poorest
Item Unit all 36 factor factor Your
nurseries average average nursery
Level of profit
Net nursery income (Table 12) $ 278,300 2,151,511 ( 266,537)
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $ 477,374 2,109,605 39,433

Production rate (Table 2)
Sales/sq ft of area in prod- cents 50.0 336.0 23.0

Labor efficiency (Table 3)
Own plant sale/employee- $ 30,908 48,325 10,395

Use of capital (Table 4)
Annual turnover of owned
capital value - - % 42.4 292.0 18.0

Level of costs (Table 7)
Cost/sq ft of prod area- cents 59.0 27.0 540.0

Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in inventory value cents 84.2 42.0 565.0










Seasonality of Sales


Figure 2 compares average monthly sales of the 36 container nurseries with
annual average cash costs and annual average total costs per month. Sales were
running high in January 1986, dropped in February and March, eased up some in
April and May, then plunged to the lowest point in the year in August. They
rose in September and October, eased down some in November, then surged to the
year's peak in December.
When compared to annual average costs per month, sales exceeded average
total costs only three months out of the year, January, February and December.
Sales didn't even cover average cash costs for three months of the year, July,
August and September. For the remaining six months of the year, sales were
adequate for covering average cash costs, but did not cover average total costs.


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 using the formulas shown and write the results on the lines
provided for this purpose on each table. Another alternative is to acquire the
University of Florida microcomputer program, WOODYNBA.BAS, for making these
calculations. Either alternative should provide some valuable insight into the
business side of operating a woody ornamental nursery. It should improve man-
agement 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
calculation may wish to consider becoming a participant in the Florida Nursery
Business Analysis Program. If you would like to do so, contact your ornamental
agent in your nearby county Extension office, or contact the authors in Gaines-
ville. Nursery operators who authorize a commercial accounting firm to supply
the data required for the program can participate with a minimum of effort on
their part.


















Total Cosls s \ 0 ^ 0^
46 -

44
c \42-
0

o 40-

S 38-

36-

Cash Cos-1
32-

30-

28-

26-,
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

MONTH

Figure 1.--Monthly sales compared to average monthly costs, 36 wholesale woody ornamental container
nurseries in Florida, 1986