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J. Robert Strain


Economic Information
Report 162


Business Analysis of Foliage Plant
Nurseries in South Florida, 1980


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


June 1982


6'1:












ABSTRACT


Average sales, costs and returns information are presented for 12
wholesale foliage plant nurseries in South Florida for the tax year of
1980. Average value of plant sales was $842,716. Cash costs averaged
$814,651. Non-cash costs and allowances including a 15 percent return
on investment amounted to another $119,767. Total costs were $934,419.
After adjustments for change in plant inventory value and additions for
miscellaneous income, net nursery income averaged $94,960, and return to
capital was $44,295 for a 7.2 percent return on investment. Comparable
information is also presented for the average of the four larger and the
seven smaller foliage nurseries in the study.
Key words: foliage nursery business analysis, income, costs, in-
vestment, efficiency measures, South Florida.









ACKNOWLEDGEMENTS


This report was made possible by the 12 cooperating foliage plant
nurserymen who made available their production and accounting records on
a confidential basis for analysis and averaging. In addition, assist-
ance and encouragement were supplied by Extension Ornamental Horticul-
tural Agents Loretta Hodyss, Robert Haehle and DeArmand Hull. Shirley
Harris and Alice Bliss did the typing. Expressing appreciation for 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 author.










TABLE OF CONTENTS


ABSTRACT . . .

ACKNOWLEDGEMENTS . .

LIST OF TABLES . . .


INTRODUCTION . . ..

PROCEDURE . . ...

DEFINITIONS . . .

DATA AND RESULTS . . .

Size of Business . .

Rates of Production . .

Labor Efficiency . .

The Use of Space . .

Efficiency in Use of Capital .

Dollar Costs by Expense Category























* S S S S


* a S S S



* S S S S

* S S S S


* S a S S

* S S a S


Percent of Total Cost by Expense Categoryl


Costs Per Square Foot of Total Bed and Bench Space'


* .


Costs Per Square Foot of Propagating and Finishing Space

Costs Per Dollar of Sales Adjusted for Inventory Change

Costs Per Dollar of Sales1 . .

Income Summary . . . . .

Total Gain . . . . .

Net Nursery Income . . . . .

Return to Capital . . . .

Factors Associated With Level of Profit . .

Size of Business . . . . .

Production Rate . . . .

Labor Efficiency . . . . .

Space Use Intensity . . . .

1
These sections also contain the following subcategories:

Salaries and Wages
Production Supplies
Other Production Costs
Administrative and Overhead
Total Cash Costs
Non-Cash Costs
Total All Costs
ii


Page

i

i

iii


* S S



* S S

* S S

* S S

* S S


* S S


* 5 5

* S S

* S *


* S S



* S S


* S S a


* S S S S














TABLE OF CONTENTS (Continued)

Page
Use of Capital . .. . . . 29
Level of Costs . ... . . .. . .. 29
Cost Efficiency . . . . .. . 30
Growth in the Business . .. . . . 30
Range of Figures . . . . ... . 31
CONCLUDING COMMENTS . . . . .. . 32



LIST OF TABLES

Table
1 Size of business, 12 wholesale foliage plant nurseries in South
Florida, 1980 . . . . . 5
2 Rates of production, 12 wholesale foliage plant nurseries in South
Florida, 1980 . . . . . . . 6
3 Labor efficiency, 12 wholesale foliage plant nurseries in South
Florida, 1980 . . .. .. . . .. 7
4 The use of space, 12 wholesale foliage plant nurseries in South
Florida, 1980 . . . . .. ........ 9
5 Efficiency in use of capital, 12 wholesale foliage plant nurseries in
South Florida, 1980 . . . . .. . 11
6 Dollar costs by expense category, 12 wholesale foliage plant
nurseries in South Florida, 1980 . . . .. 13
7 Percent of total costs by expense category, 12 wholesale foliage
plant nurseries in South Florida, 1980 . . . 15
8 Costs per square foot of total bed and bench space, 12 wholesale
foliage plant nurseries in South Florida, 1980 . . 17
9 Cost per square foot of propagating and finishing bed and bench
space, 12 wholesale foliage plant nurseries in South Florida, 1980 19
10 Costs per dollar of sales adjusted for change in plant inventory
12 wholesale foliage plant nurseries in South Florida, 1980 . 21
11 Costs per dollar of sales (no adjustment for change in plant inven-
tory), 12 wholesale foliage plant nurseries in South Florida, 1980 23
12 Income summary, 12 wholesale foliage plant nurseries in South
Florida, 1980 . . . . . . ... 25
13 Factors associated with level of profit, 12 wholesale foliage plant
nurseries in South Florida, 1980 . . . 27
14 Range of figures on factors associated with level of profit,
12 wholesale foliage plant nurseries in South Florida, 1980 . 31













BUSINESS ANALYSIS OF FOLIAGE PLANT NURSERIES IN SOUTH FLORIDA, 1980

J. Robert Strain

INTRODUCTION

This publication contains information of sales costs, returns and
production efficiency for foliage plant nurseries in South Florida for 1980.
The other publications in this series include reports on Central Florida
foliage nurseries, container nurseries, and potted flower nurseries.
Purposes of the nursery business analysis series include:
1) Furnishing nurserymen with various physical and economic measures
that may be used in evaluating the efficiency of individual nurseries;
2) Supplying cooperating nurserymen with data so that they may make more
informed management decisions;
3) Providing individuals considering entering the wholesale plant pro-
duction business with an estimate of the input requirements and revenue
potential; and
4) Providing Florida Extension personnel with data for conducting edu-
cational programs with nurserymen.


PROCEDURE


The information and averages presented in this report are based on data
supplied by 12 nurserymen in the form of confidential production and
accounting records. Their nurseries are all located in southern Florida. The
nurserymen participated in the program voluntarily and do not represent a
statistically selected sample. In fact, the nurserymen participating in the
Florida Nursery Business Analysis Program are thought to represent some of the
more efficient foliage nurseries in South Florida, rather than being typical
of the foliage nursery industry.




J. ROBERT STRAIN is extension economist and professor of food and
resource economics.









Data collected were for the 1980 tax year. In some cases, data were
received for a fiscal year which did not coincide with the 1980 calendar
year. Data for fiscal years ending after July 1, 1979 and before July 1, 1981
were included with 1980 calendar year data.
Not all nurserymen drew a regular salary from their operation. In these
instances, an estimate of the value of the time of the operator was collected
and used in the analysis in order to provide a more equitable basis for com-
paring data. For the same reason, interest expense paid by individual
nurserymen was excluded from the costs listed in this report. Instead, an
interest charge for the value of the capital invested was calculated at the
rate of 15 percent per year and included as a non-cash cost of operation.
The value of the capital investment reflects the depreciated book value
of buildings, improvements, machinery, and equipment. Growing plants are also
included as a part of the 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 yet of a salable size. Some will barely be
started, others almost ready to sell, and others scattered in between. A
common practice is to value all plants, whether just started or almost
finished, at 50 to 60 percent of their wholesale price if finished. However,
some nurserymen use other methods. For this report, the values received from
the nurserymen 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 nurseryman
if he were to buy it in 1980, it does represent the investment he actually had
in the operation.
The data from the individual nurseries were averaged and are presented
here in tabular form. The tables contain average values for all 12 nurseries,
for the five "larger" nurseries, and for the seven "smaller" nurseries. For
the purposes of this report, the larger nurseries were those with $500,000 or
more in plant sales, while the smaller nurseries were those with less than
$500,000 in plant sales.
Nurserymen participating in the program received an analysis of their own
operation shortly after they supplied their data. Their analyses contained
the same tables presented in the same sequence and with the same table numbers
used in this report.










DEFINITIONS


In general, terms used in this report are thought to be self
explanatory. However, experience indicates that some of the terms used here
are less familiar than others. They are defined as follows, and again later
where 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
growing-on is not deducted.

Fulltime equivalent employee: the equivalent of one person working 40
hours a week for 52 weeks a year (2080 manhours a year). The most common
method for obtaining the number of fulltime equivalent employees for this
report was to divide the total annual payroll hours for the nursery by 2080,
and then add on any unpaid family or management time.

Capital owned: the net value (cost after adjusting for depreciation
taken in prior years) of capital assets or investment in the nursery
operation.

Capital managed: the sum 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 additional capital items whose
value would be added to capital owned to obtain 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 in the operation.

Total gain: the sum of plant sales. change in plant inventory, increase
in supply inventory, and miscellaneous cash income. It represents the total
effect of the year's operation, be it in the form of cash or inventory change.

Net nursery income: the net effect of the year's operation. To obtain
net nursery income, all cash costs (except operator's salary), and all non-
cash allowances (except interest 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
substracting the salary or time value of the operator. It is what the owned
capital earned.








DATA AND RESULTS


The data in the first 11 tables present various size and efficiency
measures. Data in tables 12 through 14 relate to the profitability of South
Florida foliage nurseries. Where information in the tables is presented as
the nearest whole number, arithmetic errors due to rounding may be noted.
In the first five tables dealing with size of business, rates of pro-
duction, labor efficiency, use of space and capital efficiency, more than one
measure of efficiency could be used. The first item in each table is the one
selected as the best single measure. It is followed by other measures that
are also useful for certain purposes or are meaningful to many growers.

Size of Business (Table 1)


Table 1 is basic. It plus Table 6 provide most of the data required for
developing the remaining tables in this report.
For the size of business, the one best measure selected was "Value of own
plants sold" (Table 1A). This amounted to $261,519 for the seven smaller
nurseries. For the five larger ones, and average was $1,656,392, or 6 times
the volume of the smaller nurseries. The average for all 12 was $842,716.
Bed and bench space for propagating and finishing plants (Table 1D) for
the seven smaller nurseries was 181,579 square feet. For the five larger
nurseries, it was 671,448 square feet, or over three times that of the smaller
nurseries. The average for all 12 nurseries was 385,691 square feet.
Total nursery area including buildings and roadways (Table 1F & 1G) for
the smaller nurseries was 6.4 acres (276,826 square feet). For the five
larger nurseries, the average was 35.3 acres (1,537,594 square feet), or over
five and a half times the average of the smaller nurseries. The average for
all 12 nurseries was 18.4 acres (802,146 square feet).
Employee numbers for the seven smaller nurseries averaged 9.1 fulltime
equivalent employees. For the five larger nurseries, it was 40.8, or four and
a half times the number of the smaller nurseries. The average for all 12
nurseries was 22.3 employees.
Capital owned in the seven smaller nurseries averaged $263,888. For the
five larger nurseries, it was $1,106,647, or a little over four times the
figure for the smaller nurseries. Average for all 12 nurseries was $615,038.












Table 1.--Size of business, 14 foliage plant nurseries in South Florida 1980

Average Average Average Your
Item Unit all 12 5 larger 7 smaller Nur
Nursery
nurseries nurseries nurseries

The one best measure

A Value of own plants solda... $ 842,716 1,656,392 261,519

Other useful indicators of size
Value of own plans sold-------------------------------
Value of own plants sold


B adjusted for change in......
plant inventory value

C Total bed & bench space.....

D Propagating & finishing
bed & bench space............

E Stock plant bed
& bench space...,...........

F Total nursery area..........
G Total nursery area..........

H Average fulltime
b
equivalent employees .......

Capital owned In:
I Growing plants ..... .......
J Buildings, fences, wells....
K Machinery & equipment .......
L Land....................... .
M Supplies.... ...............

N Total owned capital .........

Capital managed in:
0 Growing plants...............
P Buildings, fences, wells....
Q Machinery & equipment .......
R Land ................ ........
S Supplies...............

T Total managed capital.......


$ 873,811 1,669,683


sq ft 594,650


sq ft 385,691


sq ft 208,959

sq ft 802,146
acres 22.3


number 22.3


304,667
157,041
49,417
87,627
16.285

615,038


304,667
162,471
55,774
269,117


808,314


305,331


1,132,877 210,203


671,448 181,579


461,428 28,624

1,537,594 276,826
35.3 6.4


40.8


521,604
323,300
81,146
166,256
14,340

1,106,647


521,604
323,300
92,946
350,256
14,340

1,302,447


149,711
38,285
26,764
31,464
17.674

263,888


149,711
47, 592
29,223
211,161

1755,674
455,361


avalue of own plants sold--is the value of total pla


nt sales minus the


cost of plants purchased for Immediate resale. The cost of plants purchased
for growing-on are not deducted.
bFulitime equivalent employee--is the equivalent of one person working 40
hours a week for 52 weeks a year (2080) manhours).
CCapital owned--Is the net value (original cost less depreciation taken)
of the capital assets used in the nursery operation.
dCapital managed--is the sum of capital owned plus the value of
additional capital items used and under the control of the manager (e.g.,
rented land).









Capital managed by the smaller nurseries averaged $455,361. Most of the
added value was from rented land. For the larger ones, it was $1,302,447,
with most of the additions also being in the form of rented land.

Rates of Production (Table 2)


"Value of own plants sold per square foot of total bed and bench space"

(Table 1A 1IC) was selected as the one best measure of rate of production in
the nursery. The seven smaller nurseries averaged $1.24 per square foot. For
the five larger nurseries, the average was $1.46 per square foot, or 18 per-
cent greater than the rate of the smaller ones. The average for all 12 was
$1.42.
When sales were adjusted for changes in inventory (Table 1B 1C), the
value for the smaller nurseries increased 21 cents per square foot. For the
larger nurseries, it increased one cent.
On a per acre basis for total nursery area including stock plants,
buildings and roadways (Table 1A t 1G), own plants sold by the smaller nur-
series amounted to $41,151 per acre. For the five larger nurseries, it was 14
percent greater at $46,926 per acre. Average for all was $45,763.

Table 2.--Rates of production, 12 wholesale foliage plant nurseries in South
Florida, 1980
Average Average Average
Item Unit all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries

The one best measure
------------------------------------------------------------
Value of own plants sold per
sq ft of total bed & bench...... $ 1.42 1.46 1.24
space (Table 1A 1C)
------------------------------------------------------------------------------
Other useful Indicators
---------------------------O- -indicators-----------------------------
Value of own plants sold per
sq ft adjusted for inventory.... $ 1.47 1.47 1.45
change (Table 1B f 1C)
Value of own plants sold per
sq ft of propagating & finishing
space (Table IA I ID)......... $ 2.18 2.47 1.44
-- adjusted for Inventory change
(Table 18 10).............. $ 2.27 2.49 1.68
Value of own plants sold
per acre (Table 1A i IG).. $ 45,763 46,926 41,151
-- adjusted for inventory change
(Table 1B IG) ....... ...... $ 47,452 47,302 48,045











Labor Efficiency (Table 3)


"Value of own plants sold per employee" (Table 1A t 1H) was selected as
the one best measure of labor efficiency. This was $28,625 per employee for
the seven smaller nurseries. For the five larger nurseries, the average was
$40,648, or approaching one and a half times the volume per employee of the
smaller nurseries. For all 12 nurseries, the average was $37,790 per
employee.
Plant sales adjusted for changes in inventory (Table 1B t 1H) increased
$4,800 for the seven smaller nurseries to an average for $33,479. For the
five larger nurseries, they increased $326 to an average of $40,974.
Total bed and bench space per employee (Table 1C t 1H) was 23,049 square
feet for the seven smaller nurseries. For the five larger nurseries, the
average was greater at 27,801 square feet.
Total nursery area including stock beds, buildings and roadways per
employee (Table 1F f 1H) amounted to 30,354 square feet for the seven smaller
nurseries. For the five larger nurseries, it was 24 percent greater at 37,732
square feet.


Table 3.--Labor efficiency, 12 wholesale foliage plant nurseries in South
Florida, 1980
Average Average Average Your
Item Unit all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries
The one best measure
Value of own plants sold
per employee (Table lA 1 IH) $ 37,790 40,648 28,675
Other useful indicators
Value of own plants sold per
employee adjusted for change $ 39,184 40,974 33,479
In inventory (Table 1B f 1H)
Total bed & bench space
per employee (Table tC 1H) sq ft 26,666 27,801 23,049
Propagating & finishing space
per employee (Table ID f IH) sq ft 17,296 16,477 19910
Total nursery area per
employee (Table IF f 1H) sq ft 35,971 37,732 30,354








The Use of Space (Table 4)


The one measure selected as best for measuring the intensity of space use
was "Annual turnover of plant inventory value" (Table 1A 1II). This indi-
cates the number of times that funds tied up in plant inventory were
represented by sales during the year.
The reliability of this number depends upon the care and accuracy with
which plant inventory records are kept. Some nurserymen on the program keep
careful inventories of plant numbers, while others tend to approximate their
figures. For this reason, the industry average for this measure may not be as
reliable as desired. But the idea is deemed valid, and should be especially
useful to those who compare their figures with their own data of the previous
year. In this case, the nurseryman has first hand knowledge of the nature and
dependability of the comparison.
Annual turnover of plant inventory value in the seven smaller nurseries
averaged 175 precent. This means that annual plant sales amounted to one and
three quarters (175 percent) times the value of plants in inventory. For the
four larger nurseries, turnover was 318. Their annual plant sales were 3.18
times the value of plants in inventory. The average for all 12 nurseries was
277 percent.
Vacant bed and bench space is the measure used for efficiency of space
use. Generally, reducing the percent of space vacant is desirable. However,
some vacancy is-inevitable between the time a plant is removed for sale and
the time another is put in its place. The average amount of vacant space
during the year divided by total bed and bench space (Table 1C) shows the
average percent of vacant space. This was 12.46 percent for the seven smaller
nurseries. For the five larger ones, it was only 3.86 percent. The average
for all was 5.64 percent.
Other useful indicators to study are percent of total nursery area
including buildings and roadways that is bed and bench space, and the division
of bed and bench space between propagating and finishing area and stock
plants. Other things being equal, the higher the percentage of total nursery
area devoted to bed and bench space, and the higher the percentage of bed and
bench space used for propagating and finishing rather than stock plants, the
better. But, of course, other things are not always equal. The most common
two differences are cost of cuttings and availability of quality material when
it is needed.










The seven smaller nurseries had 210,203 square feet of bed and bench

space, which was 75.93 percent of their total nursery area. For the four

larger nurseries, it was 1,132,877 square feet. which was over five times the

area of the smaller nurseries. As a percent of total nursery area, it was

lower at 73.68 percent. The average for all 12 nurseries was 594,650 square

feet, which amounted to 74.13 percent of the total nursery area.

Propagating and finishing area as a percent of total bed and bench space

(Table 1D 1C) in the seven smaller nurseries represented 86.38 percent of

the total area. For the five larger nurseries, it was quite a bit lower at

59.27 percent. Thus, the larger nurseries maintained a much larger proportion

of their total bed and bench space for stock plants. This may be due in part
to smaller nurseries, especially those just getting started, being unable to

afford the luxury of maintaining as many stock plants as they would like. In

any event, smaller nurseries appeared more efficient in their division of area

between stock plants and plant production than the larger nurseries.


Table 4.--The use of space, 12 wholesale foliage plant nurseries In South
Florida, 1980
Average Average Average Your
Item Unit all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries
Intensity of space use
------------------------------------------ nt tyfp us ----------------------------
Annual turnover of plant In-
ventory value (Table 1A i 11).. $ 277 318 175
-------------------'-----"-------------
----------------------------------------------------------------------------------
Efficiency of space use

Vacant bed & bench space ....... sq ft 33,514 43,755 26,199
(divided by Table iC)'......... % 5.64 3.86 12.46
- -------------------"----""""-
---------------------------------------------------------------
Total nursery area
Incl bldgs & roadways......... .sq ft 802,146 1,537,594 276,826
(same as Table 1F)
Total bed & bench space ........sq ft 594,650 1,132,877 210,203
(Table C IC) ............ .. .. 74.13 73.68 75.93

Propagating & finishing bed &...sq ft 385,691 671,448 181,579
bench space (Table ID i 1C).. % 64.86 59.27 86.38

Stock plant bed & bench..........sq ft 208,959 461,428 28,624
space -(Table IE f 1C)... % 35.14 40.73 13.62








Efficiency in Use of Capital (Table 5)


A number of possibilities exist for measuring efficiency in the use of
capital. 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 A 1N).
Other things being equal, larger turnover numbers are desirable, because
larger numbers indicate greater sales per dollar invested in the nursery.
Annual turnover for the seven smaller nurseries was 99 percent. This
means that annual sales amounted to 99 percent of the amount of money invested
in the nursery. For the five larger nurseries, it was 150 percent, or one and
a half times the annual sales of plants per dollar invested in the nursery
when compared to the smaller nurseries. All 12 averaged 137.
Capital invested per employee (Table 1N i 1H) averaged $28,935 in the
seven smaller nurseries. For the five larger nurseries, it was lower at
$27,157, or about 94 percent of the amount of the smaller nurseries. Capital
managed per employee is slightly higher in all cases, but the relationships
stayed about the same. Thus, smaller nurseries averaged higher capital
investments per employee than the larger nurseries.
The same was true on a per acre basis. Capital invested in smaller
nurseries averaged $41,524 per acre (Table 1N i 1G). For the five larger
nurseries, it was $31,351, about 75 percent of the rate of the smaller ones.
Managed capital tied up in plant inventory amounted to 32.83 percent of
the total in the smaller nurseries (Table 10 1IT). For the five larger
nurseries, it was more at 40.05 percent. Average for all 12 nurseries was
37.69 percent.
Buildings. fences, and wells required 10.45 percent of the total
resources of the seven smaller nurseries (Table 1P i 1T). For the five larger
nurseries, it was 24.82 percent, over double the share invested this way by
the smaller nurseries. The average for all 12 nurseries was 20.10 percent.
Managed capital invested in machinery and equipment by the seven smaller
nurseries represented 6.42 percent of the total (Table 1Q 1IT). For the five
larger nurseries, it was 7.14 percent, 11 percent more than the portion of the
total invested this way by the smaller nurseries. Average for all was 6.90.
The land of the seven smaller nurseries accounted for 46.37 percent of
the total capital managed (Table 1R 1IT). For the five larger nurseries, it




11



was about two-thirds this at 26.89 percent. Average for all 12 nurseries,

then was 33.29 percent.

Supply inventories of the seven smaller nurseries took 3.88 percent of

the managed capital of the business (Table 1S t IT). For the five larger

nurseries, the figure was only 1.10 percent. Average for all 12 nurseries was

2.01 percent.


Table 5.--Efficiency in use of capital, 12 foliage plant nurseries in South
Florida, 1980

Average Average Average Your
Item Unit all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries

The one best measure

Annual turnover of owned
capital value (Table 1A 1IN) % 137 150 99

Other useful indicators


Annual turnovere of managed
capital value (Table IA t IT)

Per employee:
Capital owned (Table IN t 1H)
--- managed (Table IT i 1H)

Per acre:
Capital owned (Table IN f 1G)
--- managed (Table 1T t 1G)

Managed capital/employee in:
Plants .(Table 10 1 1H)
Land .. ... (Table IP 1H)
Mach & equip .(Table 10 1H)
Land . .(Table IR t 1H)

Managed capital/acre in:
Plants .(Table 10 i 1G)
Land . .(Table IP 1IG)
Mach & equip .(Table 10 IG)
Land . .(Table 1R I 1G)

Percent of capital managed in:
Plants .(Table 10 IT)
Buildings. .(Table IP I IT)
Mach & equip .(Table 10Q IT)
Land . .(Table 1R IT)
Supplies .(Table IS IT)

Total nursery (Table IT 1T)


% 104


27,580
36,247


33,399
43,895


13,662
7,286
2,501
12,068


16,545
8,823
3,029
12,068


37.69
20.10
6.90
33.29
2 .01

100.00


127



27,157
31,962


31,351
36,898


12,800
7,934
2,281
8,595


14,777
9, 159
2,633
8,595


40.05
24.82
7.14
26.89

10 1000
100.00


57


28,935
49,930


41,524
71,653


16,416
5,218
3,204
23,154


23,558
7,489
4,598
23,154


32.83
10.45
6.42
46.37
3.88

100.00


100.00


eAnnual turnover of capital value--is the
dividing the value of own plants sold (Table
(Table IN or IT).


percentage that results from
IA) by the value of capital










Dollar Costs by Expense Category (Table 6)


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. Dollar costs should be
useful for comparing the relative magnitude of the various cost items, and as
a guide to persons interested in South Florida foliage nurseries as an invest-
ment, either as buyers or as lenders.

Salaries and Wages
The salary and wi o jroup includes operator salary or time value.
Average for the seven smaller nurseries was $102,451. For the five larger
nurseries, this expenditure was five and a half times that amount, or
$559,882.

Production Supplies
Production supplies include the group starting with "plants and seeds"
through "other production supplies." They averaged $111,198 in the smaller
nurseries. For the five larger ones, they were six and three quarters times
this amount, or $753,500.

Other Production Costs
Other production costs include "repairs" and "equipment operating costs."
They averaged $15,730 in the seven smaller nurseries. For the five larger
ones, they were $47,055, about three times the amount of the smaller ones.

Administrative and Overhead
Administrative and overhead expenses usually cannot be assigned to any'
particular crop or growing activity, yet must be paid in order to remain in
business. They include the group starting with "travel and entertainment"
through "other cash expense." They averaged $40,116 in the smaller
nurseries. For the five larger nurseries, they were $217,432, or almost five
and a half times the expense of the seven smaller nurseries.

Total Cash Costs
Total cash costs in the seven smaller nurseries averaged $269,495. For
the five larger nurseries, they were close to six times this amount, amounting
to $1,577,869.






13




Non-Cash Costs

Non-cash costs include the group starting with "depreciation" through

"interest on capital." These charges averaged $49,433 in the smaller

nurseries. For the larger ones, they were $218,238, or over four times more.

Total All Costs

The sum of all costs and allowances in the seven smaller nurseries

amounted to $318,928. For the five larger nurseries, they were $1,796,107, or

over five and a half times higher than those of the smaller nurseries.



Table 6.--Dollar costs by expense category, 12 wholesale foliage plant
nurseries In South Florida, 1980

Average Average Average Your
Item all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries
- - Dollars - - -


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

Plants & seeds to grow on ........
Pots & growing containers ........
Fuel for production heat..........
Peat, soil, shavings, etc. .......
Fertilizer & lime ................
Pesticides & other chemicals .....
Packing boxes & supplies...........
Other production supplies ........

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

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

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 ...................


50,665
242,382

209,052
43,734
9,194
27,269
22,180
20,759
17,657
14, 583

17,038
11,744

8,530
10,585
7,980
5,120
5,557
4,460
9,287
62,479

814,651


14,591
12,923
0
92,256

119,769

934,419


96,637
463,246

442,229
69,722
20,920
52,208
39,234
34,780
33,640
28,168

31,639
15,416

17,145
19,804
15,586
8,516
11,526
8,087
5,426
131 ,34 1

1,577,869


26,068
26,174
0
165,997

218,238

1,796,107


17,829
84,622

42,497
25,171
817
10,316
9,999
10,745
6,241
9, 149

6,609
9,121

2,376
3,999
2,547
2,694
1,293
1,869
12,045
13 292

269,495


6,393
3,458
0
39,583

49 433

318,928










Percent of Total cost by Expense Category (Table 7)


While expenditures in the form of dollars show the magnitude of expenses
for various cost categories, they are not very helpful for comparing cost
relationships 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 6 by the corresponding "Total all costs"
figure at the bottom of the table.

Salaries and wages
Salaries and wages (includes operator) averaged 32.12 percent of all
costs, cash plus non-cash, in the seven smaller nurseries. For the five
larger ones, they were 31.17 percent, about one percent less.

Production Supplies
Production supplies ("plants and seeds" through "other production
supplies") averaged 34.87 percent of all costs in the smaller nurseries. For
the five larger ones, they were 41.94 percent, or about seven percent more.

Other Production Costs
Other production costs ("repairs" and "equipment operating costs")
averaged 4.93 percent of the total in the small nurseries. For the five
larger nurseries, they were 2.62 percent, or over two percent less than the
smaller nurseries.

Administrative and Overhead
Administrative and overhead expense ("travel" through "other cash
expenses") averaged 12.58 percent of all costs in the smaller nurseries. For
the five larger nurseries, they were 12.09 percent of total costs, or about
the same, percentagewise.

Total Cash Costs
Total cash costs in the seven smaller nurseries represented 84.50 percent
of all costs and allowances. For the five larger nurseries, they were over
three percent higher at 87.85 percent.

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") are the
additional costs that need to be covered eventually, though not necessarily











with cash during this accounting period. They averaged 15.50 percent of all

costs and allowances in the seven smaller nurseries. For the five larger

nurseries, they amounted to 12.15 percent of the total. This was over three

percent less than the smaller nurseries. Practically all of this difference

is in the share of the total attributed to interest on capital. The smaller

nurseries had a considerably higher capital investment per dollar of expense

than the larger ones. This is one of the effects of that difference.


Table 7.--Percent of total costs by expense category, 12 wholesale foliage
plant nurseries in South Florida, 1980
Average Average Average Your
Item all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries
- - Percent - -


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

Plants & seeds to grow on .........
Pots & growing containers .........
Fuel for production heat..,........
Peat, soil, shavings, etc. ....
Fertilizer & lime .................
Pesticides & other chemicals ......
Packing boxes & supplies..........
Other production supplies .........

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

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

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 ....................


5.42
25.94

22.37
4.68
0.98
2.97
2.37
2.22
3.05
1.89

1.82
1.26

0.91
1.13
0.85
0.55
-.59
0.48
0.99
6 69

87.18


1.56
1.38
0.00
9 87

12.82


5.38
25.79

24.62
3.88
1.16
2.91
2.18
1.94
3.38
1.87

1.76
0.86

0.95
1.10
0.87
0.47
0.64
0.45
0.30

87.85
87.85


1.45
1.46
0.00
9.24

12 1 5


5.59
26.53

13.32
7.89
0.26
3.23
3.14
3.37
1.70
1.96

2.07
2.86

0.74
1.25
0.80
0.84
"0.41
0.59
3.78
4 17

85.50


2.00
1.08
0.00


15.50


100.00 100.00


100.00 100.00








Costs Per Square Foot of Total Bed and Bench Space (Table 8)


While expenses as a percent of total costs facilitate comparing operating
statements, they do notallow easy comparison of the relative growing costs be-
tween nurseries. But costs per square foot do. The traditional basis for com-
parison is costs per square foot of total bed and bench space. These were ob-
tained by dividing each of the dollar cost figures in Table 6 by the appropri-
ate area in production figure from Table 1C. "Total bed and bench space".

Salaries and Wages
Salaries and wages (includes operator) per square foot of total bed and
bench space averaged 48.74 cents per square foot in the seven smaller
nurseries. For the five larger ones, they were 49.42 cents, or a half a cent
a square foot more than the smaller nurseries.

Production_Supplies
Production supplies ("Plants and seeds" through "other production
supplies") averaged 52.91 cents in the smaller nurseries. For the larger
ones, they were 66.51 cents, or 13-1/2 cents more per square foot.

Other Production Costs
Other production costs ("repairs" and "equipment operating costs")
averaged 7.48 cents per square foot in the smaller nurseries. For the larger
nurseries, they averaged 4.15 cents, or more than three cents less than the
smaller nurseries.

Administrative and Overhead
These costs ("travel" through "other cash expenses") averaged 19.U8 certs
per square foot in the smaller nurseries. For the five larger nurseries, they
amounted to 19.19 cents, about the same.

Total Cash Costs
Total cash costs per square foot of total bed and bench space in the
smaller nurseries were 128.21 cents. For the larger nurseries, they were
139.28 cents, or more than 11 cents higher than the costs of the smaller
nurseries. However, Table 2 indicated higher sales per square foot which off-
set the higher costs.

Non-Cash Costs
Non-cash Costs ("depreciation" through "interest on capital") amounted to












23.52 cents per square foot of total bed and bench space in the seven smaller

nurseries. For the five larger nurseries, they averaged 19.26 cents, or four

cents less than the amount for the smaller nurseries. As mentioned before,

the reason for the majority of the difference is the allowance for interest.

Total All Costs

The total for all costs and allowances averaged 151.72 cents in the

smaller nurseries. For the larger ones, they were 6.8 cents higher at 158.54.



Table 8.--Costs per square foot of total bed and bench space, 12 wholesale
foliage plant nurseries in South Florida, 1980

Average Average Average Your
Item all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries


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

Plants & seeds to grow on .........
Pots & growing containers .........
Fuel for production heat............
Peat, soil, shavings, etc. ......
Fertilizer & lime .................
Pesticides & other chemicals .....
Packing boxes & supplies ..........
Other production supplies ........

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

Travel & entertainment ............
Insurance .........................
Telephone ...................... ..
Electricity .............. .......
Taxes, Ilcenses, bonds ............
Advertising .......................
Rent: land and/or buildings ..... ..
Other cash expense ................

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 ...... ...........


- - Cents - - -


8. 52
40.76

35.16
7.35
1.55
4.67
3.73
3.49
4.79
2.59

2.87
1.97

1.43
1.78
1.34
0.86
0.93
0.75
1.56
10 51

137.00



2.45
2.17
0.00
15 51

20. 14


8.53
40.42

39.04
6.15
1.85
4.61
3.46
3.07
5.36
2.03

2.79
1.36

1.51
1.75
1.38
0.75
1.02
0.71
0.48


139.28



2.30
2.31
0.00
14 65

19.26


157.14 158.54


8.48
40.26

20.22
11.97
0.39
4.91
4.76
5.11
2.58
3.91

3.14
4.34

1.13
1.90
1.21
1.28
0.62
0.89
5.73
6.32

128.21



3.04
3.04
0.00
18.88

23.52

151.72


~








Costs Per Square Foot ofPropagating and Finishing Space (Table 9)


Cost per square foot of total bed and bench space is the traditional
basis for comparisons between nurseries. However, costs per square foot of
propagating and finishing space are more appropriate for estimating individual
plant growing costs, or for comparing growing cost efficiency between
nurseries. These costs were obtained by dividing the dollar cost figures in
Table 6 by the plant production area from Table 1D, "Propagating and finishing
bed and bench space."

Salaries and Wages
Salaries and wages (includes operator) per square foot amounted to 56.42
cents in the smaller nurseries. For the larger ones, they were 83.38 cents,
almost one and a half times that of the smaller nurseries.

Production Supplies
Production supplies ("plants and seeds" through "other production
supplies") averaged 61.24 cents per square foot in the smaller nurseries. For
the larger ones, they were 112.21 cents approaching double the cost per
square foot of propagating and finishing space.

Other Production Costs
Other production costs ("repairs" and "equipment operating costs")
averaged 8.66 cents in the smaller nurseries. For the larger ones, they were
7.01 cents, one and a half cents higher than the smaller nurseries.

Administrative and Overhead
These costs ("travel" through "other cash expenses") averaged 22.08 cents
in the seven smaller nurseries. For the five larger ones, they were 32.38
cents, which was ten cents greater than these costs in the smaller nurseries.

Total Cash Costs
Total cash costs in the seven smaller nurseries averaged 148.42 cents per
square foot of propagating and finishing space. For the five larger
nurseries, they amounted to 234.99 cents, or one and a half times the cash
cost per square foot in the smaller nurseries.

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") in the sev-
en smaller nurseries averaged 27.22 cents per square foot of propagating and





19



finishing space. For the five larger nurseries, they were five cents higher.

Total All Costs

Total for all costs and allowances in the seven smaller nurseries aver-

aged 175.64 cents per square foot. For the five larger nurseries, this total

was 267.50 cents. This was one and a half times the cost per square foot of

propagating and finishing space in the smaller nurseries. While smaller

nurseries appear more efficient by this indicator, final judgement must be

reserved until comparisons in the other indicators are completed.



Table 9.--Costs per square foot of propagating and finishing bed and bench
space, 12 wholesale foliage plant nurseries In South Florida, 1980

Average Average Average Your
Item all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries
- - Cents - - -


Cash Costs

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

Plants & seeds to grow on .........
Pots & growing containers .........
Fuel for production heat............
Peat, soil, shavings, etc. ........
Fertilizer & lime .................
Pesticides & other chemicals ......
Packing boxes & supplies ..........
Other production supplies .........

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

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

Total cash costs .................

Non-cash costs

Depreciation: mach & equip ........
Depreciation: bidgs, fences, wells
Inventory decrease In supplies ....
Interest on capital, 12% ..........

Total non-cash costs .... ...... .

Total all costs ...................


13.14
62.98

54.20
11.34
2.38
7.20
5.75
5.38
7.38
4. 58

4.42
3.04

2.21
2.74
2.07
1.33
1.44
1.16
2.41


211.22



3.78
3.35
0.00
23.92



242.27


14.39
68.99

65.86
10.38
3.12
7.77
5.84
5.18
9.05
5.01

4.71
2.30

2.55
2.95
2.32
1.27
1.72
1.20
0.81
19 56

234.99



3.88
3.90
0.00
24.72

32.70

267.50


9.82
45.42

23.40
13.86
0.45
5.68
5.51
5.92
2.98
3.44

3.64
5.02

1.31
2.20
1.40
1.48
0.71
1.03
6.63
7.32

148.42



3.52
1.90
0.00


175.64

175.64


-~









Costs Per Dollar of Sales Adjusted for Inventory Change(Table 10)


Costs per square foot of growing area are important for comparing costs
of production between nurseries, and for estimating individual plant growing
costs. However, they do not indicate the profitability of the nursery oper-
ation as well as do costs per dollar of sales. Adjusting sales for changes in
value of plant inventory shows how well the business is doing in total, not
just cash-wise. These figures were developed by dividing the dollar costs
shown in Table 6 by the appropriate 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 33.55 cents per dollar of
adjusted sales in the seven smaller nurseries. For the larger nurseries, they
were 33.53 cents, essentially the same.

Production Supplies
Production supplies ("plants and seeds" through "other production
supplies") averaged 36.41 cents in the seven smaller nurseries. For the five
larger nurseries, they averaged close to nine cents more, or 45.13 cents.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") in the
seven smaller nurseries averaged 5.15 cents per dollar of sales after
adjusting for changes in plant inventory value. For the five larger
nurseries, they were 2.81 cents, over two cents below the smaller nurseries.

Administrative and Overhead
These costs ("travel" through "other cash expenses") amounted to 13.12
cents per dollar of adjusted sales in the seven smaller nurseries. For the
larger nurseries, they averaged 13.02 cents, again practically the same..

Total Cash Costs
In the smaller nurseries, the sum of all cash costs per dollar of sales
after adjusting for change in plant inventory value averaged 88.26 cents. For
the five larger nurseries, out-of-pocket costs were 94.50 cents, or six cents
more per dollar of adjusted sales.

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") in the
seven smaller nurseries accounted for 16.19 cents per dollar .of adjusted











sales. For the larger nurseries, they were 13.07 cents, or three cents less

than the smaller ones. Again, most of the difference was in interest charged.


Total All Costs

Total costs per dollar of adjusted sales in the smaller nurseries were

104.45 cents, or four cents more than receipts. For the larger nurseries,

costs totaled 107.57 cents, or seven cents more than revenue received.


Table 0O.--Costs per dollar of sales adjusted for change in plant inventory,
12 wholesale foliage plant nurseries in South Florida, 1980

Average Average Average Your
Item all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries

- - Cents - - -


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

Plants & seeds to grow on .........
Cans & other growing containers ...
Fuel for production heat............
Peat, soil, shavings, etc .........
Fertilizer & lime ............ ...
Pesticides & other chemicals ......
Packing boxes & supplies............
Other production supplies .........

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

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

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 ..... .............


5.80
27.74

23.92
5.00
1.05
3.18
2.54
2.38
3.26
2.02

1.95
1.34

0.98
1.21
0.91
0. 59
0.64
0.51
1.06
7 15

93.23



1.67
1.48
0.00

13. 5
13.71


5.79
27.74

26.49
4.18
1.25
3.13
2.35
2.08
3.64
2.01

1.89
0.92

1.03
1.19
0.93
0.51
0.69
0.48
0.32

94.50
94.50


1.56
1.57
0.00
9 94

15.07


106.94 107.57


5.84
27.71

13.92
8.24
0.27
3.38
3.27
3. 52
1.77
2.04

2.16
2.99

0.78
1.31
0.83
0.88
0.42
0.61
3.94
4.35

88.26



2.09
1.13
0.00


104.45
16 19

104.45


--










Costs Per Dollar of Sales (Table 11)


While total business position is indicted by costs per dollar of sales
adjuste-d for change in plant inventory value, bill paying ability depends upon
costs relative to cash received. These figures were developed by dividing the
dollar cost figures shown in Table 6 by the appropriate sales figure from
Table 1A, "Value of own plants sold."

Salaries and Wages
Salaries and wages (includes operator) in the smaller nurseries averaged
39.18 cents per dollar of cash received. For the larger nurseries, they were
33.80 cents, or more than five cents less than the smaller nurseries.

Production Supplies
Production supplies ("plants and seeds" through "other production
supplies") in the seven smaller nurseries averaged 42.51 cents per dollar.
For the five larger nurseries, they were 45.49 cents, or almost three cents
more than the smaller nurseries.

Other Production Costs
Other production costs ("repairs" and "equipment operating costs") in the
seven smaller nurseries averaged 6.02 cents per dollar of cash received. For
the five larger nurseries, they were 2.84 cents, or three cents less than the
seven smaller nurseries.

Administrative and Overhead
These costs ("travel" through "other cash expense") in the smaller nur-
series averaged 15.33 cents per dollar of sales. For the larger nurseries,
they were 13.14 cents, or over two cents lower than the smaller nurseries.

Total Cash Costs
Total cash costs in the seven smaller nurseries averaged 103.05 cents per
dollar of cash received. For the five larger nurseries, they were almost
eight cents less at 95.26 cents.

Total All Costs
In terms of bill paying ability, the larger nurseries averaged enough
sales to pay the cash costs incurred during the year. However, the seven
smaller nurseries lacked more than 3 cents for every dollar of sales of
covering cash costs. However, plant inventory increased during the year and










should have provided a sound borrowing base when needed. Their non-cash costs

averaged 18.9 cents per dollar of sales. The five larger nurseries averaged

13.18 cents in non-cash allowances per dollar of sales, but had only four and

three quarters cents in cash receipts to cover it. Close to the same was true

for the average of all 12 nurseries.





Table 11. Costs per dol lar of sales (no adjustment for change in plant
Inventory), 12 wholesale foliage plant nurseries In South Florida,
1980


Average Average Average


all 12
nurseries


5 larger
nurseries


7 smaI let
nurser e'


Your
r
nur ser y
s


Cash costs

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

Plants & seeds to grow on .......
Pots & growing containers........
Fuel for production heat.........
Peat, soil, shavings, etc........
Fertilizer & lime................
Pesticides & other chemicals....
Packing boxes & supplies .........
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 .............


- - Cents -


6.01
28.76

24.81
5.19
1.09
3.30
2.63
2.46
3.38
2.10

2.02
1.39

1.01
1.26
0.95
0.61
0.66
0.53
1.10
7,41

96.67



1.73
1.53
0.00
1 0.95

10.88
110.88


5.83
27.97

26.70
4.21
1.26
3.15
2.37
2.10
3.67
2.03

1.91
0.93

1.04
1.20
0.94
0.51
0.70
0.49
0.33
7.93

95.26



1.57
1. 58
0.00
10.02

13.18

108.43


I tem


6.82
32.36

16.25
9.62
0.31
3.94
3.82
4.11
2.07
2.39

2.53
3.49

0.91
1.53
0.97
1.03
0.49
0.71
4.61
5.08

103.05



2.44
1.32
0.00


15 149
18.90

121.95


~








Income Summary (Table 12)


This section concentrates on developing net nursery income and allocating
it between the time the effort of the owner-operator and a return on the money
invested in the operation. After all is said and done, it is for the payment
for his time that a nurseryman works, and it is for a return to capital that
nurserymen 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 inventory, increase in supply inventory,
and miscellaneous income. Miscellaneous income refers to income to the
nursery from sources other than plant sales, such as rent income, interest
income, income from the sale of fertilizer and supplies, and boxing charges.
Total gain for the seven smaller nurseries averaged $322,537. Larger
nurseries averaged five times that amount, or $1,675,950. For all 12
nurseries, it averaged $886,459.

Net Nursery Income
Net nursery income is the total return for the year for the time and
managerial skills of the operator plus the capital invested in the
operation. To obtain net nursery income, substract all cash costs shown in
Table 6 (except operator's salary), and all non-cash costs shown there (except
interest on capital) from total gain. The result is net nursery income, or
income for the time and capital investment supplied by the owner-operator.
For smaller nurseries, it averaged $61,021. For the five larger nur-
series, it was $142,476. This was two and a third times that of the smaller
nurseries. Average for all 12 nurseries was $94,960.

Return to Capital
From net nursery income is substracted 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 impor-
tant. 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 opportunities.

Return to capital for the seven smaller nurseries averaged $43,192, or

16.37 percent return on the capital invested. For the five larger nurseries,

return to capital was $45,840, or 4.14 percent. Average for all 12 nurseries

was $44,295, or 7.20 percent.


Table 12. Income summary, 12 wholesale foliage plant


nurseries in South


Florida, 1980

Average Average Average Your
Item Unit all 12 5 larger 7 smaller
nursery
nurseries nurseries nurseries

Value of own plants sold ..... $ 842,716 1,656,392 261,519
Plant Inventory change ....... $ 31,095 13,291 43,813
Supply inventory change ...... $ 6,735 2,880 9,488
Miscellaneous cash Income .... $ 5.913 7 717

Total gain ................ $ 886,459 1,675,950 322,537

Cash costs less op. sal....... $ (763,985)(1,481,232) (251,666)
Non-cash costs less 12% int... $ ( 27,513)( 52,241) ( 9,850)
Total deductions ............ (94.960) (142 476) (261 516) ( )

Net nursery Incomeg ......... $ 94,960 142,476 61,021

Operator salary or time value $ (50.665) (96.637) (17,829) (

Return to capital ........... $ 44,295 45,840 43,192

Rate of return to capital1... % 7.20 4.14 16.37


fTotal gain--the sum of
Inventories, and miscellaneous


plant
I income.


sales, change in plant and supply
It represents the total effect of the


year's operation, be it in the form of cash or change in inventory values.

gNet nursery income--the net effect of the year's operation. To obtal-n
it, all cash costs (except operator's salary), and all non-cash allowances
(except interest 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.
hReturn 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.
IRate 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.









Factors Associated With Level of Profit (Table 13)


In this section, information presented earlier is re-grouped to concen-
trate attention on factors that are generally deemed related to level of
profit in a foliage nursery. The factors are presented in the same sequence
that they appeared before. But here, the average for all 12 nurseries is
compared with the average for the four most profitable and the four 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 the areas. Nevertheless,
nurserymen analyzing their own operation may find this section especially
valuable for indicating the general area of their business needing additional
study and analysis.
Net nursery income from Table 12 was selected as the indicator for level
of profit. Average for all 12 nurseries was $94,960. The most profitable
third of the nurseries averaged about three times this amount, or $287,886.
The least profitable third averaged a loss of $58,641. The following compares
the averages for these three groupings of foliage nurseries in those factors
generally associated with level of profit.
Size of Business
The indicator of size of business selected from Table 1 was "Value of own
plants sold." The 12 nurseries average was $842,716. The most profitable
third had $1,640,204 in sales, or double the volume of the average. The least
profitable group averaged $490,492, or about a third of the volume of the
average. This does not mean that small businesses cannot be profitable, but
it does indicate that larger 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 desirable. The average for all 12 nurseries was $1.42 per square foot.
The most profitable third had five cents less, or $1.37, and the least profit-
able third had about 78 percent of the average, or $1.12.
Lower sales per square foot of bed and bench space can result from a










number of things, such as devoting excessive space to stock plants, 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 yield 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.

Labor Efficiency
The indicator of efficiency in the management and use of labor selected



Table 13.--Factors associated with level of profit, 12 wholesale container
ornamental plant nurseries in Florida, 1980.
Average Most Least Your
Item Unit all 12 Profitable Profitable
nursery
nurseries third (4) third (4) nur
Level of profit
----------------------------------------------------------------
Net Nursery Income (Table 12) $ 94,960 287,886 (58,641)
Factors associated with level of profit
------------------------------------------------------------------------------------
Size of business (Table 1)
Value of own plants sold .... $ 824,719 1,640,204 490,492
Production rate (Table 2)
Sales/sq ft of total
bed & bench space............ 1.42 1.37 1.12

Labor efficiency (Table 3)
Own plant sales/employee .... $ 37,790 40,852 33,367

Space use Intensity (Table 4)
Annual turnover of plant
inventory value ............. 277 441 134
Use of capital (Table 5)
Annual turnover of owned..... % 137 164 97
Level of costs (Table 8)
Cost/sq ft of total bed space $ 1.57 1.44 1.43

Cost efficiency (Table 10)
Cost/S sales adjusted for
change in inventory value...cents 106.94 99.83 135.45
Growth in the business
Increase in sales & plant
Inventory over last year ... $ 51,920 145,895 (64,445)








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 12 nurseries was $37,790. Sales were eight percent higher at $40,852 for
the most profitable third, and 12 percent lower at $33,367 for the least
profitable third of the nurseries.
Lower sales per employee can result during periods of rapid expansion
vhen extra help is needed to care for larger numbers of plants before they
begin reaching salable size. Or it can also be the result of difficult econ-
omic 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 use of labor.

Space Use Intensity
The indicator of intensity in the use of space selected from Table 4 was
"Annual turover of plant inventory value." In general larger percentage
numbers are desirable, because they indicate that the value of money tied up
in inventory is being revolved faster. Average turnover was 277 percent,
meaning that the value of own plants sold was 2.77 (277 percent) times the
investment in plant inventory. For the most profitable third, it was 441
percent, or over one and a half times the average. For the least profitable
third, it was less than half the average at 134.
Reduced intensity of space use may be the result of things that increase
the amount of money invested in inventory such as excessive numbers of stock
plants, rapid expansion of the business so that plant numbers are up although
accompanying sales have not yet started, selecting varieties that grow slow
relative to the price they receive, or holding plants too long after they
reach salable size. Or it can be the result of any of the items that reduce
sales volume for the given nursery as mentioned earlier. Either over or under
valuing inventory can also change the intensity of use figure. However,
variations in the indicator for this reason are illusionary, and do not pro-
vide a sound basis for management evaluations or decisions.
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.
Larger percentage numbers are desirable, for they indicate greater sales per










dollar of investment in the nursery.
Annual turnover of owned capital averaged 137 percent, meaning that the
value of own plants sold during the year amounted to 1.37 (137 percent) times
the value of the capital invested in the operation. For the most profitable
third, it was 27 percent higher at 164. The rate for the least profitable
third was 70 percent of the average, or 97. Hence, this group had about twice
the nursery investment per dollar of sales as the most profitable third.
Problems that lower rate of turnover 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 the capital turn-
over rate for given nursery.
Level of Costs
The indicator of level of cost selected was "Cost per square foot of
total bed and bench space" from Table 8. This is the traditional indicator
for comparing costs between nurseries. In general, a lower cost per square
foot is desirable, if other things are equal.
Costs for total bed and bench space averaged $1.57, 15 cents higher than
sales per square foot before adjusting for changes in plant inventory. This
means sales did not cover all cash costs plus all non-cash costs and
allowances noted in Table 8. For the most profitable third, they were $1.44,
or seven cents higher than sales per square foot. The least profitable third
averaged $1.43, which was 31 cents more than sales per square foot of total
bed and bench space.
Problems that cause costs per square foot to increase include inefficient
planning and utilization of labor, insufficient investment in labor saving
capital items, destruction and loss or theft of supplies and plants or seeds,
not checking for best price before purchasing needs and not carefully
managing the nursery operation. Other causes of increased cost may not be a
problem if they are compensated for by increased revenue. One example might
be choosing to grow varieties whose cuttings are unusually expensive in order
to capitalize upon a specialized premium market.









Cost Efficiency
The indicator of cost efficiency selected was "Costs per dollar of sales
adjusted for change in plant inventory from Table 10. Other things being the
same, lower costs per dollar of sales are desirable.
Average costs were 106.94 cents. Thus, not all cash costs and non-cash
allowances were covered. For the most profitable third, costs were 99.83
cents, leaving a little after all costs were paid. The least profitable third
had 135.45 cents per dollar received. Thus, this group lacked more than 35
cents per dollar of sales of being able to cover all cash plus non-cash costs
and allowances incurred during the year.
Rising costs per dollar of sales are common during periods of rapid
expansion. But this can also occur as a result of the things mentioned
earlier that affect rates of production, level of costs, and labor
efficiency. It can be an outgrowth of some combination of insufficient sales
for the size of nursery being operated and lack of attention to cost control
and efficient nursery operation.
Growth in the Business
The indicator selected was the sum of the increase in plant sales and
increase in plant inventory value. In general, a steady growth in the
business is desirable.
On the average, growth was valued at $51,920. This was about six percent
of the annual sales volume of $842,716. The most profitable third grew $145,
895, or almost nine percent. The least profitable third decreased by $64,445.
Growth in sales of a business can, of course, be due partially to infla-
tionary 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 needs to be planned and
orderly so that it contributes to the profitability of an operation. By way
of contrast, expanding too rapidly can result in excessive increases in costs,
and a strong need 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. Thus,
growth, though desirable in an economic sense, needs to be carefully planned
and executed.








Range of Figures (Table 14)


In this section, the average for all 12 nurseries is repeated for ease of

comparison. The remainder of the table differs from the previous section in

that the three best and the three worst numbers for each factor were averaged

to provide the range of high-low figures shown here for each factor. In the

previous section, figures for all factors were for the same group of high or

low profit nurseries. This section shows the average for the best three and

worst three numbers regardless of the nursery or profit level involved.

As can be seen, quite a range in the figures was found for most of the

factors. Nurserymen analyzing their own operation should be suspicious about

any of their own figures that fall outside these ranges. The discussions of

things that contribute to variations in the figures earlier also apply here.


Table 14.--Range of figures associated with level of profit, 12 wholesale
foliage plant nurseries in South Florida, 1980.
Average 3 best 3 poorest
Your
Item Unit all 14 factor factor
nursery
nurseries average average

Level of profit

Net Nursery Income (Table 12) $ 94,960 353,927 (69 520)
Factors associated with level of profit

Size of business (Table 1)


Value of own plants sold ....

Production rate (Table 2)
Sales/sq ft of total
bed & bench space...........

Labor efficiency (Table 3)
Own plant sales/employee ....

Space use Intensity (Table 4)
Annual turnover of plant
inventory value.............

Use of capital (Table 5)
Annual turnover of owned
capital value ..............

Level of costs (Table 8)
Cost/sq ft of total bed space

Cost efficiency (Table 10
Cost/$ sales adjusted for
change in inventory.........


842,716 2,336,948


$ 37,790


37,790


% 277



% 137


$ 1.57



cents 106.94


Growth In the business
Increase In sales & plant
Inventory over last year ... $


185,471 (120,142)


179,948



23,261


23,261



120



65


4.32



141.03


52,477


52,477



487



183


1.01



94.86


51,920










CONCLUDING COMMENTS


Nurserymen who are interested in seeing how they compare with those
participating in the Nursery Business Analysis Program may calculate their own
numbers and write them on the lines of each table provided for this purpose.
Doing so should provide some valuable insight into the business side of oper-
ating a foliage nursery. It should improve management decisions concerning
things that affect the profitability of the nursery operation.
Nurserymen who find this kind of information to be useful, but have
difficulty finding the time or energy to engage in the tedium of doing their
own calculations, may wish to consider becoming participants in the program.
If you would like to do so, contact your Ornamental Horticultural Agent in
your nearby Extension office, or contact the author in Gainesville.