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Robert Strain


Alan W.


Hodges


Economic Information
Report 212


Business Analysis of Foliage Plant
Nurseries in South Florida, 1984


S .


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


December


1985
















ABSTRACT


Average sales, costs and returns information are presented for 26 wholesale
foliage plant nurseries in South Florida for the tax year of 1984. Average val-
ue of plant sales was $842,865. Cash costs including a return to the operator
averaged $752,929. Non-cash costs and allowances including a 12 percent return
on investment amounted to another $121,416. When the return to the operator and
return on investment were deducted, remaining costs totaled $738,154. After ad-
justments for change in plant inventory value and additions for miscellaneous
income, net nursery income averaged $188,614, and return to capital averaged
19.7 percent. Comparable information is presented also for the average of the
nine largest and ten smallest nurseries in the study.

KEY WORDS: Foliage nursery business analysis, income, costs, investment,
efficiency measures, South Florida.













ACKNOWLEDGEMENTS

This report was made possible by the cooperating 26 foliage plant nursery
operators who made available their production and accounting records on a confi-
dential basis for analysis and averaging, and was greatly facilitated by funds
provided by the Florida Foliage Association. Much assistance and encouragement
was supplied by Extension Ornamental Horticultural Agents Loretta Hodyss,
DeArmand Hull and Peter Larson. 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 . . .


INTRODUCTION . . . .
PROCEDURE . . . .
DEFINITIONS. . . . .
DATA AND RESULTS . . .
Size of Business . . .
Rates of Production. . .
Labor Efficiency . . .
The Use of Space .. . .
Efficiency in the Use of Capital .
Dollar Costs by Expense Category*.


Percent of Total Costs by Expense Category*. . .
Cost Per Square Foot of Total Bed and Bench Space* .
Cost Per Square Foot of Propagating and Finishing Space*
Cost Per Dollar of Sales Adjusted for Inventory Change*.
Cost Per Dollar of Sales*. . . . .
Income Summary . . . . . .
Total Gain . . . . . .
Net Nursery Income . . . . .
Return on Capital . . . .
Factors Associated With Level of Profits . .
Size of Business . . . . .
Production Rate. . . . . .
Labor Efficiency . . . . .
Space Use Efficiency . . . .
Use of Capital . ... . . . .


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


following subcategories:


Page
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i


. . . . .
. . . . .


j I I I









TABLE OF CONTENTS (Continued)


Level of Costs . . . . . .
Cost Efficiency. . . . . .
Growth in the Business . . . . .
Range of Figures . . . . . .
CONCLUDING COMMENTS. . . . . . .


LIST OF TABLES
Table
1 Size of business, 26 wholesale foliage plant nurseries in
South Florida, 1984. . . . . .

2 Rates of production, 26 wholesale foliage plant nurseries in
South Florida, 1984. . . . . .

3 Labor efficiency, 26 wholesale foliage plant nurseries in
South Florida, 1984. . . . . .

4 The use of space, 26 wholesale foliage plant nurseries in
South Florida, 1984. . . . . .

5 Efficiency in the use of capital,
26 wholesale foliage plant nurseries in South Florida, 1984.

6 Dollar costs by expense category,
26 wholesale foliage plant nurseries in South Florida, 1984.

7 Percent of total costs by expense category,
26 wholesale foliage plant nurseries in South Florida, 1984.

8 Costs per square foot of total bed and bench space,
26 wholesale foliage plant nurseries in South Florida, 1984.

9 Costs per square foot of propagating and finishing space,
26 wholesale foliage plant nurseries in South Florida, 1984.


Page

5


6


7


9





..13
. . 5
. . 6





. . 9












. . 17


. 19


10 Costs per dollar of sales adjusted for change in plant inventory,
26 wholesale foliage plant nurseries in South Florida, 1984. ... .21

11 Cost per dollar of sales (no adjustment for change in plant inventory,
26 wholesale foliage plant nurseries in South Florida, 1984 .... .23

12 Income summary, 26 wholesale foliage plant nurseries in
South Florida, 1984. . . . .. . . 25

13 Factors associated with level of profit, 26 wholesale
foliage plant nurseries in South Florida, 1984. . . ... 27

14 Range of figures on factors associated with level of profit,
26 wholesale foliage plant nurseries in South Florida, 1984 .... 31

















BUSINESS ANALYSIS OF FOLIAGE PLANT NURSERIES IN SOUTH FLORIDA, 1984


J. Robert Strain and Alan W. Hodges


INTRODUCTION


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


PROCEDURE


The information and averages presented in this report are based on data sup-
plied by 26 nursery operators in the form of confidential production and ac-
counting records. Their nurseries are all located in the South Florida counties
of Dade, Broward, and Palm Beach. The nursery operators participated in the pro-
gram voluntarily and do not represent a statistically selected sample. In fact,
the nursery operators participating in the Florida Nursery Business


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













Analysis Program are thought to represent some of the more efficient foliage
plant nurseries in South Florida, rather than being typical of the foliage plant
nursery industry.
Data were collected for the 1984 tax year. In some cases, data were received
for a fiscal year that did not coincide with the 1984 calendar year. Data for
fiscal years ending after July 1, 1983 and before July 1, 1985 were included
with the 1984 calendar year data.
Not all nursery operators drew a regular salary from their operation. In
these instances, an estimate of the value of the time of the operator was col-
lected and used in the analysis in order to provide a more equitable basis for
comparing data. For the same reason, interest expense paid by the individual
nursery operator was excluded from the costs listed in this report. Instead, an
interest charge for the total owned investment was calculated at the rate of 12
percent per year and included as a non-cash cost.
The owned capital investment reflects the depreciated book value of build-
ings, improvements, machinery and equipment. Growing plants also are included
as a part of the owned capital investment, but at a value lower than the regular
wholesale price. This is because, in a normal growing operation, most of the
plants in inventory are not yet of a saleable size. Some will barely be start-
ed, some ready to sell, and others scattered in between. A common practice is
to value all plants, whether just started or almost finished at 50 percent of
their wholesale price if finished. However, some nursery operators use other
methods. For this report, the values received from the nursery operators were
the values used. Land included in owned capital investment was valued at the
original purchase price. While this may not represent the investment of a nurs-
ery operator if he or she were to buy the land in 1984, it does represent the
investment actually involved in the operation.
The data from individual nurseries are averaged and presented in tablular
form. The tables present average values for all 26 nurseries, for the nine
"largest" nurseries, and for the ten "smallest" nurseries. The largest nurs-
eries had plant sales valued at $500,000 or more. The smallest nurseries had
less the $200,000 in annual sales.










DEFINITIONS


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

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

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

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

Annual turnover of capital: the percentage that results from dividing the
value of own plant 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 invento-
ries, and miscellaneous cash income. It represents the total effect of the
ear's operation, be it in the form of cash received or 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 inter-
est on capital) are subtracted from total gain. The result is the return for
the time and managerial skills of the operator, and for the use of the capital
invested in the operation.

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

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










DATA AND RESULTS


The data in the first 11 tables present various size and efficiency mea-
sures. Data in Tables 12 through 14 relate to the profitability of nurseries.
In the first five tables, more than one measure of efficiency could be used.
The first item in each table has traditionally been presented as "The one best
measure." It is followed by other measures that also are useful for certain
purposes or are meaningful to many growers. Where information in the tables is
presented to the nearest whole number, arithmetic inconsistencies from rounding
may be noted.


Size of business (Table 1)


Size of business data in Table 1 is basic. When combined with cost data in
Table 6, it provides the nursery operator most of the data required for develop-
ing 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. This averaged $842,865 for the 26 nurseries. For
the nine largest nurseries, it was $2,089,487, or about 2.5 times the average.
The smallest ones had $92,716, or about 11 percent of the average. Adjusting
sales for change in value of plant inventory (Table 1 item B) did not alter ma-
terially these relationships.
Total bed and bench space (Table IC) averaged 647,457 square feet for the 26
nurseries. For the nine largest nurseries, it was 1,659,771 square feet, or 2.6
times the average. The ten smallest nurseries had 61,244 square feet, or about
one tenth the average.
Capital owned (Table IN) averaged $680,888 for the 26 nurseries. For the
nine largest nurseries, it was $1,425,284, or 2.1 times the average. The ten
smallest nurseries had $201,592, or 30 percent of the average.
Capital managed (Table 1T) averaged $916,234, or 35 percent more than the
capital owned by the nursery operators. The difference between capital owned
and capital managed was largely due to the value of land. For the nine largest
nurseries, it was $2,041,728, or 43 percent more than they owned. The ten
smallest nurseries managed 22 percent more than the capital owned, or $245,291.
The difference also was in the value for land.










Table l.--Size of business, 26 wholesale foliage plant nurseries in South
Florida, 1984.

Average Average Average
Item Unit all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
The one best measure
A Value of own plants sold(a) $ 842,865 2,089,487 92,716
Other useful indicators of size


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 S
bench space . .

F Total nursery area .
G Total nursery area .

H Average fulltime
equivalent employees(b).

Capital owned(c) in:
I Growing plants . .
J Buildings, fences, wells
K Machinery & equipment. .
L Land . . .
M Supplies . . .
N Total owned capital

Capital managed(d) in:
0 Growing plants . .
P Buildings, fences, wells
Q Machinery & equipment.
R Land . . .
S Supplies . . .
T Total managed capital


$ 920,771 2,259,882


sq ft 647,457


sq ft 558,929


sq ft 88,528


sq ft
acres


number r


1,659,771


1,415,237


244,533


850,255 2,148,441
19.5 49.3


126,357


61,244


55,012


6,232

120,509
2.8


19.4


$ 347,458
$ 150,107
$ 53,013
$ 120,260
$ 10,049
$ 680,888


347,458
190,415
59,725
308,587
10,049
916,234


752,386
302,568
109,034
246,127
15,169
1,452,284


752,386
409,012
123,478
741,682
15,169
2,041,728


82,731
76,258
20,040
20,184
2,380
201,592


82,731
83,007
21,340
55,834
2,380
245,291


(a) Value of own plants sold--is the value
cost of plants purchased for immediate resale.
growing-on is no deducted.


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


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

(c) Capital owned--is the net value (original cost less depreciation taken)
of capital assets in the nursery operation.

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











Rates of Production (Table 2)


"Value of own plants sold per square foot of total bed and bench space" (Ta-
ble 1 item A divided by item C) is the traditional rate of production measure
used among nurseries. The average value for the 26 nurseries was $1.30. For
the nine largest nurseries, it was $1.26. The ten smallest nurseries had $1.51,
or 16 percent greater than the average sales per square foot of bed and bench
space. When sales were adjusted for change in inventory value (Table 1B divided
by 1C), the smallest nurseries showed more than 45 percent higher sales per
square foot than the average.
Sales per square foot of propagating and finishing space (Table lA divided
by ID) is a more accurate indicator of growing efficiency. Output from stock
plant areas may reduce costs, but pay no bills unless cuttings are sold. It is
the plants grown on the propagating and finishing space that pay the bills for
the entire nursery operation. This amounted to $1.51 per square foot for the 26
nurseries. For the nine largest nurseries' it was $1.48. The ten smallest nurs-
eries had $1.69 which was 11 percent greater than the average.

Table 2.--Rates of production, 26 wholesale foliage plant nurseries in South
Florida, 1984.

Average Average Average
Item Unit all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per
sq ft of total bed & bench
space -- (Table 1A/1C) $ 1.30 1.26 1.51
Other useful indicators
Value of own plants sold per
sq ft adjusted for inventory
change - (Table IB/IC) $ 1.42 1.36 2.06

Value of own plants sold per
sq ft of propagating & fin-
ishing space (Table 1A/1D) $ 1.51 1.48 1.69
--- adjusted for inventory
change - (Table 1B/1D) $ 1.65 1.60 2.30

Value of own plants sold per
acre - (Table 1A/1G) $ 43,181 42,365 33,514
--- adjusted for inventory
change - (Table 1B/1G) $ 47,173 45,818 45,674









Labor Efficiency (Table 3)


"Value of own plants sold per employee" (Table 1A divided by 1H) was se-
lected as the one best measure of labor efficiency. This averaged $43,559 per
employee for the 26 nurseries. For the nine largest nurseries, sales averaged
$45,394, or 4.2 percent more than the average. The smallest nurseries had
$21,764 in sales per employee, or less than half the average value. Adjusting
for change in inventory value (Table 1B divided by 1H) increased the average by
$4,026 to $47,585. For the nine largest nurseries, the increase was $3,701 per
person to $49,095. The smallest nurseries were up $7,897 per person to $29,661.
Total bed and bench space per employee (Table 1C divided by 1H) averaged
33,460 square feet. For the nine largest nurseries, it was 36,058 square feet,
or roughly 8 percent more than the average. The ten smallest nurseries had
14,377 square feet per person, less than half of the average.
Propagating and finishing space per person (Table ID divided by 1H) averaged
28,885 square feet per employee. For the nine largest nurseries it was 6 per-
cent higher at 30,746 square feet. The smallest nurseries had only 45 percent
of the average at 12,914 square feet.

Table 3.--Labor efficiency, 26 wholesale foliage plant nurseries in South
Florida, 1984.

Average Average Average
Item Unit all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per
employee (Table 1A/1H) $ 43,559 45,394 21,764
Other useful indicators
Value of own plants sold per
employee adjusted for change
in inventory (Table IB/1H) $ 47,585 49,095 29,661

Total bed & bench space per
employee (Table 1C/1H) sq ft 33,460 36,058 14,377

Propagating & finishing space
per employee (Table 1D/1H) sq ft 28,885 30,746 12,914

Total nursery area per
employee (Table 1F/1H) sq ft 43,941 46,675 28,288







8


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 divided by 11). This
indicates the number of times that funds tied up in plant inventory were repre-
sented by sales during the year.
The reliability of this number depends upon the care and accuracy with which
plant inventory records are kept. Some nursery operators in the program keep
careful inventories of plant numbers, while others tend to approximate their
figures. 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 nursery operator has first hand knowledge of the nature and the de-
pendability of the comparison.
Annual turnover of plant inventory value in the 26 nurseries averaged 243
percent. This means that annual plant sales amounted to almost two and one half
times (243 percent) of the value of plants in inventory. For the nine largest
nurseries, turnover was 278 percent. Their annual plant sales were 2.78 times
the value of plants in inventory. The ten smallest nurseries had a much lower
turnover rate. It was 112 percent.
Vacant bed and bench space is a measure of efficiency of space use. Gener-
ally, reducing the percent of space vacant on the average is desirable. How-
ever, some vacancy is inevitable between the time a plant is removed for sale
and the time another is put in its place to start growing. 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 5.53 percent for the 26
nurseries. For the largest ones, it was 5.69 percent. The smallest nurseries
had 6.27 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 space and stock plant area. 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. However,
other things are seldom equal, such as the cost of raising rather than buying
cuttings, and availability of quality material when needed.











Total nursery area including buildings and roadways averaged 850,255 square
feet for the 26 nurseries. The larger nurseries averaged 2,148,441 square feet.
The smaller nurseries averaged 120,509 total square feet.
The 26 nurseries averaged 647,457 square feet of bed and bench space, which
was 76.15 percent of their total nursery area. The nine largest nurseries aver-
aged 77.25 percent of their total area in bed and bench space, while the ten
smallest nurseries utilized 50.82 percent of their total nursery area as bed and
bench space.
Propagating and finishing area averaged 558,929 square feet for the 26 nurs-
eries. This was 86.33 percent of the total bed and bench space (Table 1D di-
vided by 1C). For the nine largest nurseries, it was 1,415,237 square feet, or
2.5 times the average. However, this was 85.27 percent of the total bed and
bench space, indicating that the largest, nurseries devoted slightly more of
their space to stock plants than the average. The ten smallest nurseries had
55,012 square feet for propagating and finishing, which was but 10 percent of
the average. However, this space represented 89.82 percent of the total bed and
bench space. This is probably natural, since smaller nurseries, especially those
just getting started, may not be able to afford the luxury of maintaining as
many stock plants as they would like.

Table 4.--The use of space, 26 wholesale foliage plant nurseries in South
Florida, 1984.

Average Average Average
Item Unit all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
Intensity of space use
Annual turnover of plant in-
ventory value -(Table 1A/11) % 243 278 112
Efficiency of space use
Vacant bed & bench space sq ft 35,807 94,434 3,841
- -(divided by Table 1C) % 5.53 5.69 6.27
Other useful indicators
Total nursery area incl bldgs
roadways (same as Table 1F) sq ft 850,255 2,148,441 120,509

Total bed & bench space sq ft 647,457 1,659,771 61,244
- - -(Table 1C/1F) % 76.15 77.25 50.82

Propagating & finishing bed sq ft 558,929 1,415,237 55,012
& bench space -(Table 1D/1F) % 86.33 85.27 89.82

Stock plant bed & bench space sq ft 88,528 244,533 6,232
- - -(Table IE/1C) % 13.67 14.73 10.18













Efficiency in use of capital (Table 5)


A number of possibilities exist for measuring efficiency in the use of capi-
tal. The one selected as the best single indicator was "Annual turnover of own-
ed capital value". This is the percentage that results from dividing the value
of own plants sold by the value of capital owned (Table IA divided by 1N). An-
nual turnover averaged 123.8 percent for the 26 nurseries. This means that
sales for the year equaled almost one and a quarter times the capital invested.
For the nine largest nurseries, it was 146.6, which was a 23 percent faster
turnover rate than the average. The ten smallest nurseries had 46.0, which was
roughly a third of the average turnover rate.
Managed capital turnover averaged 92.0 percent for the 26 nurseries. Thus,
there was enough additional capital being managed to reduce the turnover rate
about 32 percent. For the nine largest nurseries, it was 102.3, meaning there
was enough additional capital involved in the operation to reduce the turnover
rate by 44 percent. The ten smallest nurseries had enough additional capital to
manage to reduce turnover by 8 percent to 37.8.
Capital invested per employee (Table IN divided by 1H) averaged $35,188 for
the 26 nurseries. For the nine largest nurseries, it was $30,964, or about 88
percent of the average, indicating more efficient use of owned capital. The ten
smallest nurseries had $47,332 which was 35 percent higher than the average.
Average capital investment per acre of nursery area (Table 1N divided by 1G)
was $34,883 for the 26 nurseries. For the nine largest nurseries, it was
$28,898, or 17 percent lower than the average. The ten smallest nurseries had
$72,869, or over two times the average. Calculations for managed capital showed
a similar relationship, with the largest nurseries managing about 12 percent
less than the average per acre, and the smallest nurseries having almost twice
the average.
Growing plants represented 37.9 percent of the capital managed by the 26
nurseries. For the largest nurseries, it was 36.9 percent. The smallest nurs-
eries had 33.7 percent of their capital tied up in plants.
Buildings and installations averaged 20.8 percent of the total. For the
nine largest nurseries, it was about the same at 20.0 percent. The nine smal-
lest nurseries had 33.8 percent of their capital in buildings. For all three











groups, machinery and equipment took between 6 and 9 percent of the capital.


The smallest nurseries used less than the average for land.


Both largest and


smallest nurseries show less than the average investment in supplies.


Table 5.--Efficiency in use of capital, 26 wholesale foliage
in South Florida, 1984.


plant nurseries


Average Average Average
Item Unit all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
The one best measure
Annual turnover(e) of owned
capital value (Table 1A/IN) % 123.8 146.6 46.0
Other useful indicators


Annual turnover(e) of managed
capital value (Table IA/1T)

Per employee:
Capital owned (Table 1N/1H)
--- managed (Table 1T/1H)

Per acre:
Capital owned (Table 1N/IG)
--- managed (Table IT/1G)

Managed capital/employee in:
Plants - (Table 10/1H)
Buildings (Table 1P/1H)
Mach & equip (Table 1Q/1H)
Land - (Table 1R/1H)

Managed capital per acre in:
Plants - (Table 10/1G)
Buildings (Table 1P/1G)
Mach & equip (Table 1Q/1G)
Land - (Table IR/1G)

Percent of capital managed in:
Plants - (Table 10/1T)
Buildings (Table 1P/1T)
Mach & equip (Table .Q/1T)
Land - (Table IR/1T)
Supplies (Table 1S/1T)
Total nursery (Table 1T/1T)


92.0


35,188
47,351


34,883
46,940


17,957
9,841
3,087
15,948


17,801
9,755
3,060
15,809


37.9
20.8
6.5
33.7
1.1
100.0


102.3


30,964
44,356


28,898
41,396


16,346
8,886
2,683
16,113


15,255
8,293
2,504
15,038


36.9
20.0
6.1
36.3
0.7
100.0


37.8


47,332
57,580


72,869
88,665


19,420
19,485
5,009
13,107


29,905
30,004
7,714
20,182


33.7
33.8
8.7
22.8
1.0
100.0


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


percentage that results from
by the value of capital (Table











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 pro-
duction costs, and administrative and overhead expense. Dollar costs should be
useful for comparing the relative magnitude of the various cost items, and as a
guide to persons interested in South Florida foliage nurseries as an investment,
either as buyers, sellers or as lenders.
Salaries and Wages
The salary and wage group includes operator salary or time value. Average
was $292,859. For the largest nurseries, they were $698,915, or 2.4 times the
average. The smallest nurseries had $49,301, or 17 percent of the average.
Production Supplies
Production supplies include the group starting with "plants and seeds"
through "other production supplies." They averaged $308,430 for the 26 nurs-
eries. For the largest nurseries, they were $759,956, or 2.5 times the average.
The smallest nurseries had $31,489, or 10 percent of the average.
Other Production Costs
Other production costs include "repairs" and "equipment operating costs."
They averaged $32,617 for the 26 nurseries. For the nine largest nurseries,
they were $77,046, or 2.4 times the average. The smallest nurseries had $5,430,
or 17 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 bus-
iness. They include the group starting with "travel and entertainment" through
"other cash expenses". They averaged $119,023 for the 26 nurseries. For the
largest nurseries, they were $298,057, or over two and one half times the aver-
age. The smallest nurseries had $16,226, or 14 percent of the average.
Total Cash Costs
Total cash costs averaged $752,929. Largest nurseries averaged $1,833,974,
or 2.4 times the average. The smallest had $102,446, or 14 percent of 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.


eraged $121,416. For the largest nurseries, they were $249,350, or about double
the average. The smallest ones had $45,792, or 38 percent of the average.
Total All Costs
Total costs averaged $874,345. Largest nurseries averaged $2,083,325 (2.4
times the average), and smallest ones had $148,237 (17 percent of the average).

Table 6.--Dollar costs by expense category, 26 wholesale foliage plant nurseries
in South Florida, 1984.

Average Average Average
Item all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
- - 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 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 . . .


54,485
238,374

149,722
41,108
6,752
27,754
16,556
18,647
24,993
22,898

21,239
11,378


7,426
13,945
9,524
5,133
4,537
9,908
9,383
59,167
752,929


18,403
21,306
0
81,707
121 416


104,226
594,689

367,530
95,623
17,716
65,761
41,964
48,435
63,588
59,339

53,854
23,192


16,099
33,579
21,132
10,888
10,862
24,260
21,526
159,711
1,833,974


37,580
40,736
0
171,034
249,350


20,930
28,371

9,452
9,667
1,200
2,957
1,615
1,644
2,762
2,192

2,336
3,094


2,096
2,617
1,60-2
1 ,779
581
1,515
2,270
3,766
102,446


9,014
12,587
0
24,191
45,792


874,345 2,083,325


These costs av-


148,237











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 relation-
ships between different sizes of nurseries. But costs as a percent of total
costs 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 33.49 percent of all costs
for the 26 nurseries. For the nine largest ones, they were about the same,
33.55 percent. For the ten smallest nurseries they were also about the same at
33.26 percent.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 35.26 percent for the 26 nurseries. For the largest nurseries, they
were 36.47 percent, or 1.20 percent more than the average. The smallest nurs-
eries averaged 21.24 percent of total costs, or 14.02 percent below the average.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
3.73 percent for the 26 nurseries. For the nine largest ones, they were 3.69
percent. The ten smallest nurseries had 3.67 percent.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 13.61 percent
of all costs for the 26 nurseries. For the nine largest ones, they were 14.29
percent. The smallest nurseries had 10.94 percent, or 2.67 percent under the
average.
Total Cash Costs
Total cash costs represented 86.11 percent of all costs and allowances for
the 26 nurseries. For the largest ones, it was 88.03 percent, or 1.92 percent
more than the average. The smallest ones had 69.11 percent, 17 percent less
than the average in cash costs.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") are the addi-
tional costs that need to be covered eventually, though not necessarily with
cash during this accounting period. They averaged 13.89 percent of total costs











for the 26 nurseries. For the nine largest ones, they averaged 11.97, or 2 per-
cent less than the average. Hence, the largest nurseries had a higher percent
of their total operating expense in the form of cash costs. The ten smallest
nurseries had 30.89 percent of their total as non-cash costs. This was more
than two times the average. The largest differences were in the percentages of
total costs represented by interest on capital.



Table 7.--Percent of total costs by expense category, 26 wholesale foliage
plant nurseries in South Florida, 1984.

Average Average Average
Item all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
- - 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 expenses . .
Total cash costs. . .


6.23
27.26

17.12
4.70
0.77
3.17
1.89
2.13
2.86
2.62


S. 2.43
S. 1.30


0.85
1.59
1.09
0.59
0.52
1.13
1.07
6.77
86.11


Non-Cash Costs
Depreciation: mach & equip. ... 2.10
Depreciation: bldgs, fences, wells. 2.44
Inventory decrease in supplies. .. 0.00
Interest on capital, 12% . 9.34
Total non-cash costs . 13.89


5.00
28.55

17.64
4.59
0.85
3.16
2.01
2.32
3.05
2.85

2.58
1.1


0.77
1.61
1.01
0.52
0.52
1.16
1.03
7.67
88.03


1.80
1.96
0.00
8.21
11.97


14.12
19.14

6.38
6.52
0.81
1.99
1.09
1.11
1.86
1.48

1.58
2.09


1.41
1.77
1.08
1.20
0.39
1.02
1.53
2.54
69.11


6.08
8.49
0.00
16.32
30.89


Total All Costs . . .


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 not allow easy comparison of relative growing costs between
nurseries. But costs per square foot do. The traditional basis for comparison
is costs per square foot of total bed and bench space. These were obtained by
dividing each of the dollar cost figures in Table 6 by the appropriate area in
production figure from Table IC, "Total bed and bench space."
Salaries and Wages
Salaries and wages (includes operator) per square foot of total bed and
bench space averaged 45.2 cents for the 26 nurseries. For the largest ones,
they were 42.1 cents, or about three cents less than the average. The smallest
nurseries had 80.5 cents, or 35 cents above the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 47.6 cents. For the nine largest nurseries, they were 45.8 cents,
about two cents less than the average. The smallest nurseries had 51.4 cents,
or about four cents over the average.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
5.1 cents in the 26 nurseries. For the nine largest ones, they were 4.6 cents.
The smallest nurseries had 8.9 cents, almost four cents above the average.
Administrative and Overhead
These costs ("travel" through "other cash expenses") averaged 18.4 cents per
square foot. For the nine largest nurseries, they were 18.0 cents, a half cent
less. The smallest ones had 26.5 cents, 8.1 cents above the average.
Total Cash Costs
Total out-of-pocket costs per square foot of total bed and bench space aver-
aged 116.3 cents ($1.16). For the nine largest nurseries, they were 110.5
cents, or six cents below the average. The smallest ones had 167.3 cents, or
almost half a dollar above the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") amounted to
18.7 cents per square foot. Largest nurseries had 15.0 cents. The smallest nur-
series had 74.8 cents, nearly four times higher than the average.





17


Total All Costs
The total for all costs and allowances averaged 135.0 cents ($1.35) in the
26 nurseries. For the nine largest ones, they were 125.5 cents, or 10 cents be-
low the average. The smallest nurseries had 242.0 cents, or $1.07 over the
average cost per square foot of total bed and bench space.



Table 8.--Costs per square foot of total bed and bench space, 26 wholesale
foliage plant nurseries in South Florida, 1984.

Average Average Average
Item all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
- - 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 expenses . .
Total cash costs . .


8.4
36.8

23.1
6.3
1.0
4.3
2.6
2.9
3.9
3.5


S. 3.3
. 1.8


1.1
2.2
1.5
0.8
0.7
1.5
1.5
9.1
116.3


Non-Cash Costs
Depreciation: mach & equip. . 2.8
Depreciation: bldgs, fences, wells. 3.3
Inventory decrease in supplies. .. 0.0
Interest on capital, 12% . 12.6
Total non-cash costs .. 18.7

Total All Costs. .... . 135.0


6.3
35.8

22.1
5.8
1.1
4.0
2.5
2.9
3.8
3.6

3.2
1.4


1.0
2.0
1.3
0.7
0.6
1.5
1.3
9.6
110.5


2.3
2.4
0.0
10.3
15.0

125.5


34.2
46.3

15.4
15.8
2.0
4.8
2.6
2.7
4.5
3.6


3.4
4.3
2.6
2.9
0.9
2.5
3.7
6.2
167.3


14.7
20.5
0.0
39.5
74.8

242.0









Costs Per Square Foot of Propagating and Finishing Space (Table 9)


Costs per square foot of total bed and bench space is the traditional basis
for comparisons between nurseries. However, costs per square foot of propaga-
ting 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".
Salary and Wages
Salaries and wages (includes operator) per square foot amounted to 52.4
cents in the 26 nurseries. For the nine largest ones, they averaged 49.4 cents,
or about three cents below the average. The smallest nurseries had 89.6 cents,
or 37.3 cents greater than the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 55.2 cents per square foot. For the largest nurseries, they were 53.7
cents, or one and a half cents below the average. The smallest ones had 57.2
cents, or about two cents above the average.
Other Production Costs
Other production costs ("repairs" and "equipment operation") averaged 5.8
cents. For the largest nurseries, they were 5.4 cents. The ten smallest nurs-
eries had 9.9 cents, or 4.1 cents above the average.
Administrative and Overhead
These costs ("travel" through "other cash expenses") averaged 21.3 cents.
For the largest nurseries, they were 21.1 cents. The ten smallest nurseries had
29.5 cents, or more than eight cents higher than the average.
Total Cash Costs
Total cash costs in the 26 nurseries averaged 134.7 cents ($1.35) per square
foot of propagating and finishing space. For the nine largest nurseries, they
were 129.6 cents, down about five cents. The ten smallest nurseries had 186.2
cents, or 52 cents above the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") averaged 21.7
cents. The largest nurseries had 17.6 cents, or about four cents under the
average, and smallest nurseries had 83.3 cents, nearly four times the average.






19



Total All Costs
Total costs per square foot of propagating and finishing space averaged
$1.56. For the largest nurseries, they were $1.47, or nine cents below the
average. The smallest ones had $2.69, or 1.7 times the average.





Table 9.--Costs per square foot of propagating and finishing space,
26 wholesale foliage plant nurseries in South Florida, 1984.

Average Average Average
Item all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
- - 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 expenses . .
Total cash costs . .


9.8
42.6

26.8
7.3
1.2
5.0
3.0
3.3
4.5
4.1


. 3.8
S. 2.0


1.3
2.5
1.7
0.9
0.8
1.8
1.7
10.6
134.7


Non-Cash Costs
Depreciation: mach & equip. . 3.3
Depreciation: bldgs, fences, wells. 3.8
Inventory decrease in supplies. 0.0
Interest on capital, 12% .. 14.6
Total non-cash costs. . ... 21.7


7.4
42.0

26.0
6.8
1.3
4.7
3.0
3.4
4.5
4.2


1.1
2.4
1.5
0.8
0.8
1.7
1.5
11.3
129.


2.7
2.9
0.0
12.1
17.6


Total All Costs . . .


38.0
51.6

17.2
17.5
2.2
5.4
2.9
3.0
5.0
4.0


4.3
5.6


3.8
4.8
2.9
3.2
1.1
2.8
4.1
6.8
186.2


16.4
22.9
0.0
44.0
83.3

269.5


156.4 147.2










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


Costs per square foot of growing area are important for comparing relative
costs between nurseries, and for estimating individual plant growing costs.
However, they do not indicate the profit potential of a nursery operation as
well as do costs per dollar of sales. Adjusting sales for changes in inventory
value shows how the business is doing in total, not just cash-wise. These fig-
ures were developed by dividing the dollar costs shown in Table 6 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 31.8 cents per dollar of
sales after adjusting for changes in inventory. For the nine largest nurseries,
they were 30.9 cents, or about one cent less than the average. The smallest
nurseries had 39.0 cents, or 7.2 cents above the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 33.5 cents. For the nine largest nurseries, they were 33.6 cents. The
smallest nurseries had 8.6 cents below the average, or 24.9 cents.
Other Production Supplies
Other production costs ("repairs" and "equipment operating costs") averaged
3.5 cents per dollar of adjusted sales. For the nine largest nurseries, they
were 3.4 cents. The smallest nurseries had 4.3 cents.
Administrative and Overhead
These costs ("travel" through "other cash expense") amounted to 12.9 cents
per dollar of adjusted sales. For the nine largest nurseries they were 13.2
cents. The smallest nurseries had the same as the average, 12.9 cents.
Total Cash Costs
Total cash costs per dollar of adjusted sales averaged 81.7 cents. For the
nine largest nurseries, they were 81.1 cents. The smallest nurseries also had
81.1 cents.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") averaged 13.3
cents. For the nine largest nurseries, they were 11.1 cents, or more than two











Smallest ones had much higher non-cash costs, 36.2 cents,


or 23 cents over average.
Total All Costs
Total costs per dollar of adjusted sales averaged 95.0 cents. For the larg-
est nurseries, they were 92.2 cents. The smallest ones had 117.3 cents.



Table 10.--Costs per dollar of sales adjusted for change in plant inventory,
26 wholesale foliage plant nurseries In South Florida, 1984.

Average Average Average
Item all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
- - 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 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. . .


5.9
25,9


16.3
4,5
0.7
3.0
1.8
2.0
2.7
2.5

2.3
1.2

0.8
1.5
1.0
0.6
0,5
1.1
1.0
6.4
81 .7


4.6
26.3


16.3
4.2
0.8
2.9
1.9
2.1
2.8
2.6

2.4
1.0

0.7
1.5
0.9
0.5
0.5
1.1
0.9
7.1
81.1


1.7
1.8
0.0
7.6
11 .1


. 2.0


2.3
0.0
9,0
13.3


16.6
22.4


1.6
2.1
1.3
1.4
0.5
1.2
1.8
3.0
81.1


7.1
10.0
0.0
19.1
36.2


Total All Costs . . .


cents below average.


95.0 92.2


117.3










Costs Per Dollar of Sales (Table 11)


While total business position is indicated by costs per dollar of sales ad-
justed for changes in inventory value, bill paying ability depends upon costs
relative to cash received. These figures were developed by dividing the dollar
costs shown in Table 6 by the appropriate figure from Table 1A, "Value of own
plants sold."
Salaries and Wages
Salaries and wages (includes operator) amounted to 34.7 cents per dollar of
cash received. For the nine largest nurseries, they were 33.4 cents, or one
cent less than the average. The smallest nurseries had 53.2 cents, or 18.5
cents over average.
Production Supplies
Production suppiies("plants and seeds" through "other production supplies")
averaged 36.6 cents per dollar of cash sales, For the nine largest nurseries,
they were 36.4 cents. The smallest nurseries had 34.0 cents, 2.6 cents lower.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
3.9 cents per dollar of cash received. For the nine largest nurseries, they
were 3.7 cents. The smallest nurseries had 5.8 cents, two cents higher.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 14.1 cents per
dollar of sales. For the nine largest nurseries, they were 14.3 cents. The
smallest nurseries had 17.5 cents, or 3.4 cents above average.
Total Cash Costs
Total cash costs averaged 89.3 cents per dollar of cash received. For the
largest nurseries, they were 87.8 cents, or one and a half cents lower than av-
erage. Thus, the 26 nursery average and the largest nurseries showed a balance
of 11 cents and 12 cents, respectively, after paying current operating costs.
The smallest ones had 110.5 cents, or 21 cents over the average, and lacked 10.5
cents of being able to cover current bills.
Non-Cash Costs
Non-cash cost allocations fer the year averaged 14.4 cents per dollar of
sales. Largest nurseries had 11.9 cents in non-cash costs. Smallest nurseries
had much higher non-cash costs, 49.4 cents per dollar of sales.










Total All Costs
Total costs averaged 103.7 cents, or 3.7 cents more than the cash received.
Largest nurseries averaged 99.7 cents. Smallest nurseries averaged 159.9 cents.
In terms of bill paying ability, the smallest nursery average+ did not show
enough sales to pay the cash costs Incurred during the year. Only the largest
nursery average covered all cash costs and non-cash allowances including a 12
percent return on investment.

Table 11.--Costs per dollar of sales (no adjustment for change in plant inven-
tory), 26 foliage plant nurseries in South Florida, 1984.

Average Average Average
Item all 26 9 large 10 small Your
nurseries nurseries nurseries nursery
- ents - --


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 . . .


6.4
28,.3


17.7
4.9
0.8
3,3
2.0
2.2
3.0
2,7

2.5
1.4

0.9
1.7
1.1
0.6
0,5
1.2
1.1
7.0
89.3


2-,2
2", 2
2.5
0.0
9.7
103.7
103.7


5.0
28.4


17.6
4.6
0.9
3.2
2.0
2.3
3.0
2.8

2.6
1.1

0,8
1.6
1.0
0.5
0.5
1.2
1.0
7.6
87.8


1.8
1.9
0.0
8.2
11.9

99.7


22.6
30.6

10.2
10.4
1.3
3.2
1.7
1.8
3.0
2.4


2.3
2.8
1.7
1.9
0.6
1.6
2.5
4.1
110.5


9.7
13.6
0.0
26.1
49.4

159.9









Income Summary (Table 12)


This section concentrates on developing net nursery income and allocating it
between the time and effort of the owner-operator and a return on the money in-
vested in the operation. After all is said an done, it is for a payment on his
time that a nursery operator works, and it is for a return to capital that nurs-
ery 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 would include rent income, interest income, delivery in-
come, boxing charges, and income from the sale of fertilizer and supplies.
Total gain for the 26 nurseries averaged $926,768. Largest nurseries aver-
aged almost 2.5 times that amount, or $2,275,502. Smallest nurseries had 14
percent of the average, or $127,426
Net Nursery Income
Net nursery income is the total return for the year for the time and mana-
gerial skills of the operator plus the capital invested in the operation. To
obtain it, all cash costs from Table 6 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 26 nurseries, it averaged $188,614. For the nine largest nurseries,
it was $467,438, or 2.5 times the average. Smallest nurseries had $24,310, or
13 percent of the average,
Return to Capital
From net nursery income is subtracted the salary or time value of the owner-
operator to obtain that part of net nursery income attributable to capital.
This is the earnings of the money invested in the nursery. Dividing it by the
value of capital invested gives the rate of return earned by the investment.
When the owner and operator are the same person, dividing net nursery income
between the operator and return to capital may not seem important. But when the
owners are outside investors, then accurate division is important. In either
case, rate of return is a common indicator for evaluating an investment or for
selecting between alternative investment opportunities.











Return to capital for the 26 nurseries amounted to $134,129, or a return of
19.7 percent. For the nine largest nurseries, it was $363,211 for a 25.5 per-


cent return on the capital investment.


The smallest nurseries averaged $3,380


for a 1.7 percent return on the capital invested.




Table 12.--Income summary, 26 wholesale foliage plant nurseries in South
Florida, 1984.

Average Average Average
Item Unit all 26 5 large 10 small Your
nurseries nurseries nurseries nursery
- - Dollars - - -
Value of own plants sold - $ 842,865 2,089,487 92,716
Plant inventory change - $ 77,906 170,336 33,641
Supply inventory change- - $ 191 1,774 1,069
Miscellaneous cash income- $ 5,806 13,905 0
Total gain(f)- -------- r $ 926,768 2,275,502 127,426

Deduct cash costs less op salary $( 698,444) (1,729,748) ( 81,515)( )
Deduct non-cash costs less int $( 39,709) ( 78,316) ( 21,600)()
Total deductions -- --- $( 738,154) (1,808,064) ( 103,116)(

Net nursery income(g)- - $ 188,614 467,438 24,310
Deduct op salary or time value $( 54,485) ( 104,226) ( 20,930)(

Return to capital(h) - $ 134,129 363,211 3,380
Rate of return to capital(i) % 19.7 25.5 1.7

(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 sub-
tracting 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.










Factors Associated With Level of Profit (Table 13)


In this section,information presented earlier is summarized to concentrate
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 ap-
peared before. But here, the average for all 26 nurseries is compared with the
average for the eight most profitable and the eight least profitable of the nur-
series participating in the program. As will be seen, profit or lack of profit
does not depend upon performance in any single area, but, rather, on the balance
of performance in all areas. Nevertheless, nursery operators analyzing their
own operations may find this section especially valuable for indicating the gen-
eral 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 26 nurseries was $188,614. The most profitable
third of the nurseries averaged 2.7 times this amount, or $513,774. The least
profitable third averaged -$4,583. The following compares the average for these
three groupings of foliage nurseries using one indicator from most of the pre-
ceeding tables. A more complete analysis would use all indicators listed for
each table. For in most cases, each indicator measures things from a little
different angle.
Size of Business
The indicator of size of business selected from Table 1 was "Value of own
plants sold." The 26 nurseries averaged $842,865. The most profitable third
had $2,153,330 in sales, or 2.6 times more. The least profitable group averaged
$132,727, or about 16 percent 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 desir-
able. The average for all 26 nurseries was $1.30 per square foot. The most
profitable third and the least profitable third had $1.18.










Lower sales per square foot of total 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 yields of salable plants. In addition, nursery layout and
fertilizing and growing techniques can alter the time and space used for the
same crop in two different nurseries. Also, markets and marketing programs can
alter the returns received by two different nurseries for the same crop.

Table 13.--Factors associated with level of profit, 26 wholesale foliage plant
nurseries in South Florida, 1984.

Average Average 8 Average 8
Item Unit all 26 most profit least profit Your
nurseries nurseries nurseries nursery
Level of profit
Net nursery income (Table 12) $ 188,614 513,774 -4,583
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $ 842,865 2,153,330 132,727

Production rate (Table 2)
Sales/sq ft of total
bed and bench space - $ 1.30 1.18 1.18

Labor efficiency (Table 3)
Own plant sales/employee $ 43,559 45,181 26,868

Space use intensity (Table 4)
/Annual turnover of plant
inventory value -- ----- % 243 289 114

Use of capital (Table 5)
Annual turnover of owned
capital value - --- 124 146 46

Level of costs (Table 8)
Cost/sq ft of total bed space- $ 1.35 1.15 1.90

Cost efficiency (Table 10)
Cost/$ sales adjusted for
change in inventory value $ .95 .91 1.44

Growth in the business
Increase in sales and plant
inventory over last year $ 143,847 357,834 18,201










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 26
nurseries was $43,559 per person. Sales were four percent higher than average
at $45,181 for the most profitable third, and 62 percent of the average at
$26,868 for the least profitable third of the nurseries. Higher sales per em-
ployee viewed alone at this point in time might seem to indicate true efficien-
cy. On the other hand, if viewed together with other indicators, it might in-
stead show less than optimum number of employees for volume of plants being
handled. This could result in tardy or untimely plant care, hence, slower
growth and lower quality plus a failure to restock empty space promptly. In
this case, other indicators such as production rate, space use intensity, capi-
tal turnover, and costs per square foot would not support the labor efficiency
indicator.
Lower sales per employee can result during periods of rapid expansion when
extra help is needed to care for 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 and utilization of
labor.
Space Use Intensity
The indicator of intensity in the use of space selected from Table 4 was
"Annual turnover of plant inventory value." Generally speaking, larger percent-
age turnover numbers are desirable, because they indicate that the value of
money tied up on inventory is being revolved faster. Average turnover was 243
percent, meaning that the value of own plants sold was 2.43 (243 percent) times
the average investment in plant inventory. For the most profitable third, it
was 289 percent, or 42 percent more than the average. For the least profitable
third, it was 46 percent of the average at 114.
Reduced intensity of space use may be the result of things that increase the
amount of money invested in inventory such as excessive investment in stock
plants, rapid expansion of the business so that plant values are up although









accompanying sales have not yet started, poor labor manag-,ment so there is not
enough labor at crucial times for rapidly refilling empty space, selecting vari-
eties that grow slowly relative to the price they receive, inadequate fertiliza-
tion program resulting in slow plant growth, 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 a given nursery as mentioned earlier. Either over or under
valuing inventory can also change the intensity of use figure. However, varia-
tions in the indicator for this reason are fictitious, and do not provide 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. In gen-


eral, larger percentage turnover numbers ar
greater sales per dollar of investment in the
Annual turnover of owned capital averaged
ue of own plants sold during the year amounted
the capital invested. For the most profitable
rate for the least profitable third was about
Problems that lower turnover rate include
that lower production rate hence sales volume
Low capital turnover is particularly common i
or in nurseries that are expanding rapidly.


e desirable, for they indicate
nursery.
124 percent, meaning that the val-
to almost one and a quarter times
e third, it was 146 percent. The
a third of the average, 46.9.
any of the items already mentioned
for a given nursery investment.
n nurseries just getting started,
Excessive investments in land,


labor saving machinery and equipment, or expensive (though maybe unnecessary)
niceties will also tend to lower captial turnover rate.
Level of Costs
The indicator of level of costs selected was "Costs per square foot of total
bed and bench space" from Table 8. This is a traditional indicator for compar-
ing costs between nurseries. Other things being equal, a lower cost per square
foot is desirable.
Costs for total bed and bench space averaged $1.35, or five cents higher
than sales per square foot before adjusting for changes in plant inventory val-
ue. This means that sales did not cover all cash costs plus all non-cash allow-
ances noted in Table 8. For the most profitable third, costs were $1.15 per
square foot or 20 cents less than the average and three cents less than sales
per square foot. The least profitable third averaged $1.90 cents, which was 72
cents per square foot more than sales.









Problems that cause costs per square foot to increase include inefficient
planning and utilization of labor, insufficient investment in labor saving capi-
tal items, destruction or theft of supplies and plants, not checking for best
price before purchasing needs, and not carefully managing the nursery operation.
Other causes of increased costs may not be a problem if they result in increased
revenue. One example might be increased costs for sleeves and packaging in or-
der to satisfy the requirements of a premium market.
Costs Efficiency
The indicator of cost efficiency selected was "Cost per dollar of sales ad-
justed for change in plant inventory." This shows how well the nursery did in
total, cash plus change in inventory values. In general, lower costs per dollar
of sales are desirable.
Average costs were 95.0 cents. For the most profitable third, costs were
90.1 cents. The least profitable third had 143.4 cents per dollar received.
Thus, this group lacked more than 40 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 expan-
sion. But this also can 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 the nursery
being operated and lack of attention to cost control and efficient nursery oper-
ation.
Growth in the Business
The indicator selected was the sum of the increase in plant sales and in-
crease in plant inventory value. In general, a steady growth in the business is
desirable.
On the average, growth was valued $143,527. This was about 18 percent of
the annual sales volume of $839,771. The most profitable third increased
$357,834, about 17 percent of annual sales. The least profitable third of the
nurseries increased $18,201, or about 14 percent of sales.
Growth in sales of a business can, of course, be due in part to inflationary
price increases. It can also be the result of all the things already mentioned
that increase sales volume or plant inventory for a given operation. To stay
healthy, businesses do need to grow, at least enough to keep up with inflation.
But at the same time, growth needs to be planned and orderly so that it contrib-









utes to the profitability (4 an oper ic:n. !iv .,,y ,'. c .)trast, ton rapid of an
expansion program can result in excssi've increases in costs and strong needs
for cash before the new plants have reached salable size. The inventory in-
crease may look good on paper, but prove inadequate for paying the bills.
Growth, though desirable in an economic sense, needs to be carefully planned and
executed.


*.anr e of -igures (Table 14)


In this section, the average for all 26 nurseries is repe rAt- -, 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

Table 14.--Ranqe of figures on factors associated with level of pron t., :6
wholesale foliage plant nurseries in South Florida, 1984

Average 3 best 3 worst
Item liiit a i 26 factor factor Your
nurseries average average nursery
Level of Drofit
Net nursery income (Table 12) S 188,614 836,628 -24,119
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold- S 842,865 3,721,172 25,071

Production rate (Table 2)
Sales/sq ft of total- - S 1.30 6.56 0.43

Labor efficiency (Table 3)
Own plant sales/employee- S 43,559 58,036 9.525

Space use intensity (Table 4)
Annual turnover of plant inv- 243 1,187 57

Use of capital (Table 5)
Annual turnover of owned cap- 124 221 30

Level of costs (Table 8.
Cost/sq ft of total bed space S 1.35 0.69 9.71

Cost efficiency (Table 10)
Cost/$ sales adjusted for
change in inventory value .95 0.60 1.76

Growth in the business
Increase in sales & plant S 143,847 820,898 741










provide the range of high-low figures shown. In the previous section, figures
for all factors were for the same groups of high profit and low profit nurs-
eries. This section shows the average for the best three and worst three num-
bers regardless of the nursery or profit level to which they belong.
As can be seen in Table 14, 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
would also apply here.




CONCLUDING COMMENTS


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