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J. Robert Strain


Alan W.


Economic Information
Report 219


Hodges


Business Analysis of Foliage Plant
Nurseries in Central Florida, 1984


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


January 1986


_ _~ ___


I


114

















ABSTRACT


Average sales, costs and returns information are presented for 20 wholesale
foliage plant nurseries in Central Florida for the tax year of 1984. Average
value of plant sales was $482,530. Cash costs including a return to the opera-
tor averaged $409,716. Non-cash costs and allowances including a 12 percent re-
turn on investment amounted to another $65,851. Deducting the return to opera-
tor and return on investment left total costs of $405,080. After adjustments
for change in plant inventory value and additions for miscellaneous income, net
nursery income averaged $110,756, and return to capital averaged 23.8 percent.
Comparable information is presented also for the average of the seven largest
and six smallest nurseries in the study.

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















ACKNOWLEDGEMENTS

This report was made possible by the cooperating 20 foliage plant nursery
operators who made available their production and accounting records on a
confidential basis for analysis and averaging. Assistance and encouragement were
supplied by Extension Ornamental Horticultural Agents Bruce Barmby, Cathy Neal,
Roger Newton, Sylvester Rose, LaRue Robinson, and Jerry Southwell.
Acknowledgement and appreciation of the help received, however, does not alter
the fact that errors in the data or in the interpretation of the information
presented herein are the sole responsibility of the authors.

















ABSTRACT


Average sales, costs and returns information are presented for 20 wholesale
foliage plant nurseries in Central Florida for the tax year of 1984. Average
value of plant sales was $482,530. Cash costs including a return to the opera-
tor averaged $409,716. Non-cash costs and allowances including a 12 percent re-
turn on investment amounted to another $65,851. Deducting the return to opera-
tor and return on investment left total costs of $405,080. After adjustments
for change in plant inventory value and additions for miscellaneous income, net
nursery income averaged $110,756, and return to capital averaged 23.8 percent.
Comparable information is presented also for the average of the seven largest
and six smallest nurseries in the study.

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















ACKNOWLEDGEMENTS

This report was made possible by the cooperating 20 foliage plant nursery
operators who made available their production and accounting records on a
confidential basis for analysis and averaging. Assistance and encouragement were
supplied by Extension Ornamental Horticultural Agents Bruce Barmby, Cathy Neal,
Roger Newton, Sylvester Rose, LaRue Robinson, and Jerry Southwell.
Acknowledgement and appreciation of the help received, however, does not alter
the fact that errors in the data or in the interpretation of the information
presented herein are the sole responsibility of the authors.










TABLE OF CONTENTS

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

INTRODUCTION . . . . . .
PROCEDURE . . . . . .
DEFINITIONS. . . . . . .
DATA AND RESULTS . . . .. .
Size of Business . . . . .
Rates of Production. . . . . .
Labor Efficiency . . . . .
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. .
Balance Sheet. . .
Current Assets . .
Long Term Assets .
Total Assets . .
Liabilities. . .
Net Worth. . .
Total Profitability Model. .
Margin Management. .
Asset Management .
Leverage Management. .
Factors Associated With Leve
Size of Business .
Production Rate. .
Labor Efficiency .
Space Use Efficiency .
Use of Capital . .
Level of Costs . .
Cost Efficiency. .
Growth in the Business .
Range of Figures . .
CONCLUDING COMMENTS. . .


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


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LIST OF TABLES

Table Page
1 Size of business, 20 wholesale foliage plant nurseries in
Central Florida, 1984. . ..... . .. 5

2 Rates of production, 20 wholesale foliage plant nurseries in
Central Florida, 1984. . . . . ... . 6

3 Labor efficiency, 20 wholesale foliage plant nurseries in
Central Florida, 1984. . . . ... .. .. 7

4 The use of space, 20 wholesale foliage plant nurseries in
Central Florida, 1984. . . . . ... . 9

5 Efficiency in the use of capital,
20 wholesale foliage plant nurseries in Central Florida, 1984. 11

6 Dollar costs by expense category,
20 wholesale foliage plant nurseries in Central Florida, 1984. 13

7 Percent of total costs by expense category,
20 wholesale foliage plant nurseries in Central Florida, 1984. 15

8 Costs per square foot of total bed and bench space,
20 wholesale foliage plant nurseries in Central Florida, 1984. 17

9 Costs per square foot of propagating and finishing space,
20 wholesale foliage plant nurseries in Central Florida, 1984. 19

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

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

12 Income summary, 20 wholesale foliage plant nurseries in
Central Florida, 1984. . . . . .. . 25

13 Balance sheet, 20 wholesale foliage plant nurseries in
Central Florida, 1984. . . . . ... .. ... 27

14 Factors associated with level of profit, 20 wholesale
foliage plant nurseries in Central Florida, 1984. . ... 31

15 Range of figures on factors associated with level of profit,
20 wholesale foliage plant nurseries in Central Florida, 1984. 35

LIST OF FIGURES

Figure Page
1 Total profitability model, 20 wholesale foliage plant nurseries in
Central Florida, 1984 . . . . ., .. 29














BUSINESS ANALYSIS OF FOLIAGE PLANT NURSERIES IN CENTRAL FLORIDA, 1984


J. Robert Strain and Alan Hodges


INTRODUCTION


This publication contains information on sales, costs, returns and produc-
tion efficiency for foliage plant nurseries in Central Florida for 1984. Other
publications in this series includes reports on South Florida foliage plant nur-
series, Dade County Florida foliage plant nurseries, and woody container orna-
mental plant nurseries.
Purposes of the nursery business analysis series include:
1) Furnishing nursery operators with various physical and economic meas-
ures 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 20 nursery operators in the form of confidential production and ac-
counting records. Their nurseries are located in the Central Florida counties
of Hillsborough, Pinellas, Lake, Orange, Hardee, Brevard and Seminole. They
participated in the program voluntarily and do not represent a statistically
selected sample. In fact, the nursery operators participating in the Florida
Nursery Business Analysis Program are thought to represent some of the more


J. ROBERT STRAIN is an extension economist and professor, and ALAN HODGES is
a research assistant, both in IFAS Food and Resource Economics Department, Uni-
versity of Florida, Gainesville.


I












efficient foliage plant nurseries in Central Florida, rather than being typical
of the foliage plant nursery industry.
Data were collected for the 1984 tax year. In some cases, data were receiv-
ed for a fiscal year that did not coincide with the 1984 calendar year. Data
for fiscal years ending after July 1, 1983 and up to November 1, 1985 were in-
cluded 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 allowance.
The value of owned capital or investment in the nursery reflects the depre-
ciated book value of buildings, improvements, machinery and equipment. This is
a total value; related debt is not deducted in determining this value of capital
owned. Growing plants also are included as a part of the owned capital invest-
ment, but at a value lower than the regular wholesale price. This is because,
in a normal growing operation, most of the plants in inventory are not of a sal-
able size. Some will barely be started, some ready to sell, and others scat-
tered 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 nursery 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 20 nurseries, for the seven
"largest" nurseries, and for the six "smallest" nurseries. The largest nur-
series had plant sales valued at $600,000 or more. The smallest nurseries had
less than $200,000.











DEFINE N .I


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


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

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

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

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

Annual turnover of capital: the percentage that results from dividing the
value of own 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
year'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 15 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 $482,530 for the 20 nurseries. For
the seven largest nurseries, it was $924,066, or about double the average. The
smallest ones had $113,253, or about one quarter 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 1C) averaged 115,254 square feet for the 20
nurseries. For the seven largest nurseries, it was 168,826 square feet, or 1.5
times the average. The six smallest nurseries had 40,505 square feet, or about
a third of the average.
Capital owned (Table 1P) averaged $419,668 for the 20 nurseries. For the
six largest nurseries, it was $762,379, or 1.8 times the average. The five
smallest nurseries had $130,731, or 35 percent of the average.
Capital managed (Table 1W) averaged $477,138, or 17 percent more than the
capital owned by the nursery operators. This difference was primarily in the
value buildings and land. For the seven largest nurseries, it was $849,062, or
14 percent more than they owned. The six smallest nurseries managed two percent
more than the capital owned, or $132,731. For these groups, the difference was
also in the value of buildings and land rented.








Table 1.--Size of business, 20 wholesalgege plant r ,rse~' es
Florida, 1984.


in Central


Average Average Average
Item Unit all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
The one best measure
A Value of own plants sold(a) $ 482,530 924,066 113,253
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 &
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 Cash & accounts receivable
P Total owned capital

Capital managed(d) in:
Q Growing plants . .
R Buildings, fences, wells
S Machinery & equipment.
T Land . . .
U Supplies . . .
V Cash & accounts receivable
W Total managed capital .


$ 511,470


sq ft 115,254


sq ft 93,184


sq ft 22,070


sq ft
acres


number


157,422
3.6


11.8


163,885
95,470
26,450
33,192
22,623
78,048
419,668


163,885
138,647
28,580
45,355
22,623
78,048
477,138


987,626


168,826


36,332

192,194
4.4


19.1


299,277
177,558
41,907
39,564
44,011
160,062
762,379


299,277
243,063
45,835
56,814
44,011
160,062
849,062


127,354


40,505


36,721


3,785

73,955
1.7


4.7


48,212
38,888
8,399
15,875
9,605
9,752
130,731


48,212
38,888
10,399
15,875
9,605
9,752
132,731


(a) Value of own plants sold--is the value of total plant sales minus the
cost of plants purchased for immediate resale. The cost of plant purchased for
growing-on is not deducted.
(b) Fulltime equivalent employee--is the equivalent of one person paid 2080
hours (40 hours a week for 52 weeks a year including paid vacation time, if any).
(c) Capital owned--is the current value (original cost less depreciation
taken) of capital assets, or current investment in the nursery operation. Re-
lated debt is not deducted in this determination of the value of capital owned.
(d) Capital managed--is the sum of capital owned plus the value of addition-
al capital items used and under the control of the manager (e.g., rented land).










Rates of Production (Table 2)


"Value of own plants sold per square foot of 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 20 nurseries was $4.19. For
the six largest nurseries, it was $5.47, or about 31 percent more than the aver-
age. The five smallest nurseries had 2.80, or two-thirds of the average sales
per square foot of bed and bench space. When sales were adjusted for change in
inventory value (Table 1 item B divided by item C), the relationship remained
practically the same.
Sales per square foot of propagating and finishing space (Table 1A divided
by 1D) 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 $5.18 per square foot for the 20
nurseries. For the seven largest nurseries, it was $6.97, or 35 percent greater
than the average. The six smallest nurseries had $3.08 which was 60 percent of
the average.


Table 2.--Rates of production, 20 wholesale foliage plant
Florida, 1984.


nurseries in Central


Average Average Average
Item Unit all 20 7 large 6 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) $ 4.19 5.47 2.80
Other useful indicators
Value of own plants sold per
sq ft adjusted for inventory
change - (Table 1B/1C) $ 4.44 5.85 3.14

Value of own plants sold per
sq ft of propagating & fin-
ishing space (Table 1A/1D) $ 5.18 6.97 3.08
--- adjusted for inventory
change - (Table 1B/1D) $ 5.49 7.45 3.47

Value of own plants sold per
acre - (Table 1A/1G) $ 133,520 209,436 66,706
--- adjusted for inventory
change - (Table 1B/1G) $ 141,528 223,842 75,012










Labor Efficiency (Table 3)


"Value of own plants sold per employee" (Table 1A divided by 1H) was select-
ed as the one best measure of labor efficiency. This averaged $40,892 per em-
ployee for the 20 nurseries. For the seven largest nurseries, sales averaged
$48,305, or 18 percent more than the average. The six smallest murseries had
$24,251 in sales per employee, or two-thirds the average. Adjusting for change
in inventory value (Table 1B divided by 1H) increased the average for all 20
nurseries to $43,345. For the seven largest nurseries, this increased their
sales per person to $51,627. The smallest nurseries were up to $27,271 per
person.
Total bed and bench space per employee (Table 1C divided by 1H) averaged
9,767 square feet. For the seven largest nurseries, it was 8,825 square feet,
or 19 percent less than the average. The six smallest nurseries had 8,673
square feet per person, or 11 percent below the average.
Propagating and finishing space per person (Table 1D divided by 1H) averaged
7,897 square feet per employee. For the seven largest nurseries it was 12 per-
cent lower at 6,926 square feet. The smallest nurseries had virtually the
same, 7,863 square feet.


Table 3.--Labor efficiency, 20 wholesale foliage plant nurseries in Central
Florida, 1984.

Average Average Average
Item Unit all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per
employee (Table 1A/1H) $ 40,892 48,305 24,251
Other useful indicators
Value of own plants sold per
employee adjusted for change
in inventory (Table 1B/1H) $ 43,345 51,627 27,271

Total bed & bench space per
employee (Table 1C/1H) sq ft 9,767 8,825 8,673

Propagating & finishing space
per employee (Table 1D/1H) sq ft 7,897 6,926 7,863

Total nursery area per
employee (Table 1F/1H) sq ft 13,341 10,047 15,836












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 op-
erators 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 dependability of the comparison.
Annual turnover of plant inventory value in the 20 nurseries averaged 294
percent. This means that annual plant sales amounted to almost three times the
value of plants in inventory. For the seven largest nurseries, turnover was 309
percent. Thus, their annual plant sales were 3.1 times the value of plants in
inventory. The six smallest nurseries had a lower turnover rate. It was 235
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 4.99 percent for the 20
nurseries. For the largest ones, it was 4.16 percent. The smallest nurseries
had 2.73 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.










The 20 nurseries averaged 115,254 square feet of bed and bench space, which
was 73.21 percent of their total nursery area. The six largest nurseries aver-
aged 87.84 percent of their total area in bed and bench space, while the six
smallest nurseries utilized 54.77 percent of their total nursery area as bed and
bench space.
Propagating and finishing area averaged 93,184 square feet for the 20 nur-
series. This was 80.05 percent of the total bed and bench space (Table 1D di-
vided by 1C). For the seven largest nurseries, it was 132,494 square feet, or
142 percent of the average. This represented 78.48 percent of the total bed and
bench space. The six smallest nurseries had 36,721 square feet for propagating
and finishing, which was only 39 percent of the average. However, this space
represented 90.66 percent of their total bed and bench space. Thus, the smallest
nurseries devoted a greater proportion of their growing area to plants for sale.
This is probably natural, since smallest nurseries, especially those just get-
ting 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, 20 wholesale foliage plant nurseries in Central
Florida, 1984.

Average Average Average
Item Unit all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
Intensity of space use
Annual turnover of plant in-
ventory value (Table 1A/11) % 294 309 235
Efficiency of space use
Vacant bed & bench space sq ft 5,756 7,022 1,107
- (divided by Table 1C) % 4.99 4.16 2.73
Other useful indicators
Total nursery area (Table 1F) sq ft 157,422 192,194 73,955
Total bed & bench space sq ft 115,254 168,826 40,505
- - (Table 1C/1F) % 73.21 87.84 54.77

Propagating & finishing bed sq ft 93,184 132,494 36,721
& bench space (Table ID/1C) % 80.85 78.48 90.66

Stock plant bed & bench space sq ft 22,070 36,332 3,785
- - (Table 1E/1C) % 19.15 21.52 9.34












Efficiency in use of capital (Table 5)


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
owned capital value." This is the percentage that results from dividing the
value of own plants sold by the value of capital owned (Table 1A divided by 1P).
Annual turnover averaged 115.0 percent for the 20 nurseries. This means that
sales for the year equaled one and a sixth times the capital invested. For the
seven largest nurseries, it was 121.2, which was a six percent faster turnover
rate than the average. The six smallest nurseries had 88.6, which was only
three quarters of the average turnover rate.
Managed capital turnover averaged 107.2 percent for the 20 nurseries. Thus,
there was enough additional capital being managed to reduce the turnover rate by
eight percent. For the seven largest nurseries, it was 116.4 meaning there was
enough additional capital involved in the operation to reduce the turnover rate
by almost five percent. The six smallest nurseries managed a small amount of
additional capital, reducing turnover by only one percent.
Capital invested per employee (Table IP divided by 1H) averaged $35,565 for
the 20 nurseries. For the seven largest nurseries, it was $39,853, or about 12
percent more than the average. The six smallest nurseries had $27,994 which was
21 percent below the average.
Average capital investment per acre of nursery area (Table 1P divided by 1G)
was $116,252 for the 20 nurseries. For the seven largest nurseries, it was
$172,875, or 49 percent higher than the average. The six smallest nurseries had
$76,901, or two-thirds of the average. Calculations for managed capital showed
a similar relationship, with the largest nurseries managing about 46 percent
more than the average per acre, and the smallest nurseries having about 31 per-
cent less than the average.
Growing plants represented 34.3 percent of the capital managed by the 20
nurseries. For the largest nurseries, it was 35.2 percent. The smallest nur-
series had 36.4 percent of their capital tied up in plants.
Buildings and installations averaged 29.1 percent of the total. Largest
nurseries had about the same at 28.6 percent. Smallest nurseries had 29.3.










Machinery and equipment took between 5.4 and 7.8 percent of the capital. Land
required 9.5 percent of the capital. Largest nurseries used 6.7 percent of
their capital for land. Smallest nurseries used more than the average for land
(12.0 percent). Cash and accounts receivable accounted for 16.4 percent of all
capital managed. Largest nurseries required 18.9 percent of the total. Small-
est nurseries only had 7.3 percent of their capital utilized this way.


Table 5.--Efficiency in use of capital, 20 wholesale foliage
in Central Florida, 1984.


plant nurseries


Average Average Average
Item Unit all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
The one best measure
Annual turnover(e) of owned
Capital value (Table 1A/1P) % 115.0 121.2 86.6
Other useful indicators
Annual turnover(e) of managed
capital value (Table IA/1W) % 107.2 116.4 85.3

Per employee:
Capital owned (Table 1P/1H) $ 35,565 39,853 27,994
Capital managed (Table 1W/1H) $ 40,435 44,384 28,422

Per acre:
Capital owned (Table 1P/1G) $ 116,252 172,875 76,901
Capital managed (Table 1W/1G) $ 132,171 192,531 78,077

Managed capital/employee in:
Plants- - (Table 1Q/1H) $ 13,889 15,644 10,324
Buildings -(Table 1R/IH) $ 11,750 12,706 8,327
Mach & equip- (Table IS/1H) $ 2,422 2,396 2,227
Land- - (Table 1T/1H) $ 3,844 2,970 3,399

Managed capital per acre in:
Plants- - (Table 1Q/1G) $ 45,397 67,863 28,360
Buildings (Table 1R/1G) $ 38,406 55,116 22,875
Mach & equip- (Table IS/1G) $ 7,917 10,393 6,117
Land- - (Table IT/1G) $ 12,564 12,883 9,338

Percent of capital managed in:
Plants- - (Table 1Q/1T) % 34.3 35.2 36.4
Buildings (Table 1R/1T) % 29.1 28.6 29.3
Mach & equip- (Table 1S/1T) % 6.0 5.4 7.8
Land- - (Table 1T/1T) % 9.5 6.7 12.0
Supplies- (Table IU/1T) % 4.7 5.2 7.2
Cash & A/R- (Table 1V/1T) % 16.4 18.9 7.3
Total nursery- (Table 1W/IT) % 100.0 100.0 100.0

(e) Annual turnover of capital value--is the percentage that results from


of capital (Table


dividing the value of own plants sold (Table 1A) by the value
1P or 1W).










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 Central Florida foliage nurseries as an invest-
ment, either as buyers, sellers or lenders.
Salaries and Wages
The salary and wage group includes operator salary or time value. Average
was $157,452. For the largest nurseries, they were $292,833, or 86 percent
greater than the average. The smallest nurseries had $45,149, or 29 percent of
the average.
Production Supplies
Production supplies include the group starting with "plants and seeds"
through "other production supplies." They averaged $185,240 for the 20 nurser-
ies. For the largest nurseries, they were $379,509, or twice the average. The
smallest nurseries had $40,348, or 22 percent of the average.
Other Production Costs
Other production costs include "repairs" and "equipment operating costs."
They averaged $16,019 for the 20 nurseries. For the seven largest nurseries,
they were $21,716, or 1.4 times the average. The smallest nurseries had
$4,050, or a quarter 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 $45,626 for the 20 nurseries. For the
largest nurseries, they were $84,104, or over one and three quarters times the
average. The smallest nurseries had $11,220, or one quarter of the average.
Total Cash Costs
Total cash costs averaged $409,716. Larger nurseries had $778,070, 90 per-
cent above average. Smaller ones had $100,763, or a quarter of the average.
Non-Cash Costs
Non-cash costs include depreciation allowances, decreases in the supply in-









ventory (using supplies purchased during a previous time period), and an inter-
est charge for the use of the capital invested in the nursery. These costs av-
eraged $65,851. For the largest nurseries, they were $105,338, 1.6 times the
average. The smallest ones had $30,766, or 47 percent of the average.
Total All Costs
Total costs averaged $475,567. Larger nurseries averaged $883,407, or 1.86
times the average. Smaller nurseries had $131,529, or 28 percent of average).

Table 6.--Dollar costs by expense category, 20 wholesale foliage plant nurseries
in Central Florida, 1984.

Average Average Average
Item all 20 7 large 6 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 . . .


29,493
127,959

100,238
26,639
19,022
10,789
3,801
5,382
16,326
8,425

8,477
7,542
2,468
10,386
4,579
5,441
3,672
2,211
6,693
10,176
409,716

8,138
16,719
0
40,994
65,851

475,567


48,923
243,910

213,615
49,887
33,361
17,928
6,968
9,304
30,750
17,696
12,814
8,902

5,292
18,850
8,264
8,721
6,790
4,826
15,108
16,163
778,070

10,045
23,015
0
72,278
105,338
883,407


17,588
27,561

15,021
7,699
4,549
2,886
1,122
1,923
4,087
3,061

1,494
2,556


290
2,151
2,701
1,999
1,280
207
340
2,252
100,763


3,090
13,158
0
14,518
30,766

131,529


I










Percent of Total Cost by Expense Cdtegory (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 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 33.11 percent of all costs
for the 20 nurseries. For the seven largest ones, they were about the same,
33.15 percent. The six smallest nurseries had a slightly higher figure, 34.32
percent.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 40.08 percent for the 20 nurseries. For the largest nurseries, they
were 42.96 percent, or almost 3 percent above average. The smallest nurseries
averaged 30.67 percent of total costs, or 9.41 percent less than average.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
3.37 percent for the 20 nurseries. For the seven largest ones, they were 2.46
percent, or about one percent under the average. The six smallest nurseries had
3.08 percent, or 0.29 percent below the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 9.58 percent of
all costs for the 20 nurseries. For the seven largest ones, they were 9.52
percent. The smallest nurseries had 8.53 percent, or one percent under the
average.
Total Cash Costs
Total cash costs represented 86.15 percent of all costs and allowances for
the 20 nurseries. For the largest ones, it was 88.08 percent, or two percent
more than the average. The smallest ones had 76.61 percent, or ten percent
less than the average.
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 13.85 percent of total costs
for the 20 nurseries. For the seven largest ones, they averaged 11.92, or 1.9
percent less than the average. Hence, the largest nurseries had a higher per-
cent of their total operating expense in the form of cash costs. The five smal-
lest nurseries had 23.39 percent of their total as non-cash costs. This was
9.5 percent more than the average, and more than twice the rate of the largest
nurseries. The largest differences were in the percentages of total costs rep-
resented by depreciation on buildings and interest on capital.

Table 7.--Percent of total costs by expense category, 20 wholesale foliage
plant nurseries in Central Florida, 1984.

Average Average Average
Item all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
- Prcent - - -


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 . .


6.20
26.91


21.08
5.60
4.00
2.27
0.80
1.13
3.43
1.77

1.78
1.59

0.52
2.18
0.96
1.14
0.77
0.46
1.41
2.14
86.15


Non-Cash Costs
Depreciation: mach & equip. ... 1.71
Depreciation: bldgs, fences, wells. 3.52
Inventory decrease in supplies. .. 0.00
Interest on capital, 12% .. 8.62
Total non-cash costs . 13.85


5.54 13.37
27.61 20.95


24.18
5.65
3.78
2.03
0.79
1.05
3.48
2.00

1.45
1.01

0.60
2.13
0.94
0.99
0.77
0.55
1.71
1.83
88.08


1.14
2.61
0.00
8.18
11.92


11.42
5.85
3.46
2.19
0.85
1.46
3.11
2.33

1.14
1.94


0.22
1.64
2.05
1.52
0.97
0.16
0.26
1.71
76.61


2.35
10.00
0.00
11.04
23.39


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 136.6 cents for the 20 nurseries. For the largest ones,
they were 173.5 cents, or about 37 cents more than the average. The smallest
nurseries had 111.4 cents, or 25 cents below the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 165.5 cents. For the seven largest nurseries, they were 224.8 cents,
or 59 cents more than the average. The smallest nurseries had 99.7 cents, or
66 cents under the average.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
13.9 cents in the 20 nurseries. For the seven largest ones, they were 12.9
cents, or a cent above average. The smallest nurseries had 10.0 cents, or
almost four cents below the average.
Administrative and Overhead
These costs ("travel" through "other cash expenses") averaged 39.5 cents per
square foot. For the seven largest nurseries, they were 49.9 cents, more than
ten cents greater. The smallest ones had 27.7 cents, 12 cents below the
average.
Total Cash Costs
Total out-of-pocket costs per square foot of total bed and bench space aver-
aged 355.5 cents ($3.56). For the seven largest nurseries, they were 460.9
cents, or $1.05 above the average. The smallest ones had 248.8 cents, or $1.07
below the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") amounted to
57.1 cents in the 20 nurseries. For the largest ones, they were 62.4 cents, or











fhe smallest nurseries had 76.0 cents, or


19 cents greater than the average.
Total All Costs
The total for all costs and allowances averaged 412.6 cents ($4.13) in the
20 nurseries. For the seven largest ones, they were 523.3 cents, or $1.10 above
the average. The smallest nurseries had 324.7 cents, or 88 cents under the
average cost per square foot of total bed and bench space.


Table 8.--Costs per square foot of total bed & bench space, 20 wholesale
foliage plant nurseries in Central Florida, 1984.

Average Average Average
Item all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
S - 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. . .

Total All Costs. . . .


25.6
111.0

87.0
23.1
16.5
9.4
3.3
4.7
14.2
7.3


29.0
144.5

126.5
29.6
19.8
10.6
4.1
5.5
18.2
10.5


7.6
5.3


9.0
4.0
4.7
3.2
1.9
5.8
8.8
355.5


7.1
14.5
0.0
35.6
57.1


3.
11.2
4.9
5.2
4.0
2.9
9.0
9.6
460.9


6.0
13.6
0.0
42.8
62.4


43.4
68.0

37.1
19.0
11.2
7.1
2.8
4.8
10.1
7.6


3.7
6.3


0.7
5.3
6.7
4.9
3.2
0.5
0.8
5.6
248.8


32.5
0.0
35.8
76.0


412.6 523.3


five cents higher than the average.


324.7










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 169.0
cents ($1.69) in the 20 nurseries. For the seven largest ones, they averaged
221.0 cents, or about 52,cents above the average. The smallest nurseries had
123.0 cents, or 46 cents less than the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 204.6 cents ($2.05) per square foot. For the largest nurseries, they
were 286.5 cents, or 82 cents above the average. The smallest ones had 109.9
cents, or 95 cents below the average.
Other Production Costs
Other production costs ("repairs" and "equipment operation") averaged 17.2
cents. For the largest nurseries, they were 16.4 cents. The five smallest nur-
series had 11.1 cents, or 6.4 cents below the average.
Administrative and Overhead
These costs ("travel" through "other cash expenses") averaged 49.0 cents.
For the largest nurseries, they were 63.3 cents, or 14.3 cents higher. The five
smallest nurseries had much lower overhead costs, 30.6 cents, or 33 cents below
the average.
Total Cash Costs
Total cash costs in the 20 nurseries averaged 439.7 cents ($4.40) per square
foot of propagating and finishing space. For the seven largest nurseries, they
were 587.2 cents, up by almost a dollar and a half. The six smallest nurseries
had 274.4 cents, or 62 percent of the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") averaged 70.7
cents for the 20 nurseries. The largest nurseries had 79.5 cents, or about nine








19


cents above the average, and smallest nurseries had 83.8 cents, or 14 cents
above the average.
Total All Costs
Total costs per squcie foot of propagating and finishing space averaged
$5.10. For the largest nurseries, they were $6.67, or $1.57 above the average.
The smallest ones had $3.58, or S1.52 below the average.


Table 9.--Costs per square foot of propagating and finishing space,
20 Wholesale nurseries in Central Florida, 1984.


Item


Average
all 20
nurseries


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

Plants & seeds to qr'w o .
Pots & growing containers
Fuel for production he;it. .
Peat, soil, shavings, ptc .
Fertilizer F lime .
Pesticides & other ch,-.calds.
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 . ... .


31 ./
137.3

107
23.
20. '-
1 1 .
4.
5.8
17.5
9. 0


9.1


2. 7
11.?
4.9
5.8
3.9
2. 4
7.2
10.9
439.7


S 8.7


17.9
0.0
44.0
70.7

510.4


Average
7 large
nurseries


- .- - Cents - - -


36.9
184.1

161.2
37.7
25.2
13.5
5.3
7.0
23.2
1 3.4


4. 0
14.2
6.2
6.6
5.1
3.6
11.4
12.2
587.3


7.6
17.4
0.0
54.6
79-5

666.8


Average
6 small
nurseries


Your
nursery


47.9
75.1

40.9
21.0
12.4
7.9
3.1
5.2
11.1
8.3


4.1
7.0


0.8
5.9
7.4
5.4
3.5
0.6
0.9
6.1
274.4


8.4
35.8
0.0
39.5
83.8


358.2


~-----~-~










Costs Per Dollar ot Sales Adjusted for inventory Change (Tc Tahi 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 fiq-
ures were developed by dividing the dollar costs shown in Table 6 by the anrro-
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 30.8 cents per dollar or
sales after adjusting for changes in inventory. For the seven largest nur-
series, they were 29.7 cents, or about one cent below the average. The smallest
nurseries had 35.4 cents, or five cents above the average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies"')
averaged 37.2 cents. For the seven largest nurseries, they were 38.4 cents, or
about one cent above the average. The smallest nurseries had five and a half
cents below the average, or 31.7 cents.
Other Production Supplies
Other production costs ("repairs & maintenance" and 'equipment operating
costs") averaged 3.2 cents per dollar of adjusted sales. For the largest nur-
series, they were 0.9 cent less, or 2.2 cents. The smallest had 3.2 cents.
Administrative and Overhead
These costs ("travel" through "other cash expense") amounted to 8.9 cents
per dollar of adjusted sales. For the seven largest nurseries, they were 8.5
cents, or 0.4 cents below the average. The smallest nurseries had almost the
same as the average, or 8.9 cents.
Total Cash Costs
Total cash costs per dollar of adjusted sales averaged 80.1 cents. For the
largest nurseries, they were 1.3 cents less, or 78.8 cents. The smallest nur-
series had 79.1 cents, one cent above the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") averaged 12.9
cents. For the seven largest nurseries, they were 10.7 cents, or 1.2 cents


I











below average. The smallest nurseries had much higher costs, 24.2 cents, or
11.3 cents over average.
Total All Costs
Total costs per dollar of adjusted sales averaged 93.0 cents. For the larg-
est nurseries, they were 89.5 cents. The smallest ones had 103.3 cents, or a
deficit of over 3 cents per dollar of sales adjusted for plant inventory change.


Table 10.--Costs per dollar of sales adjusted for change in plant inventory,
20 foliage plant nurseries in Central Florida, 1984.

Average Average Average
Item all 20 7 large 6 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 . .

Total All Costs . . .


5.8
25.0


19.6
5.2
3.7
2.1
0.7
1.0
3.2
1.7

1.7
1.5

0.5
2.0
0.9
1.1
0.7
0.4
1.3
2.0
80.1t


. 1.6


3.3
0.0
8.0
12.9


5.0
24.7

21.6
5.1
3.4
1.8
0.7
0.9
3.1
1.8


13.8
21.6

11.8
6.0
3.6
2.3
0.9
1.5
3.2
2.4


1.2
2.0


0.5
1.9
0.8
0.9
0.7
0.5
1.5
1.6



1.0
2.3
0.0
7.3
10.7


0.2
1.7
2.1
1.6
1.0
0.2
0.3
1.8
79.1


2.4
10.3
0.0
11.4
24.2


93.0 89.5


%1 i.1 I I I.J


103.3











Costs Per Dollar of Sdi.:. (Tablc 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 32.6 cents per dollar of
cash received. For the seven largest nurseries, they were 31.7 cents, or 0.9
cents less than the average. The smallest nurseries had 39.8 cents, or 7.2
cents over average.
Production Supplies
Production supplies ("plants and seeds" through "other production supplies")
averaged 39.5 cents per dollar of cash sales. For the six largest nurseries,
they were 41.1 cents, or 1.6 cents greater than average. The smallest nur-
series had 35.6 cents, or almost four cents below average.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") averaged
3.4 cents per dollar of cash received. For the seven largest nurseries, they
were 2.4 cents, or one cent lower. The smallest nurseries had 3.6 cents.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 9.5 cents per
dollar of sales. For the seven largest nurseries, they were 9.0 cents, or 0.5
cent higher. The smallest nurseries had 9.9 cents, or 0.5 cents above average.
Total Cash Costs
Total cash costs averaged 84.9 cents per dollar of cash received for all 20
nurseries. This means that they were able to meet current bills with slightly
more than 15 cents to spare per dollar of sales. For the largest nurseries,
they were 84.2 cents, or 0.7 cents lower than average. The smallest ones had
89.0 cents, about 4 cents over the average.
Non-Cash Costs
These costs ("depreciation" through "interest on capital") averaged 13.7
cents per dollar of sales. For the seven largest nurseries, they were 11.4
cents. The six smallest nurseries had much higher non-cash costs, 27.1 cents
per dollar of sales.












Total All Costs
Total all costs averaged 98.6 cents per dollar of cash sales. Largest nur-
series averaged 95.6 cents and smallest nurseries $1.16. Hence, all groups took
in enough cash to pay the cash costs for the year. However, the smallest nur-
series did not average enough sales to cover cash costs plus the non-cash cost
allowances accumulated during the year, lacking 16 cents per dollar of sales.




Table 11.--Costs per dollar of sales (no adjustment for change in plant inven-
tory), 20 foliage plant nurseries in Central Florida, 1984.

Average Average Average
Item all 20 7 large 6 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. . .


6.1
26.5


20.8
5.5
3.9
2.2
0.8
1.1
3.4
1.8

1.8
1.6

0.5
2.2
1.0
1.1
0.8
0.5
1.4
2.1
84.9


. 1.7


3.5
0.0
8.5
13.7


5.3
26.4


23.1
5.4
3.6
1.9
0.8
1.0
3.3
1.9

1.4
1.0

0.6
2.0
0.9
0.9
0.7
0.5
1.6
1.8
84.2


1.1
2.5
0.0
7.8
11.4


Total All Costs . . .


15.5
24.3

13.3
6.8
4.0
2.6
1.0
1.7
3.6
2.7


1.3
2.3


0.3
1.9
2.4
1.8
1.1
0.2
0.3
2.0
89.0


2.7
11.6
0.0
12.8
27.1

116.1


98.6 95.6











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, ad it is for a return to capital that nur-
sery 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 20 nurseries averaged $515,836. Largest nurseries aver-
aged almost double that amount, or $998,373. Smallest nurseries had 25 percent
of the average, or $127,865.
Net Nursery Income
Net nursery income is the total return for the year for the time and manage-
rial skills of the operator plus the capital invested in the operation. To ob-
tain it, all cash costs from Table 6 except the operator's salary, and all non-
cash allowances 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 (including borrowed funds) supplied by the owner-operator.
For the 20 nurseries, it averaged $110,756. For the seven largest nurser-
ies, it was $236,166, or over twice the average. Smallest nurseries had
$28,441, or 26 percent of the average.
Return to Capital
From net nursery income is subtracted the salary or time value of the owner-
operator to obtain that part of net nursery income attributable to capital.
This is the earnings of the money invested in the nursery. Dividing it by the
value of capital invested gives the rate of return earned by the investment.
When the owner and operator are the same person, dividing net nursery income
between the operator and return to capital may not seem important. But when the
owners are outside investors, then accurate division is important. In either
case, rate of return is a common indicator for evaluating an investment or for
selecting between alternative investment alternatives.











Return to capital for the 20 nurseries amounted to $81,263, or a return of
19.4 percent. For the seven largest nurseries, it was $187,243 for 24.7 percent


or a 7.3 greater than the average return on the capital investment.


The smal-


lest nurseries averaged $10,853 for a 8.3 percent return on the capital invest-
ed. This was 14.8 percent less than the average.





Table 12.--Income summary, 20 wholesale foliage plant nurseries in Central
Florida, 1984.

Average Average Average
Item Unit all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
- - Dollars - - -
Value of own plants sold - $ 482,530 924,066 113,253
Plant inventory change -- -- $ 28,940 63,560 14,101
Supply inventory change- - $ 1,158 3,381 197
Miscellaneous cash income-- $ 3,208 7,366 314
Total gain(f) ---------- $ 515,836 998,373 127,865

Deduct cash costs less op salary $( 380,223) ( 729,147) ( 83,185)( )
Deduct non-cash costs less int $( 24,857) ( 33,060) ( 16,248)( )
Total deductions- -- --- $( 405,080) ( 762,207) ( 99,423)( )

Net nursery income(g)- - $ 110,756 236,166 28,441
Deduct op salary or time value $( 29,493) ( 48,923) ( 17,588)()

Return to capital(h) -- --- $ 81,263 187,243 10,853
Rate of return to capital(i) % 19.4 24.7 8.3

(f) Total gain--the sum of plant sales, change in plant and supply inventor-
ies, 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.











Balance Sheet (Table 13)


This section is a new addition to the Florida Nursery Business Analysis se-
ries. It was made possible by the collection of additional fiscal information
this year. These balance sheet figures represent the mid-year financial situa-
tion of the firms. They were derived as an average of year-beginning and year-
end figures.
Current Assets
Current assets consist of cash, accounts receivable, and inventory values.
They are cash, or items deemed convertible to cash within a year's time. Cash
on hand includes funds in checking accounts, savings accounts, and money market
funds. Average cash on hand was $27,145. Largest nurseries had nearly twice
this amount ($53,624). Smallest ones had 18% of the average ($4,833). Accounts
receivable are the uncollected payments for plants sold. Generally, this figure
should be minimized. Uncollected funds pay no bills and earn no interest. They
averaged $50,903. Largest nurseries had over twice this amount, or $106,438.
The smallest nurseries had $4,919, or about 10% of the average. Inventory
values are the investments in growing plants and supplies presented previously
in Table 1. They averaged $186,508. Largest nurseries averaged 80 percent more
($339,288). Smallest had 30 percent of the average ($57,817). Total current
assets averaged $264,556. For largest nurseries, they were $499,350, or 1.9
times the average. Smallest averaged $67,569 (26% of average).
Long Term Assets
Long term assets are investments in buildings, machinery and land that nor-
mally would not be converted to cash within a year. Current values of invest-
ments are the original cost less accumulated depreciation. Comparing original
cost with the value remaining after subtracting accumulated depreciation pro-
vides an idea of the degree to which capital assets have been depleated. Origi-
nal investments averaged $282,128. Subtracting accumulated depreciation of
$127,016 leaves a current value of $155,112 (55.5 percent of original cost).
Largest nursery original cost was $391,752. Subtracting accumulated deprecia-
tion of $132,723 gives a remaining value of $259,029 (67 percent of original
cost). Smallest nursery original investment was almost half the average, or
$133,132. Subtracting accumulated depreciation of $69,970 makes the current
value $63,162 (47 percent of the original cost).











Total Assets
Total assets averaged $419,668. Largest nurseries had 1.8 times this amount
($758,379). Smallest nurseries had 30 percent of the average ($130,731).
Liabilities
Liabilities may be "current" (payable during the current year) or "long
term" (payable at some time after the current year). Current liabilities aver-
aged $33,035. Largest nurseries had 2.27 times this amount ($74,858). Smallest
ones had 14 percent of average ($4,469). Long term liabilities may be notes or
mortgages. They averaged $118,344. Largest nurseries had 1.4 times this amount
($165,621). Smallest ones had 60 percent of the industry average ($70,042).
Total Liabilities represent that part of the nursery that belongs to someone


Table 13.--Balance Sheet, 20 wholesale foliage
Central Florida, 1984


plant nurseries in


Average Average Average
Item all 20 7 large 6 small Your
nurseries nurseries nurseries nursery
- - Dollars - - -
Assets

Current Assets
Cash on hand ......... 27,145 53,624 4,833
Accounts receivable. ....... 50,903 106,438 4,919
Inventories: Plants ....... 163,885 299,277 48,212
Supplies ... 22,623 40,011 9,605
Total Current Assets ....... 264,556 499,350 67,569__

Long Term Assets
Machinery & equipment ...... 68,000 76,247 24,082
Buildings & fixtures ... .. .. 180,936 275,941 93,175
Land . . .. . 33,192 39,564 15,875
Sub-total (original cost). 282,128 391,752 133,132
Less accumulated depreciation. ( 127,016) ( 132,723) ( 69,970)()
Total Long Term Assets. ...... 155,112 259,029 63,162

Total Assets. ....... ... 419,668 758,379 130,731

Liabilities and Net worth

Liabilities
Current liabilities. ....... 33,035 74,858 4,469
Long-term liabilities ... 118,344 165,621 70,042
Total liabilities . . 151,379 240,479 74,511

Net Worth ...... . 268,289 517,900 56,220

Total Liabilities & Net Worth .. 419,668 758,379 130,731











else. They averaged $151,379, or 37 percent of the assets. Largest nurseries
had 1.6 times this amount, or $240,479 (33 percent of the assets). Smallest
ones had half the industry average, or $74,511 (61 percent of the assets).
Net worth
Net worth is the difference between "total assets" and "total liabilities".
This is what the owner owns. The average net worth of all 20 nurseries was
$268,289 (64 percent of the assets). Largest nurseries had $517,900 (68 per-
cent). Smallest nurseries averaged $56,220 (43 percent of the assets).


Total Profitability Model


The Total Profitability Model combines operating statement and balance sheet
figures in three sections: margin management, asset management and leverage man-
agement. Together, they indicate the firm's return on net worth.
Margin Management
Figures for this section come from Table 12. From nursery total gain
($515,836) are subtracted total deductions ($405,080) plus operator's salary
($29,493) to give return to capital ($81,263). This divided by total gain
($515,836) yields an average net profit margin of 15.75 percent. Largest nur-
series averaged a net profit margin of 18.75 percent. Smallest nurseries aver-
aged 8.49 percent.
Asset Management
Figures for this section come from the asset portion of Table 13. Current
assets ($264,556) plus long term assets ($155,112) make total assets of
$419,668. This divided into sales ($515,836) gives an asset turnover figure of
1.23. Asset turnover times net profit marlin (1l.75 percent) result in an aver-
age return to capital of 19.36 percent. Largest nurseries averaged 24.69 per-
cent return to capital. Smallest os averaged 8.30.
Leverage Management
Figures for this section come Ir 1ho liabilities -nd net worth portion of
Table 13. Current liabilities ($33,L 3S) plus lonq term liabilities ($118,344)
gives average total liabilities of ,51~ 79. This subtracted from total assets
($419,668) yields average net worth of $268,289. Total liabilities and net
worth divided by net worth gives a leverage factor of 1.56. Leverage times re-
turn to capital (19.36 percent) gives a return on net worth of 30.29 percent.
Largest nurseris had 36.15 percent. Smallest nureries averaged 19.30 percent.















MARGIN MANAGEMENT


NET PROFIT
MARGIN


LONG TERM ASSETS


LEVERAGE


Figure 1.--Total profitability model, 20 wholesale foliage plant nurseries
in Central Florida, 1984


RETURN ON












Factors Asociated With Levei oi Proi : (fable 14)


In this section,information presented earlier is re-grouped to concentrate
attention on factors that are generally deemed related to level of profit in a
foliage nursery. The factors are presented in the same sequence that they ap-
peared before. But here, the average for all 20 nurseries is compared with the
average for the seven most profitable and the six 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 20 nurseries was $110,756. The most profitable
third of the nurseries averaged double this amount, or $229,464. The least
profitable third averaged $2,597. 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 20 nurseries averaged $482,530. The most profitable third
had $700,702 in sales, or 45 percent more. The least profitable group averaged
$192,050, or about 40 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 tolal 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 20 nurseries was $4.19 per square foot. The most
profitable third had 2.6 percent less, or $4.08, and the least profitable third
had $5.32, or 27 percent more than the average.
These figures show that higher sales per square foot of bed and bench space











in a nursery do not necessarily result in higher profits. However, lower sales
per square foot may indicate 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, differ-
ent marketing programs can alter the returns received for the same crop.


Table 14.--Factors associated with level of profit, 20 wholesale foliage plant
nurseries in Central Florida, 1984.

Average Average 7 Average 6
Item Unit all 20 most profit least profit Your
nurseries nurseries nurseries nursery
Level of profit
Net nursery income (Table 12) $ 110,756 229,464 2,597
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $ 482,530 700,702 192,050

Production rate (Table 2)
Sales/sq ft of total
bed and bench space - $ 4.19 4.08 5.32

Labor efficiency (Table 3)
Own plant sales/employee $ 40,892 39,365 30,244

Space use intensity (Table 4)
Annual turnover of plant
inventory value - / 294 261 289

Use of capital (Table 5)
Annual turnover of owned
capital value - 115 129 118

Level of costs (Table 6)
Cost/sq ft of total bed space- $ 4.13 3.81 6.34

Cost efficiency (Table 7)
Cost/$ sales adjusted for
change in inventory value $ .93 .85 1.18

Growth in the business
Increase in sales and plant
inventory over last year $ 72,794 115,778 3,310











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." Average for all 20 nurser-
ies was $40,892 per person. Sales were 3.7 percent lower than average at
$39,365 for the most profitable third, and around 74 percent of the average at
$30,244 for the least profitable third of the nurseries. Higher sales per em-
ployee viewed alone at this point in time might seem to indicate true efficien-
cy. On the other hand, if viewed together with other indicators, it might in-
stead show less than optimum number of employees for volume of plants being
handled. This could result in tardy or untimely plant care, hence, slower
growth and lower quality plus a failure to restock empty space promptly. In
this case, other indicators such as production rate, space use intensity, capi-
tal turnover, and costs per square foot would not support the labor efficiency
indicator.
Lower sales per employee can result during periods of rapid expansion when
extra help is needed to care for largest numbers of plants before they begin
reaching salable size. Or it can also be the result of difficult economic times
when sales are slow, but plant care must go on. Differences between nurseries
can be the result of differences in investment in labor saving capital items,
the result of any or all of the factors noted above that lower production rate,
or the result of poor management practices in the planning and utilization of
labor.
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 294
percent, meaning that the value of own plants sold was 2.94 times the average
investment in plant inventory. For the most profitable third, it was 261 per-
cent. For the least profitable third, it was 289 percent. Thus, neither is
this measure reflected in the averages of the most profitable and least profit-
able nurseries.
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 management 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 re-
duce sales volume for a given nursery as mentioned earlier. Either over or un-
der valuing inventory can also change the intensity of use figure. However,
variations in the indicator for this reason are ficticious, 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
general, larger percentage turnover numbers are desirable, for they indicate
greater sales per dollar of investment in the nursery.
Annual turnover of owned capital averaged 115 percent, meaning that the
value of own plants sold during the year amounted to one and one sixth times the
capital invested. For the most profitable third, it was 109 percent. The rate
for the least profitable third was considerably lower than the average at 93
percent.
Problems that lower turnover rate include any of the items already mentioned
that lower production rate hence sales volume for a given nursery investment.
Low capital turnover is particularly common in nurseries just getting started,
or in nurseries that are expanding rapidly. Excessive investments in land,
labor saving machinery and equipment, or expensive (though maybe unnecessary)
niceties will also tend to lower captial turnover rate.
Level of Costs
The indicator of level of costs selected was "Costs per square foot of 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 $4.13, or six cents less than
sales per square foot before adjusting changes in plant inventory value. For the
most profitable third, costs were $3.81 per square foot or 32 cents less than
the average and 27 cents less than sales per square foot. The least profitable
third averaged $6.34 cents, which was $1.02 per square foot more than sales.


I













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
order to satisfy the requirements of a premium market.
Costs Efficiency
The indicator of cost efficiency selected was "Cost oer 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.
The average cost per dollar of sales adjusted for change in inventory for
the 20 nurseries was 93 cents. The similar figures for the most profitable and
least profitable third of nurseries was 85 cents and $1.18. Thus, the least
profitable third of nurseries had a deficit in meeting all costs of 18 cents per
dollar of sales adjusted for change in plant inventory.
Growth in the Business
The indicator used for measuring growth in the business is the sum of the
increase in plant sales and the increase in plant inventory value over the last
year. In general, a steady growth in the business is desirable.
On the average, growth was valued $72,794. This was about 15.1 percent of
the annual sales volume of $482,530. The most profitable third increased
$115,778 or almost 16.5 percent of annual sales. The least profitable third of
the nurseries increased $3,310, or about 1.7 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 contri-
butes to the profitability of an operation. By way of contrast, too rapid of an
expansion program can result in excessive increases in costs and strong needs
for cash before the new plants have reached salable size. The growth, though
desirable in an economic sense, needs to be carefully planned and executed.


=Md











Range of Figures (Table 15)


In this section, the average for all 20 nurseries is repeated for ease of
comparison. The remainder of the table differs from the previous section in
that the three best and three worst numbers for each factor were averaged to
provide the range of high-low figures shown. In the previous section, figures
for all factors were for the same groups of high profit and low profit nurser-
ies. This section shows the average for the best three and worst three numbers
regardless of the nursery or profit level to which they belong.
As can be seen in Table 15, quite a range of figures was found for most of
the factors. Nursery operators analyzing their own operation should be suspi-

Table 15.--Range of figures on factors associated with level of profit,
wholesale foliage plant nurseries in Central Florida, 1984

Average 3 best 3 worst
Item Unit all 20 factor factor Your
nurseries average average nursery
Level of profit
Net nursery income (Table 12) $ 110,756 365,476 17,081
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $ 482,530 1,273,531 80,060

Production rate (Table 2)
Sales/sq ft of total - $ 4.19 11.09 1.58

Labor efficiency (Table 3)
Own plant sale/employee- $ 40,892 82,506 17,405

Space use intensity (Table 4)
Annual turnover of plant % 294 3,053 126

Use of capital (Table 5)
Annual turnover of owned cap % 115 208 49

Level of costs (Table 8)
Cost/sq ft of total bed space- $ 4.13 1.63 10.46

Cost efficiency (Table 10)
Cost/$ sales adjusted for
change in inventory value $ .93 .75 1.22

Growth in the business
Increase in sales & plant
inventory over last year- $ 72,794 122,232 -38,723












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


Nurserymen who are interested in seeing how they compare with those partici-
pating 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 business side
of operating a foliage nursery. It should improve management decisions concern-
ing things that affect the profitability of the nursery operation.
Nurserymen who find this kind of information to be useful, but have diffi-
culty finding the time or energy to engage in the tedium of doing their own cal-
culation may wish to consider becoming a participant in the program. If you
would like to do so, contact your ornamental agent in your nearby county Exten-
sion office, or contact the authors in Gainesville.