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ABSTRACT

Average sales, costs, returns, and efficiency measures are presented for
14 wholesale container ornamental plant nurseries in Florida for the tax year
of 1980. Average value of plant sales was $379,157. Cash costs accounted for
$355,037. Non-cash allowances including a 15 percent return on investment a-
mounted to another $90,140. Total costs, then, were $445,177. After adjust-
ments for changes in Inventory values and additions for miscellaneous income,
net nursery income was $129,247, and return to capital averaged $91,759 for a
19.5 percent return on Investment. Comparable information is presented for the
average of the eight larger and the six smaller container nurseries, also.
Key words: container nursery business analysis, income, costs, Investment,
efficiency measures, Florida.

ACKNOWLEDGEMENTS

This report was made possible by the 14 cooperating container nurserymen
who made available their production and accounting records on a confidential
basis for analysis and averaging. In addition, assistance and encouragement
were supplied by Extension Ornamental Horticultural Agents Nancy Doubrava, Lor-
etta Hodyss, DeArmand Hull, Charles Lowery, Roger Newton, and Victor Yingst.
Expressing appreciation for the help received, however, does not alter the fact
that errors in the data or In the Interpretation of the information presented
herin are the sole responsibility of the author.

ABSTRACT

Average sales, costs, returns, and efficiency measures are presented for
14 wholesale container ornamental plant nurseries in Florida for the tax year
of 1980. Average value of plant sales was $379,157. Cash costs accounted for
$355,037. Non-cash allowances including a 15 percent return on investment a-
mounted to another $90,140. Total costs, then, were $445,177. After adjust-
ments for changes in Inventory values and additions for miscellaneous income,
net nursery income was $129,247, and return to capital averaged $91,759 for a
19.5 percent return on Investment. Comparable information is presented for the
average of the eight larger and the six smaller container nurseries, also.
Key words: container nursery business analysis, income, costs, Investment,
efficiency measures, Florida.

ACKNOWLEDGEMENTS

This report was made possible by the 14 cooperating container nurserymen
who made available their production and accounting records on a confidential
basis for analysis and averaging. In addition, assistance and encouragement
were supplied by Extension Ornamental Horticultural Agents Nancy Doubrava, Lor-
etta Hodyss, DeArmand Hull, Charles Lowery, Roger Newton, and Victor Yingst.
Expressing appreciation for the help received, however, does not alter the fact
that errors in the data or In the Interpretation of the information presented
herin are the sole responsibility of the author.

ABSTRACT . . .

ACKNOWLEDGEMENTS . .

LIST OF TABLES . .

INTRODUCTION . .

PROCEDURE . .

DEFINITIONS . .

DATA AND RESULTS .

Size of Business

Rates of Productior

Labor Efficiency

Capital Efficiency

* .

* *

* *

* .

* U

* C

Dollar Costs by Expense Ca

Percent of Total Costs by

.tegory .......
Expense Categoryz
Expese Categoryz
* U C S C

* S S S *

Costs Per Square Foot of Production Areaz

Costs Per Dollar of Sales Adjusted for Chan

Costs Per Dollar of Salesz. *

Income Summary . .

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

Factors Associated With Level of Profit .

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

Range of Figures . .

CONCLUDING COMMENTS . . . .

* 0

3e In

* .

* 4

* 0 4
* .
* C 4

* S 4

* 0 4
* U 4
* 5 4
* 0 4
* S 1
* S 4
* 0 4

* S 4

* 0 1
.

.

.

.

* I

Plant

. 4
. .

. .

. l

. l

. .

. .

. .
. .

. .

ZThese 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:

TABLE OF CONTENTS

* .

* .

* C

Page

I

i

ili

* .

LIST OF TABLES
Table Page
1 Size of business, 14 wholesale container ornamental plant nurseries
in Florida, 1980 . . . . . 5
2 Rates of production, 14 wholesale container ornamental plant nurs-
eries in Florida, 1980 . . . . . 6
3 Labor efficiency, 14 wholesale container ornamental plant nurseries
in Florida, 1980 .. . . . . . 7
4 Efficiency in use of capital, 14 wholesale container ornamental
plant nurseries in Florida, 1980 . . .. .. 9
5 Dollar costs by expense category, 14 wholesale container ornamental
plant nurseries in Florida, 1980 . . ... . 11
6 Percent of total costs by expense category, 14 wholesale container
ornamental plant nurseries in Florida, 1980 ... . .. 13
7 Costs per square foot of production area, 14 wholesale container
ornamental plant nurseries in Florida, 1980 . . 15
8 Costs per dollar of sales adjusted for change in plant inventory,
14 wholesale container ornamental plant nurseries in Florida, 1980 17
9 Costs per dollar of sales (no adjustment for plant inventory change)
14 wholesale container ornamental plant nurseries in Florida, 198Q 19
10 Income summary, 14 wholesale container ornamental plant nurseries
in Florida, 1980 . . . ... . 20
11 Factors associated with level of profit, 14 wholesale container
ornamental plant nurseries in Florida, 1980 . .. . 23
12 Range of figures associated with level of profit, 14 wholesale con-
tainer ornamental plant nurseries in Florida, 1980 *. .* 25

BUSINESS ANALYSIS OF CONTAINER NURSERIES IN FLORIDA, 1980

J. Robert Strain

INTRODUCTION

This publication contains Information on sales, costs, returns, and pro-
duction efficiency for wholesale container ornamental plant nurseries in Flori-
da for 1980. A container ornamental plant nursery is defined as one producing
primarily woody landscape plants in containers. Other publications In this
series include reports on Central Florida foliage plant nurseries, South Flori-
da foliage plant nurseries, and potted flowering plant nurseries.
Purposes of the nursery business analysis series include:
1) Furnishing nurserymen with various physical and economic measures that
may be used in evaluating the efficiency of individual nurseries;
2) Supplying cooperating nurserymen with data so that they may make more
Informed management decisions;
3) Providing Individuals considering entering the wholesale plant produc-
tion business with an estimate of the input requirements and the revenue po-
tential; and
4) Providing Florida Extension personnel with data for conducting educa-
tional programs with nurserymen.

PROCEDURE

The information and averages presented In this report are based on data
supplied by 14 nurserymen in the form of confidential production and accounting
records. The nurserymen participated In the program voluntarily, and do not
represent a statistically selected sample. In fact, nurserymen participating
In the Florida Nursery Analysis Program are thought to represent some of the

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

more efficient container ornamental plant nurseries in the state, rather than
being typical of the container nursery industry.
Data were collected for the 1980 tax year. In some cases, data were re-
ceived for a fiscal year which did not coincide with the 1980 calendar year.
Data for fiscal years ending after July 1, 1979 and before July 1, 1981 were
included with 1980 calendar year data.
Not all nurserymen drew a regular salary from their operation, In these
Instances, as estimate of the value of the time of the operator was collected
and used in the analysis in order to provide a more equitable basis for compar-
ing data. For the same reason, Interest expense paid by individual nurserymen
was excluded from the costs listed In this report. Instead, an Interest charge
for the value of the capital invested was calculated at the rate of 15 percent
per year and included as a non-cash cost of operation.
The value of the capital investment reflects the depreciated book value of
buildings, improvements, machinery and equipment. Growing plants are also in-
cluded as a part of the capital investment, but at a value lower than the regu-
lar wholesale price. This is because in a normal growing operation, most of
the plants in inventory are not yet of a salable size. Some will barely be
started, others almost ready to sell, and others scattered in between. A com-
mon practice Is to value all plants, whether Just started or almost finished,
at 50 to 60 percent of their wholesale price if finished. However, some nurs-
erymen use other methods. For this report, the values received from the nurs-
erymen were the values used.
Land included in owned capital Investment was valued at the original pur-
chase price. While this may not represent the Investment of a nurseryman if he
were to buy It In 1980, It does represent the investment he actually had in the
operation.
Data from the Individual nurseries were averaged and are presented here in
tabular form. The tables contain average values for all 14 nurseries, for the
eight "larger" nurseries amd for the six "smaller" nurseries. For the purposes
of this report, the larger nurseries were those with $400,000 or more In plant
sales, while the smaller nurseries were those with less than $400,000 in plant
sales.
Nurserymen participating in the program received an analysis for their own
operation shortly after they supplied their data. Their analysis followed the
same format used in this report.

DEFINITIONS

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

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

Fulltime equivalent employee: the equivalent of one person working 40
hours a week for 52 weeks a year (2080 hours a year). The most common method
for obtaining the number of fulltime equivalent employees for this report was
to divide the total annual payroll hours for the nursery by 2080, and then add
on any family or management time 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
capital items used and under the control of the
land and leased buildings and equipment is added
to obtain the value of capital managed in the
value of the total capital package being used.

plus the value of additional
manager. The value of rented
to the value of capital owned
nursery operation. It Is the

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

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

plant Inventory, Increase
It represents the total
cash or inventory change.

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 allowances
(except interest on capital) are subtracted from total gain. The result is the
return for the time and managerial skills of the operator, and for the use of
the capital invested in the operation.

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

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

DATA AND RESULTS

The data in the first nine tables present various size and efficiency mea-
sures. Data in Tables 10 through 12 relate to the profitability of container
ornamental plant nurseries. Where information in the tables is presented as
the nearest whole number, arithmetic errors due to rounding may be noted.
In the first four tables dealing with size of business, rates of produc-
tion, labor efficiency, and capital efficiency, more than one Indicator could
be used. The first item in each table is the one selected as the one best mea-
sure. It is followed by others that are also useful for certain purposes or
are meaningful to many growers.

Size of Business (Table 1)

Table 1 is basic. It plus Table 5 provide most of the data required for
developing the remaining tables in this report.
For size of business, the one best measure selected was "Value of own
plants sold" (Table 1A). This amounted to $97,183 for the six smaller nurser-
ies. For the eight larger nurseries, the average was $590,637, or approximate-
ly six times the volume of the smaller nurseries. The average for all 14 nurs-
eries was $379,157.
Production area (Table 1C & ID) for the smaller nurseries was 2.1 acres
(93,272 square feet). For the larger nurseries, the average was 15.2 acres
(660,160 square feet), or about seven times the average of the smaller nurser-
ies. The average for all 14 was 9.6 acres (417,208 square feet).
Employee numbers (Table IE) for the six smaller nurseries averaged 3.8
people. For the larger nurseries, It was 27.1 persons, or over seven times the
number of the smaller ones. The average for all 14 nurseries was 17.1 people.
Capital owned (Table 1K) in the six smaller nurseries averaged $117,769.
For the larger nurseries, it was $736,270, or a little over six times the fig-
ure for the smaller ones. The average for all 14 was $471,198.
Capital managed (Table 1Q) was $770,762 for the larger nurseries. The
smaller nurseries had another $933 In additional land and machinery managed

Table 1.--Size of business, 14 wholesale container ornamental plant nurseries
in Florida. 1980

Average Average Average Your
Item Unit all 14 8 larger 6 smaller
nursery
nurseries nurseries nurseries
The one best measure
A Value of own plants solda. $ 379,157 590,637 97,183
----------------------------------------
Other useful indicators of size
Value of own plants sold
B adjusted for change in $ 452,679 707,647 112,721
plant inventory values
C Plant production area . sq ft 417,208 660,160 93,272
D Plant production area .. acres 9.6 15.2 2.1

E Average fulltime b .number 17.1 27.1 3.8
equivalent employees
Capital owned in:
F Growing plants . ... $ 303,369 491,350 52,729
G Land . . ... $ 55,316 69,999 35,739
H Machinery & equipment .. $ 34,572 54,891 7,480
I Buildings & improvements $ 58,077 92,248 12,514
J Supplies . . $ 19864 27782 907
K Total owned capital . $ 471,198 736,270 117,769
Capital managedd in:
L Growing plants ........ $ 303,369 491,350 52,729
M Land .. . . .. $ 71,127 96,969 36,672
N Machinery & equipment .... $ 34,624 54,891 7,601
0 Buildings & improvements $ 62,375 99,771 12,514
P Supplies . . $ 19864 27782 907
Q Total managed capital .. .. $ 491,360 770,762 118,824

aValue of
cost of plants
for growing-on

own plants sold--is the value of
purchased for immediate resale.
are not deducted.

total plant sales minus the
The cost of plants purchased

bFulltime equivalent employee--is the equivalent of one person working 40
hours a week for 52 weeks a year (2080 hours a year).
cCapital owned--is the net value (original cost less depreciation taken)
of capital assets used in the nursery operation.
dCapital managed--is the sum of capital owned plus the value of additional
capital items used and under the control of the manager (e.g., rented land).

Rates of Production (Table 2)

"Value of own plants sold per square foot of area in production" (Table
1A 1C) was selected as the one best measure of nursery production rate. The
smaller nurseries averaged 104.2 cents per square foot. For the larger nurser-
ies, the average was 89.5 cents per square foot, or only 86 percent of the rate
of the smaller nurseries. The average for all 14 nurseries was 90.9 cents.
When sales were adjusted for changes in plant inventory values (Table 1B .
1C), the rate for the smaller nurseries increased to 120.8 cents, up over 161
cents. For the larger nurseries, it increased almost 18 cents to an average of
107.2 cents per square foot. This was almost 90 percent of the rate for the
smaller nurseries. The average for all 14 nurseries was 108.5 cents, up 17.6
cents.
Production rate per square foot was given preference because of the ease
In comparing it with costs per square foot as presented later. However, these
data are also shown in terms of dollars per acre In production for those who
are more accustomed to thinking in these terms.
Plant inventory values per acre In production (Table IF 1ID) for the six
smaller nurseries averaged $24,626 per acre. For the larger nurseries, it av-
eraged $32,421, or about 132 percent of the average per acre for the smaller
nurseries. The average for all 14 was $31,674.

Table 2.--Rates of production, 14 wholesale container ornamental plant nurs-
eries in Florida, 1980

Average Average Average Your
Item Unit all 14 8 larger 6 smaller
nursery
nurseries nurseries nurseries
The one best measure
Value of own plants sold per cents 909 89.5 104.2
sq ft in prod (Table 1A IC)
--------------------------------------
Other useful indicators
Value of own plants sold per
sq ft adjusted for inventory cents 108.5 107.2 120.8
change . (Table 1B 1 1C)
Value of own plants sold per $ 39,587 38,973 45,387
acre in prod (Table 1A ID)
--- adjusted for inventory $ 47,263 46,693 52,643
change . (Table 1B 0 ID)
Plant inventory value per $ 31,674 32,421 24,626
acre in prod (Table IF 10D)

Labor Efficiency (Table 3)

"Value of own plants sold per employee" (Table 1A 1 1E) was selected as
the one best measure of labor efficiency. This was $25,847 per employee for
the smaller nurseries. For the larger nurseries, the average was $21,787, or
about 16 percent below the volume per employee of the smaller nurseries. For
all 14, the average was $22,173.
Plant sales adjusted for changes In inventory (Table 1B 1 IE) increased
$4,132 for the smaller nurseries to an average of $29,979. For the larger
nurseries, they increased $4,564 to an average of $26,103. This was 13 percent
below the average for the smaller nurseries. The average for all 14 nurseries
was up $4,299 to $26,472.
Production area per employee (Table 1C 4 IE) averaged 24,806 square feet
for the smaller nurseries. For the larger nurseries, the average was 24,351
square feet, or almost the same as the average of the smaller nurseries. For
all 14 nurseries, the average was 24,398 square feet.

Table 3.--Labor efficiency, 14 wholesale container ornamental plant nurseries
in Florida, 1980

Average Average Average Your
Item Unit all 14 8 larger 6 smaller
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per 22,173 21,787 25,847
employee (Table 1A 1E)
-- -- -----_-_ P- ------^1..J1.^.'- -_--------------
Other useful indicators -
Value of own plants sold per
employee adjusted for change $ 26,472 26,103 29,979
in inventory (Table 1B 1E)
Average area in production
per employee (Table 1C 1lE) sq ft 24,398 24,351 24,806

Capital Efficiency (Table 4)

A number of possibilities exist for measuring efficiency in the use of
capital. The one selected as the best single indicator was "Annual turnover of
owned capital value" (Table 1A 5 1K). This is the percentage that results from
dividing the value of own plants sold by the value of capital owned. Annual
turnover for the smaller nurseries was 82.5 percent, meaning that annual sales
amounted to 82.5 percent of the capital invested In the nursery. For the larg-
er nurseries, it was 80.2, almost the same sales per dollar of investment as
the smaller nurseries. The average for all 14 was 80.5. Using managed capi-
tal, the figures are slightly lower for the smaller nurseries and more so for
the larger ones.
Capital owned per employee (Table 1K T 1E) in the smaller nurseries a-
mounted to $31,322. For the larger nurseries, it was $27,159, or about 86 per-
cent of the amount of the smaller nurseries. For all 14 nurseries, capital
owned per employee was $27,555.
Owned capital invested per acre (Table 1K 1D) by the smaller nurseries
was $55,001. For the larger nurseries, it was $48,582, or about 88 percent of
the rate of the smaller nurseries. The average per acre for all 14 nurseries
was $49,197.
Managed capital tied up in plant inventory (Table 1L 4 1Q) for the smaller
nurseries amounted to 44.4 percent of the total. For the larger nurseries, it
was 19 points higher at 63.8 percent.
Managed capital invested in land (Table IM j 1Q) by the smaller nurseries
represented 30.9 percent of the total. For the larger nurseries, it was less
than half at 12.6 percent. The average for all 14 nurseries was 14.5 percent
of the total.
Machinery and equipment (Table 1N 1 1Q) of the smaller nurseries accounted
for 6.4 percent of the total capital managed. For the larger nurseries, it was
7.1 percent, less than one percent higher than the portion of the total invest-
ed by the smaller nurseries. The average for all 14 nurseries was 7.0 percent
of the total.
Buildings, fences, and wells (Table 10 1Q) required 10.5 percent of the
total resources of the smaller nurseries. For the larger nurseries, they were
slightly higher at 12.9 percent. The average for all 14 nurseries was 12.7
percent.

Supply inventories (Table 1P 4 1Q) of the smaller nurseries took 7.8 per-
cent of the managed capital of the business. For the larger nurseries, the
figure was 3.6 percent, less than half that of the smaller nurseries. The av-
erage for all 14 nurseries was 4.0 percent of the total capital managed in the
operation.

Table 4.--Efficiency in use of capital, 14 wholesale container ornamental plant
nurseries in Florida, 1980

Average Average Average Your
Item Unit all 14 8 larger 6 smaller
nurseries nurseries nurseries nursery
The one best measure
Annual turnover of owned
capital value (Table 1A r 1K) 80.5 80.2 82.5
Other useful indicators
Annual turnover of managed % 77.2 76.6 81.8
capital value (Table 1A v 1Q)

Per employee:
Capital owned (Table 1K 1E)
Capital managed (Table 1Q 1E)
Per acre:
Capital owned (Table 1K 1D)
Capital managed (Table IQ 1D)
Managed capital/employee in:
Plants . (Table 1L IE)
Land ... (Table 1M v 1E)
Mach & equip (Table IN 1 IE)
Managed capital/acre in:
Plants ... (Table IL ID)
Land . (Table IM 10)
Mach & equip (Table 1N ID)
Percent of capital managed in:
Plants ... (Table 1L 1Q)
Land . (Table IM f 1Q)
Mach & equip (Table IN I 1Q)
Bldgs, etc (Table 10 f 1Q)
Supplies (Table 1P f 1Q)
Total nursery (Table 1Q 1 .1Q)

27,555
28,734

49,197
51,302

17,741
4,159
2,025

31,674
7,426
3,615

61.7
14.5
7.0
12.7
4.0
100.0

27,159
28,431

31,322
31,602

48,582 55,001
50,858 55,493

18,124
3,577
2,025

32,421
6,398
3,622

63.8
12.6
7.1
12.9
3.6
100.0

14,024
9,753
2,022

24,626
17,127
3,550

44.4
30.9
6.4
*10.5
7.8
100.1

eAnnual turnover of capital value--is the percentage that results from di-
viding the value of own plants sold (Table 1A) by the value of capital (Table
1K or 1Q).

100.0

Dollar Costs by Expense Category (Table 5)

Expenses by cost category were obtained from annual profit and loss state-
ments or tax records of the participating nurseries. The cash cost categories
were grouped into wages and salaries, production supplies, other production
costs, and administrative and overhead. Dollar costs should be useful for com-
paring the relative magnitude of the various cost items, and as a guide to per-,
sons interested in container nurseries as an investment, either as a buyer or
as a lender.

Salaries and Wages
The salary and wage group includes operator's salary or time value. The
smaller nurseries averaged $43,637. For the larger ones, this expenditure was
almost seven times that amount, or $297,730.

Production Supplies
Production supplies include the group starting with "plants and seeds"
through "other production supplies". They averaged $20,829 in the smaller
nurseries. For the larger ones, they were $168,828, about eight times more.

Other Production Costs
Other production costs include "repairs" and "equipment operating costs".
They averaged $6,772 in the smaller nurseries. The larger ones had $37,043,
over five times the amount of the smaller nurseries.

Administrative and Overhead
Administrative and overhead costs usually cannot be assigned to any par-
ticular crop or growing activity, yet must be paid in order to stay in busi-
ness. They include the group starting with "travel and entertainment" through
"other cash expense". They averaged $10,898 in the smaller nurseries. The
larger ones had $61,113, over five times those of the smaller ones.

Total Cash Costs
Total cash costs in the smaller nurseries averaged $82,137. For the larg-
er ones, they were $559,712, almost seven times more.

Non-Cash Costs
Non-cash costs and allowances, though not out-of-pocket during the year,
are still amounts that need to be covered by the business activity during the
year. These include depreciation allowances, decreases in the supply inventory
(using supplies purchased during a previous time period), and an Interest cost

for the use of the capital invested in the nursery. Failure to cover all of
these non-cash allowances means that the business is not generating enough re-
venue to replace equipment and supply inventories as they are depleted plus
provide a return on the money invested. These costs and allowances amounted to
$21,927 in the smaller nurseries. For the larger ones, they were $141,299, six
times the expense of the smaller nurseries.

Total All Costs
Total costs In the smaller nurseries averaged $104,064. For the larger
ones, they were $701,011, or close to seven times more.

Table 5.--Dollar costs by expense category, 14
plant nurseries in Florida, 1980

wholesale container ornamental

Average Average Average Your
Item all 14 8 larger 6 smaller
nurseries nurseries nurseries nursery
- -- Dollars - -

Cash costs
Operator's salary . . .
Other wages & salaries . ..
Plants & seeds to grow on ..
Cans & other growing containers .
Peat, soil, shavings, etc . .
Fertilizer & lime . .
Pesticides & other chemicals ..
Other production supplies .
Repairs & maintenance ..
Equipment operating costs . .
Travel & entertainment .
Insurance . . .
Telephone . . . .
Electricity . . ..
Taxes, licenses, bonds . .
Advertising . .. .
Rent: land and/or buildings .
Other cash expense . ....
Total cash costs . .

37,488
151,345
28,959
33,152
15,476
8,190
7,328
9,436
11,473
12,597
5,614
5,828
2,154
4,105
2,508
1,598
3,761
14,024
355,037

51,719
246,011
46,780
52,499
24,137
12,939
12,112
15,361
17,387
19,656
9,331
8,862
3,184
5,803
3,575
2,511
6,491
21,356
559,712

18,515
25,122
5,198
7,357
3,929
1,859
949
1,537
3,588
3,184
659
1,782
782
1,842
1,085
380
121
4,247
82,137

Non-cash costs
Depreciation: mach & equip .
Depreciation: bldgs, fences,;wel
Inventory decrease in supplies .
Interest on capital, 15% .
Total non-cash costs .

. .
Is .
. .
. .
* .
B:

Total all costs .

9,274 13,999 2,974
10,186 16,859 1,288
0 0 0
70680 110441 17665
90,140 141,299 21,927
445,177 701,011 104,064

S 0 .

--- --

Llr~D~L=CEIIZX1L~~

Percent of Total Costs by Expense Category (Table 6)

While expenditures in the form of dollars show the magnitude of expenses
for various cost categories, they are not very helpful for comparing. cost re-
larionships between different sizes of nurseries. But costs as a percent of
the total are useful for this purpose. These are obtained by dividing each of
the dollar expense items in Table 5 by the corresponding "Total all costs" fig-
ure at the bottom of the table.

Salaries and Wages
Salaries and wages (includes operator) for the smaller nurseries were 41.9
percent of all costs, cash plus non-cash. For the larger nurseries, they aver-
aged 42,5 percent, almost the same. The average for all 14 was 42.4 percent.

Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") in the smaller nurseries averaged 20.1 percent of all costs. For the
larger nurseries, they were 23.3 percent, or 3 percent higher. The average for
all 14 nurseries was 22.9 percent.

Other Production Costs
Other production costs ("repairs" and "equipment operating.costs") for the
smaller nurseries accounted for 6.5 percent of all costs. For the larger nurs-
eries, they were 5.3 percent, or over a percent lower. The average for all 14
nurseries was 5.4 percent of total costs.

Administrative and Overhead
These costs ("travel" through "other cash expense") for the smaller nurs-
eries amounted to 10.5 percent of all costs. For the larger nurseries, they
were 8.6 percent, or two percent less than the smaller nurseries. The average
for all 14 nurseries was 9.0 percent.

Total Cash Costs
Total cash costs for the smaller nurseries represented 78.9 percent of all
costs. For the larger nurseries, they were 79.8 percent of the total, or one
percent more than the smaller nurseries. The average for all 14 nurseries was
79.8 percent of all costs.

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") are the ad-
ditional costs that need to be covered eventually, though not necessarily with
cash during this accounting period. They averaged 21.1 percent of all costs
and allowances of the smaller nurseries. For the larger ones, they were close
to the same at 20.2 percent. The average for all 14 nurseries also was 20.2
percent of all costs.

Table 6.--Percent of total costs by expense category, 14
ornamental plant nurseries in Florida, 1980

wholesale

container

Average Average Average Your
Item all 14 8 larger 6 smaller
nurseries _nurseries nurseriesns
-- --- Percent -- -- -

Cash costs
Operator's salary . .
Other wages & salaries ....
Plants & seeds to grow on .
Cans & other growing containers .
Peat, soil, shavings, etc. ...
Fertilizer & lime . .
Pesticides & other chemicals .
Other production supplies .
Repairs & maintenance .
Equipment operating costs .
Travel & entertainment . .
Insurance . . .
Telephone . . . .
Electricity . .
Taxes, licenses, bonds ....
Advertising . . .
Rent: land and/or buildings .
Other cash expense . ....
Total cash costs . ..
Non-cash costs
Depreciation: mach & equip ..
Depreciation: bldgs, fences, wells .
Inventory decrease in supplies .
Interest on capital, 15% . .
Total non-cash costs . .
Total all costs ... .. .

8.4
34.0
6.5
7.4
3.5
1.8
1.6
2.1
2.6
2.8
1.3
1.3
0.5
0.9
0.6
0.4
0.8
3.2
79.8

2.1
2.2
0.0
15.9
20.2
100.0

7.4
35.1
6.7
7.5
3.4
1.8
1.7
2.2
2.5
2.8
1.3
1.3
0.4
0.8
0.5
0.4
0.9
3.0
79.8

2.0
2.4
0.0
15.8
20.2
100.0

17.8
24.1
5.0
7.1
3.8
1.8
0.9
1.5
3.4
3.1
0.6
1.7
0.8
1.8
1.0
0.4
0.1
4.1
78.9

2.9
1.2
0.0
17.0
21.1
100.0

100.0

--

Costs Per Square Foot of Production Area (Table 7)

While expenses as a percent of total costs facilitate comparing operating
statements, they do not allow easy comparison of relative growing costs between
-nurseries. But costs per square foot of growing area do. These were obtained
by dividing each of the dollar cost figures In Table 5 by the appropriate area
in production figure from Table 1C, "Average area of own plants in production".

Salaries and Wages
Salaries and wages (includes operator) per square foot of production area
averaged 46.7 cents In the smaller nurseries. For the larger nurseries, they
averaged 45.1 cents, or 1i cents a square foot less than the smaller nurseries.
Thus, the average for all 14 nurseries was 45.3 cents per square foot of grow-
ing area.

Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") in the smaller nurseries averaged 22.3 cents per square foot. For the
larger nurseries, they were 24.9 cents, over two cents a square foot higher
than the smaller nurseries. The average for all 14 nurseries, then, was 24.7
cents a square foot.

Other Production Costs
Other production costs ("repairs" and "equipment operating costs") in the
smaller nurseries averaged 7.2 cents per square foot. For the larger nurser-
ies, they were 5.6 cents, or about 1i cents a square foot less than the smaller
nurseries. The average for all 14 nurseries was 5.8 cents.

Administrative and Overhead
These costs ("travel" through "other cash expense") in the smaller nurser-
ies averaged 11.7 cents a square foot. For the larger nurseries, they were 9.2
cents, or 21 cents less than the cost of the smaller nurseries. The average
for all 14 nurseries was 9.6 cents a square foot.

Total Cash Costs
Total cash costs per square foot of growing area In the smaller nurseries
averaged 88.1 cents. For the larger ones, they were 84.8 cents, or about three
cents less than the rate per square foot of the smaller nurseries. The average
for all 14 nurseries was 85.1 cents per square foo .-

15

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") in the smal-
ler nurseries averaged 23.5 cents per square foot. For the larger nurseries,
they were 21.4 cents, or two cents less. Average for all 14 was 21.6 cents.

Total All Costs
Total costs for the smaller nurseries averaged over $1.11 a square foot.
For the larger nurseries, they were $1.06 cents, or 95 percent of the smaller
nursery costs. Average for all 14 nurseries was almost $1.07 a square foot.

Table 7.--Costs per square foot of production area, 14 wholesale container or-
namental plant nurseries in Florida, 1980

Average Average Average Your
Item all 14 8 larger 6 smaller
nurseries nurseries nurseries nursery
-- - nt - -

Cash costs
Operator's salary . .
Other wages & salaries . .
Plants & seeds to grow on ..
Cans & seeds to grow on .
Peat, soil, shavings, etc ..
Fertilizer & lime . .
Pesticides & other chemicals .
Other production supplies . .
Repairs & maintenance . .
Equipment operating costs .
Travel & entertainment .
Insurance . . . .
Telephone . .
Electricity . . .
Taxes, licenses, bonds .. ..
Advertising . . .
Rent: land and/or buildings .
Other cash expense . ...
Total cash costs . . .
Non-cash costs
Depreciation: mach & equip . .
Depreciation: bldgs, fences, wells .
Inventory decrease in supplies .
Interest on capital, 15% .
Total non-cash costs . .
Total all costs . . .

9.0
36.3
6.9
8.0
3.7
2.0
1.8
2.3
2.8
3.0
1.4
1.4
0.5
1.0
0.6
0.4
0.9
3.4
85.1

2.2
2.4
0.0
16.9
21.6
106.7

7.8
37.3
7.1
8.0
3.7
2.0
1.8
2.3
2.6
3.0
1.4
1.3
0.5
0.9
0.5
0.4
1.0
3.2
84.8

2.1
2.6
0.0
16.7
21.4
106.2

19.8
26.9
5.6
7.9
4.2
2.0
1.0
1.6
3.8
3.4
0.7
1.9
0.8
2.0
1.2
0.4
0.1
4.6
88.1

3.2
1.4
0.0
18.9
23.5
111.6

--F --

VVg m g
m

- --~ -~~

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

Costs per square foot of growing area are important for comparing relative
growing costs between nurseries, and for estimating individual plant growing
costs. However, they do not indicate the profitability of the nursery opera-
tion as well as do costs per dollar of sales. Adjusting sales for changes in
plant inventory value show how the business is doing in total, not just cash-
wise. These figures were developed by dividing the dollar costs shown in Table
5 by the appropriate figure from Table 1B, "Value of own plants sold adjusted
for change in plant inventory values".

Salaries and Wages
Salaries and wages (Includes operator) in the smaller nurseries averaged
38.7 cents per dollar of sales after adjusting for changes In plant inventory
values. For the larger nurseries, they were 42.1 cents, or over four cents
more than the smaller nurseries. Average for all was 41.7 cents.

Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") In the smaller nurseries averaged 18.4 cents per dollar of adjusted
sales. Larger nurseries showed 23.1, or five cents more than the smaller nurs-
eries. The average for all 14 nurseries was 22.6 cents per dollar.

Other Production Costs
Other production costs ("repairs" and "equipment operating costs") in the
smaller nurseries averaged 6.0 cents per dollar of adjusted sales. For the
larger nurseries, they were 5.3 cents, or almost one cent less than the small-
er nurseries. The average for all 14 nurseries was 5.3 cents per dollar.

Administrative and Overhead
These costs ("travel" through "other cash expense") in the smaller nurser-
ies averaged 9.7 cents per dollar of adjusted sales. For the larger nurseries,
they averaged 8.5 cents, or about one cent less than the smaller nurseries.
The average for all 14 nurseries was 8.8 cents per dollar..

Total Cash Costs
Total cash costs per dollar of adjusted sales in the smaller nurseries av-
eraged 72.9 cents. For the larger nurseries, they were 79.1 cents, or six
cents per dollar of adjusted sales more than the smaller nurseries. The aver-
age for all 14 nurseries was 78.4 cents per dollar.

17

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") in the smal-
ler nurseries averaged 19.4 cents per dollar of adjusted sales. For the larger
nurseries, they averaged 20.0 cents, a half cent more than the cost of the
smaller nurseries. The average for all 14 was 19.9 cents.

Total All Costs
Total costs in the smaller nurseries averaged 92.3 cents, or almost eight
cents less than the value per dollar of adjusted sales. For the larger nurs-
eries, they were 99.1 cents, or almost equal the value of each dollar of ad-
justed sales. The average for all 14 nurseries was 98.3 cents per dollar.

Table 8.--Costs per dollar of sales adjusted for change in plant inventory, 14
wholesale container ornamental plant nurseries in Florida, 1980
Average Average Average Your
Item all 14 8 larger 6 smaller
nurseries nurseries nurseries nur
- Cents ---- -- --

Cash costs
Operator's salary . .
Other wages & salaries .
Plants & seeds to grow on . .
Cans & other growing containers .
Peat, soil, shavings, etc .
Fertilizer & lime . . .
Pesticides & other chemicals .
Other production supplies . .
Repairs & maintenance ..
Equipment operating costs . .
Travel & entertainment . .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes, licenses, bonds . .
Advertising . . .
Rent: land and/or buildings .
Other cash expense . .
Total cash costs . .
Non-cash costs
Depreciation: mach & equip . .

Depreciation: bldgs, fences, wel
Inventory decrease in supplies
Interest on capital, 15% .
Total non-cash costs .
Total all costs . ..

8.3
33.4
6.4
7.3
3.4
1.8
1.6
2.1
2.5
2.8
1.2
1.3
0.5
0.9
0.6
0.4
0.8
3.1
78.4

2.0

Is 2.2
0.0
.5.6
19.9
98.3

7.3
34.8
6.6
7.4
3.4
1.8
1.7
2.2
2.5
2.8
1.3
1.2
0.4
0.8
0.5
0.4
0.9
3.0
79.1

2.0
2.4
0.0
15.6
20.0
99.1

16.4
22.3
4.6

6.5
3.5

1.6
0.8
1.4
3.2
2.8
0.6
1.6
0.7
1.6
1.0
0.3
0.1
3.8
72.9

2.6
1.1
0.0
15.7
19.4
92.3

--- -

~--I

II ---

Costs Per Dollar of Sales (Table 9)

While costs per dollar of sales adjusted for changes in inventory value
show how well a business is doing in total, they are not necessarily a good
indicator of bill paying ability. The ability of a nurseryman to pay his bills
depends upon his cash costs relative to cash recieved. These figures were de-
veloped by dividing the dollar costs shown in Table 5 by the appropriate fig-
ure from Table 1A, "Value of own plants sold".

Salaries and Wages
Salaries and wages (includes operator) in the smaller nurseries averaged
44.8 cents per dollar of cash received. For the larger nurseries, they were
50.4 cents, or over five cents more than the smaller nurseries. The average
for all 14 nurseries was 49.8 cents per dollar of sales.

Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") in the smaller nurseries averaged 21.5 cents per dollar of sales. For
the larger nurseries, they were 27.7 cents, or about six cents less. The aver-
age for all 14 nurseries was 27.0 cents per dollar of cash received.

Other Production Costs
Other production costs ("repairs" and "equipment operating costs") .in the
smaller nurseries averaged 7.0 cents per dollar of sales. For the larger nurs-
eries, they averaged 6.2 cents, or almost a cent less. The average for all 14
nurseries was 6.3 cents per dollar of sales.

Administrative and Overhead
These costs ("travel" through "other cash expense") in the smaller nurser-
ies averaged 11.2 cents per dollar of cash received. For the larger nurseries,
they were 10.3 cents, about a cent less than the smaller nurseries. The aver-
age for all 14 nurseries was 10.5 cents per dollar of sales.

Total Cash Costs
Total cash costs in the smaller nurseries averaged 84.5 cents leaving
about 15 cents to apply to non-cash costs. For the larger nurseries, they were
94.8 cents leaving about five cents to apply to non-cash costs. The average
for all 14 nurseries was 93.6 cents.

Total All Costs
In terms of bill paying ability, average costs per dollar of sales for
both the smaller and the larger nurseries were low enough to permit payment of
all cash expense from cash receipts. However, neither group received enough
cash to cover all non-cash allowances for the year. The smaller nurseries av-
eraged 22.6 cents in non-cash costs per dollar of sales, but had only 5.5 cents
left after paying cash costs. The larger nurseries had 23.9 cents in non-cash
costs, but had only 5.2 cents left over after paying the cash costs.

Table 9.--Costs per dollar of sales (no adjustment for plant inventory change),
14 wholesale container ornamental plant nurseries in Florida, 1980

Average Average Average Your
Item all 14 8 larger 6 smaller
nurseries nurseries nurseries
- - Cents - -

Cash costs
Operator's salary . . .
Other wages & salaries . .
Plants & seeds to grow on .
Cans & other growing containers .
Peat, soil, shavings, etc .
Fertilizer & lime . .
Pesticides & other chemicals .
Other production supplies .
Repairs & maintenance .
Equipment operating costs ..
Travel & entertainment . .
Insurance .. . .
Telephone . . . .
Electricity . . .
Taxes, licenses, bonds . .
Advertising . . .
Rent: land and/or buildings .
Other cash expense . ..
Total cash costs . .....

Non-cash costs
Depreciation: mach & equip .

. .

Depreciation: bldgs, fences, wells .
Inventory decrease in supplies ..
Interest on capital, 15% .
Total non-cash costs .
Total all costs .

9.9
39.9
7.6
8.7
4.1
2.2
1.9
2.5
3.0
3.3
1.5
1.5
0.6
1.1
0.7
0.4
1.0
3.7
93.6

2.7
0.0
18.6
23.8
117.4

8.8
41.6
7.9
8.9
4.1
2.2
2.0
2.6
2.9
3.3
1.6
1.5
0.5
1.0
0.6
0.4
1.1
3.6
94.8

2.4
2.8
0.0
18.7
23.9
118.7

19.0
25.8
5.4

7.6
4.0

1.9
1.0
1.6
3.1
3.3
0.7
1.8
0.8
1.9
1.1
0.4
0.1
4.4
84.5

1.3
0.0
18.2
22.6
107,1

-- -~

Income Summary (Table 10)

This section concentrates on developing net nursery income and allocating
it between the time and effort of the owner-operator, and a return on money
invested in the operation. After all is said and done, it is for a payment for
his time that a nurseryman works, and it is for a return to capital that nurs-
erymen 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 miscel-
laneous income. Miscellaneous income refers to money received by the nursery
from sources other than plant sales, such as rent income, interest income, de-
livery income, and sale of fertilizer and supplies.
Total gain in the smaller nurseries averaged $121,537. For the larger
nurseries, it amounted to $724,795, or almost six times that of the smaller
nurseries. The average for all 14 nurseries was $466,256.

Net Nursery Income
Net nursery income is the total return for the year for the time and man-
agerial skills of the operator plus the capital invested in the operation. To
obtain net nursery income, all cash costs of Table 5 except the operator's
salary and all non-cash costs shown there except interest on capital are sub-
tracted from total gain. The result is net nursery income, or income received
for all the time and capital investment supplied by the owner-operator.
Net nursery income for the smaller nurseries averaged $53,652. For the
larger nurseries, It amounted to $185,944, or over three times that of the
smaller nurseries. The average for all 14 nurseries was $129,247.

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 capi-
tal. 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 in-
vestment. When the owner and operator are the same person, dividing net nurs-
ery Income between the time of the operator and return to capital may not seem
very Important. But when owners are outside investors, then an acceptable
division of earnings 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 in the smaller nurseries averaged $35,138, or 29.8 per-
cent return on investment. For the larger nurseries, return to capital aver-
aged $134,225, or 18.2 percent return on investment. The average for all 14
nurseries was $91,759 return to capital, or 19.5 percent return on investment.

Table 10.--Income summary, 14 wholesale container ornamental plant nurseries in
Florida, 1980
Average Average Average Your
Item Unit all 14 8 larger 6 smaller
nurseries nurseries nurseries nursery

Value of own plants sold . $ 379,157 590,637 97,183
Plant inventory change ..... $ 73,522 117,010 15,537
Supply inventory change ..... $ 6,485 5,177 8,229
Miscellaneous cash income $ 7,092 11,971 587

Total gain . . $ 466,256 .724,795 121,537
Deduct cash costs less op sal $ (317,549) (507,993) ( 63,622)( )
Deduct non-cash costs less int $ ( 19,460) ( 30,858) ( 4,262)( )
Total deductions . $ (337,008) (538.852) ( 67884)( )
Net nursery income. . $ 129,247 185,944 53,652
Deduct op salary or time value $ ( 37 488) ( 51 719) ( 18,515)( )

Return to capital . $ 91,759 134,225 35,138
Rate of return to capitali % 19.5 18.2 29.8

fTotal gain--the sum of plant sales, change
ies, and miscellaneous income. It represents the
operation, be it in the form of cash or change in

in plant and supply inventor-
total effect of the year's
inventory values.

gNet nursery income--the net effect of the year's operation. To obtain
it, all cash costs (except operator's salary), and all non-cash allowances (ex-
cept interest on capital) are subtracted from total gain. The result is the
return for the time and managerial skills of the operator, and for the use of
the capital invested in the operation.
hReturn to capital--the portion of net nursery income that is left after
subtracting the salary or time value of the operator. It is what the owned
capital earned.
'Rate of return to capital--return to capital divided by the value of own-
ed capital. It is the rate of return earned on the capital invested.

Factors Associated With Level of Profit (Table 11)

In this section, information presented earlier is re-grouped to concen-
trate attention on factors that are generally deemed related to level of pro-
fit in a container nursery. The factors are presented in the same sequence
that they appeared earlier. But here, the average for all 14 nurseries is com-
pared with the average for the five most profitable and the five least profit-
able of the nurseries participating in the program. As will be seen, profit
or lack of profit does not depend upon performance in any single area, but,
rather, on the balance of performance in all the areas. Nevertheless, nursery-
men analyzing their own operation may find this section especially valuable
for indicating the general area of their business needing additional study and
analysis. .
"Net nursery income" from Table 10 was selected as the indicator for level
of profit. Average for all 14 nurseries was $129,247. The most profitable
third of the nurseries averaged almost double this amount, or $233,412. The
least profitable third averaged only $26,571, which is but 20 percent of the
average. The following compares the average for these three groupings of con-
tainer nurseries using one indicator from each of most of the proceeding ta-
bles. A more complete analysis would use all the indicators listed In those
tables, for in most cases, each indicator measures things from a little differ-
ent angle.

Size of Business
The indicator of size of business selected from Table 1 was "Value of own
plants sold". The average for all 14 nurseries was $379,157. The most profit-
able third had $622,797 in sales, or 64 percent more than the average. The
least profitable third averaged $202,684, or about a half of the volume of the
average. This does not mean that small businesses cannot be profitable, but it
does indicate that larger profits tend to be associated with higher dollar vol-
umes of business.

Production Rate
The indicator of rate of production selected from Table 2 was "Value of
own plants sold per square foot of area in production" which is listed here as
"Sales per square foot of area in production". In general, other things being
equal, increasing sales per square foot should increase the profitability of

a nursery. Average was 90.9 cents. Both the most and the least profitable
thirds were below this average at 89.7 and 61.7 cents respectively.
Lower sales per square foot of growing area can result from a number of
things, such as letting plants continue to grow after reaching salable size,
letting space sit vacant too long between the time a plant is sold and another
is put in its place to start growing, selecting varieties that grow slower or
are priced low relative to their growing time and space requirements, and hav-
ing disease and quality problems that reduce the yield of salable plants. In
addition, nursery layout and fertilizing and growing techniques can alter the
time and space used for the same crop in two different nurseries. Also, mar-
kets and marketing programs can alter the returns received by two different
nurseries from the same crop.

Table 11.--Factors associated with level of profit, 14 wholesale container or-
namental plant nurseries in Florida, 1980

Average Most Least Your
Item Unit all 14 profitable profitable
nurseries third (5) third (5) rs
-_ -- --_Level of p.rofit_ ___- -
Net nursery income (Table 10) $ 129,247 233,412 26,571
-Factors associated with level of profit--_ ___ _-
Size of business (Table 1)
Value of own plants sold $ 379,157 622,797 202,684
Production rate (Table 2)
Sales/sq ft of area in prod cents 90.9 89.7 61.7
Labor efficiency (Table 3)
Own plant sales/employee $ 22,173 20,815 20,661
Use of capital (Table 4)
Annual turnover of owned 8 76 7
capital value % 80.5 76.9 75.3 _____
capital value
Level of costs (Table 7)
Cost/sq ft of production area. cents 106.7 108.8 .75.1
Cost efficiency (Table 8)
Cost/$ sales adjusted for cents 98.3 95.7 115.1
change in plant inventory
Growth in the business
Increase in sales & plant $ 129,448 282,690 23,971
inventory over last year

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 14 nurseries was $22,173. For both the most profitable
and least profitable third of the nurseries, sales were lower at $20,815 and
$20,661 per employee. These were 94 and 93 percent of the average.
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. They also can 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 raio,
or the result of poor management practices in the planning and use of labor.

Use of Capital
The indicator for efficiency in the use of capital selected from Table 4
was "Annual turnover of owned capital" shown here as "Owned capital turnover".
In general, larger percentage turnover numbers are desirable, for they indi-
cate greater sales per dollar of investment in the nursery.
Average turnover for all 14 nurseries was 80.5 percent, meaning that plant
sales during the year amounted to 80.5 percent of the money invested in the op-
eration. Both the most profitable and the least profitable third of the nurs-
eries had slightly lower rates of turnover at 76.9 and 75.3 percent.
Problems that lower turnover rate include any of the items already men-
tioned that lower production rate (hence sales volume) for a given nursery in-
vestment. Low capital turnover is particularly common in nurseries just get-
ting started, or in nurseries that are expanding rapidly. It can also occur
during slow economic times when inventories are building because of slow sales.
Excessive investments in land, labor saving machinery and equipment, or expen-
sive (though maybe unnecessary) niceties will also tend to lower the capital
turnover rate.

Level of Costs
The indicator of level of cost being used is "Cost per square foot of pro-
duction area" from Table 7. Other things being equal, a lower cost per square
foot is desirable.
Average cost for all 14 nurseries was 106.7 cents. This was almost 16

Average cost for all 14 nurseries was 106.7 cents. This was almost 16
cents higher than sales per square foot of area in production noted above.
This means that on the average, sales per square foot did not cover all cash
costs plus all non-cash costs and allowances noted in Table 7. For the most
profitable third of the nurseries, costs per square foot were 108.8 cents,
which were about 19 cents more than sales per square foot. The least profit-
able third had 75.1 cents in costs, which was over 13 cents greater than sales
per square foot of area in production.
Problems that cause costs per square foot to increase include inefficient
planning and utilization of labor, insufficient investment in labor saving cap-
ital items, destruction or theft of plants and supplies, not checking for best
price before purchasing needs, and not carefully managing the nursery opera-
tion. Other causes of increased costs may not be a problem if they result in
enough increased revenue. One example might be purchasing more expensive "dec-
orator" cans and pots in order to sell to a specialized premium market.

Cost Efficiency
The indicator of cost efficiency being used is "Cost per dollar of sales
adjusted for change in plant inventory" from Table 8.. This shows how the nurs-
ery is doing in total, cash plus change in inventory values. Other things be-
ing equal, lower costs per dollar of sales are desirable.
Average for all 14 nurseries was 98.3 cents per dollar of sales after ad-
justing for changes in inventory values. Thus, on the average, sales exceeded
costs by almost two cents for every dollar of plant sales. For the more pro-
fitable third of the nurseries, the cost was 95.7 cents, leaving a margin of
over four cents per dollar of sales after adjusting for changes in inventory.
For the least profitable third, costs were about $1.15. Thus, this group lack-
ed almost 15 cents per dollar of sales of being able to cover all cash costs
plus all non-cash costs and allowances during the year when changes in inven-
tory values were also considered.
Rising costs per dollar of sales are very common during periods of rapid
expansion, because extra costs of a larger operation are incurred before the
nursery can experience accompanying extra sales. During inflationary times,
failure to get price increases as fast as costs are going up will also cause
it. While prices received are not always under the direct control of the nurs-
eryman, other things mentioned earlier are under his direction. These include
things that affect rates of production, level of costs, and labor efficiency.

Examples include letting plants continue to grow after reaching salable size
without getting much if any more money for them, letting space sit vacant too
long between the time a plant is sold and another is put in its place to start
growing again, selecting varieties that grow slower or are priced low relative
to their growing time and space requirements, having disease and quality prob-
lems that reduce the yield of salable plants, falling to plan and manage for
efficient utilization of labor, ignoring needed investments in labor saving
equipment and facilities, not checking for the best price before purchasing
needs, experiencing theft or destruction of plants or supplies, practicing less
than optimum fertilizing and growing techniques, and pursuing less desirable
markets and marketing programs.

Growth in the Business
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.
Average growth for the year was $129,448. This was about 34 percent of
the $379,157 value of own plants sold. The most profitable third of the nurs-
eries grew $282,690, or about 45 percent of their $622,979 annual sales rate.
The least profitable third grew much less. Their growth of $23,971 was only 18
percent of the average for all 14 nurseries, and only 11 percent of their
$202,684 in sales of plants.
Growth in the sales of a business, of course, can be due partially to in-
flationary price increases. It can also be the result of all the things al-
ready mentioned that increase sales volume or plant inventory values for a giv-
en operation, including' forced increases in inventory value due to slow eco-
nomic activity. To stay healthy, businesses do need to grow at least enough
to keep up with inflation. But at the same time, growth needs to be planned
and orderly so that it contributes to the profitability and financial stability
of an operation. For instance, an expansion program results in increased costs
for a period of time before additional plants from that expansion program are
ready for sale. Too rapid of an expansion program can result In excessive in-
creases in plant costs and a strong need for cash to pay those costs before the
new plants have reached a salable size. The growth indicator may look good on
paper. But tomorrow's potential sales (plant Inventory) may not be satisfac-
tory for paying today's bills.

Range of Figures (Table 12)

In this section, the average for all 14 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 for each factor. In the previous
section, figures for all factors were for the same group of high profit and low
profit nurseries. 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, quite a range in the figures was found for most of the
factors. Nurserymen analyzing their own operation should be suspicious about
any of their own figures that fall outside these ranges. The discussions of
things that contribute to variations in the figures in the previous section
would also apply here.

Table 12.--Range of figures on factors associated with level of profit, 14
wholesale container ornamental plant nurseries in Florida, 1980

Average 3 best 3 worst Your
Item Unit all 14 factor factor
nurseries average average nursery
Level of Erofit
Net nursery income (Table 10) $ 129,247 249,768 20,430
leofrof--------------------------------------
-- --- -Factors associated with-level of profit - -- -

(Table 1)

Value of own plants sold . $
Production rate (Table 2)
Sales/sq ft of area in prod cenl
Labor efficiency (Table 3)
Own plant sales/employee . $
Use of capital (Table 4)
Annual turnover of owned
capital value
Level of costs (Table 7)
Cost/sq ft of production area ceni
Cost efficiency (Table 8)
Cost/S sales adjusted for cenl
change in plant inventory
Growth in the business
Increase in sales & plant
inventory over last year

379,157 792,573 41,136

ts 90.9

22,173

80.5

fs 106.7

rs 98.3

236.0

36.0

31,000 14,791

140.7

55.2

73.0

31.3

257.6

115.8

129,448 348,014

Size of business

8,220

CONCLUDING COMMENTS

Nurserymen who are Interested in seeing how they compare with those par-
ticipating in the Florida Nursery Business Analysis Program may calculate their
own numbers by the formulas 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 nursery. It should improve management deci-
sions concerning things that affect the profitability of the nursery operation.
Nurserymen who find this kind of information to be useful, but have dif-
ficulty finding the time or energy to engage in the tedium of doing their own
calculations may wish to consider becoming participants In the program. If you
would like to do so, contact your nearby Extension Ornamental Horticultural
Agent, or contact the author In Gainesville.

	Front Cover
	Abstract
	Acknowledgement
	Table of Contents
	Main