ft ZL ':

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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 1981. Average value of plant sales was $349,986. Cash costs accounted for
$326,777. Non-cash allowances including a 15 percent return on investment
amounted to another $93,191. Total costs, then, were $419,968. After ad-
justments for changes in inventory values and additions for miscellaneous
income, net nursery income was $137,335, and return to capital averaged
$109,582 for a 22.2 percent return on investment. Comparable information is
presented for the average of the six larger and the eight smaller container
nurseries, also.

Key words: container nursery business analysis, income, costs, in-
vestment, 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,
Loretta Hodyss, DeArmand Hull, Charles Lowery, Roger Newton, Michael Sweat,
and Victor Yingst. A special thanks goes to my daughter Shari for her help
in typing this manuscript. However, expressing appreciation for the help re-
ceived does not alter the fact that errors in the data or in the interpreta-
tion of the information presented herein 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 1981. Average value of plant sales was $349,986. Cash costs accounted for
$326,777. Non-cash allowances including a 15 percent return on investment
amounted to another $93,191. Total costs, then, were $419,968. After ad-
justments for changes in inventory values and additions for miscellaneous
income, net nursery income was $137,335, and return to capital averaged
$109,582 for a 22.2 percent return on investment. Comparable information is
presented for the average of the six larger and the eight smaller container
nurseries, also.

Key words: container nursery business analysis, income, costs, in-
vestment, 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,
Loretta Hodyss, DeArmand Hull, Charles Lowery, Roger Newton, Michael Sweat,
and Victor Yingst. A special thanks goes to my daughter Shari for her help
in typing this manuscript. However, expressing appreciation for the help re-
ceived does not alter the fact that errors in the data or in the interpreta-
tion of the information presented herein are the sole responsibility of the
author.

TABLE OF CONTENTS

Page

. . . i

ABSTRACT ..

ACKNOWLEDGEMENTS . . . . .

LIST OF TABLES . . . . .

INTRODUCTION . . . . . .

PROCEDURE . . . . . .

DEFINITIONS . . . . . .

DATA AND RESULTS . . . . .

Size of Business . . . .
Rates of Production . .
Labor Efficiency . .. .
Capital Efficiency . . .
Dollar Costs by Expense Category .
Percent of Total Costs by Expense Categorya
Costs Per Square Foot of Production Area .
Costs Per Dollar of SalesaAdjusted for Change in P
Costs Per Dollar of Sales . . .

Income Summary . . . .

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

Factors Associated With Level of Profits . .

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

Range of Figures . . . .

CONCLUDING COMMENTS . . . .

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* *

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* a

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* .
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. .

I ant
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* *

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* *
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* *
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Inventory
* *

. *

* *
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* *

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* *

* *
oooo,

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aThese sections also contain the following subcategories:

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

. & . a . 0 *

LIST OF TABLES
Table Page
1 Size of business, 14 wholesale container ornamental plant
nurseries in Florida, 1981, . . 5
2 Rates of production, 14 wholesale container ornamental plant
nurseries in Florida, 1981 .. . . 6
3 Labor efficiency, 14 wholesale container ornamental plant
nurseries in Florida, 1981. . . . . 7
4 Efficiency in use of capital, 14 wholesale container ornamental
plant nurseries in Florida, 1981. . .. 9
5 Dollar costs by expense category, 14 wholesale container
ornamental plant nurseries in Florida, 1981 . 11
6 Percent of total costs by expense category, 14 wholesale
container ornamental plant nurseries in Florida, 1981 13
7 Costs per square foot of production area, 14 wholesale
container ornamental plant nurseries in Florida, 1981 . 15
8 Costs per dollar of sales adjusted for change in plant
inventory, 14 wholesale container ornamental plant nurseries
in Florida, 1981 . . . . . 17
9 Costs per dollar of sales (no adjustment for plant inventory
change), 14 wholesale container ornamental plant nurseries
in Florida, 1981. . . . . .. . 19
1.0 Income summary, 14 wholesale container ornamental plant
nurseries in Florida, 1981. . . . . 20
11 Factors associated with level of profit, 14 wholesale
container ornamental plant nurseries in Florida, 1981 . 23
12 Range of figures associated with level of profit, 14 wholesale
container ornamental plant nurseries in Florida, 1981 25

BUSINESS ANALYSIS OF CONTAINER NURSERIES IN FLORIDA, 1981

J. Robert Strain

INTRODUCTION

This publication contains information on sales, costs, returns, and pro-
duction efficiency for wholesale container ornamental plant nurseries in Flor-
ida for 1981. A container ornamental plant nursery is defined as one produc-
ing primarily woody landscape plants in containers. Other publications in
this series include reports on Central Florida foliage plant nurseries and
South Florida foliage 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 pro-
duction business with an estimate of the input requirements and the revenue
potential; 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 account-
ing records. The nurserymen participated in the program voluntarily, and do
not represent a statistically selected sample. In fact, nurserymen participa-
ting in the Florida Nursery Business Analysis Program are thought to represent
some of the more efficient ornamental plant nurseries In the state, rather
than being typical of the container nursery industry.

J. ROBERT STRAIN is extension economist and professor of food and re-
source economics.

Data were collected for the 1981 tax year. In some cases, data were re-
ceived for a fiscal year which did not coincide with the 1981 calendar year.
Data for fiscal years ending after July 1, 1980 and before July 1, 1982 were
Included with 1981 calendar year data.
Not all nurserymen drew a regular salary from their operation. In these
instances, an estimate of the value of the time of the operator was collected
and used in the analysis in order to provide a more equitable basis for 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 and for the six "smaller" nurseries. For the pur-
poses of this report, the larger nurseries were those with $500,000 or more in
plant sales, while the smaller nurseries were those with less than $500,000 in
plant sales.
Nurserymen participating in the program received an analysis 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 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 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.

Fulitime 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 plus the value of additional
capital items used and under the control of the manager. The value of rented
land and leased buildings and equipment is added to the value of capital owned
to obtain the value of capital managed in the nursery operation. It is the
value of the total capital package being used.

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

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

Net nursery income: the net effect of the year's operation. To obtain
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
owned 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 $160,345 for the eight smaller our-
series. For the six larger nurseries, the average was $602,840, or not quite
four times the volume of the smaller nurseries. The average for all 14 nur-
series was $349,986.
Production area (Table 1C & D) for the smaller nurseries was 3.7 acres
(160,070 square feet). For the larger nurseries, the average was 17.4 acres
(759,681 square feet), or about five times the average of the smaller nurser-
ies. The average for all 14 was 9.6 acres (417,046 square feet).
Employee numbers (Table 1E) for the eight smaller nurseries averaged 5.4
people. For the larger nurseries, it was 27.2 persons, or five times the
number of the smaller ones. The average for all 14 nurseries was 14.7 people.
Capital owned (Table 1K) in the eight smaller nurseries averaged
$261,697. For the larger nurseries, it was $800,707, or a little over three
times the figure for the smaller ones. The average for all 14 was $492,701.
Capital managed (Table 1Q) was $569,202 for the larger nurseries. The
smaller nurseries had another $104,532 in additional land and machinery managed
for a total of $366,229.

5

Table 1.--Size of business, 14 wholesale container ornamental plant nurseries
in Florida, 1981

Average Average Average
Item Unit all 14 6 larger 8 smaller Your
nurseries nurseries nurseries nursery
The one best measure
A Value of own plants solda... $ 349,986 602,840 160,345
Other useful indicators of size
Value of own plants sold
B adjusted for change in..... $ 454,166 742,131 238,191
plant inventory
C Plant production area.......sq ft. 417,046 759,681 160,070 .
D Plant production area.......acres 9.6 17.4 3.7
E Average fulltime
equalvent employeesb.......number 14.7 27.2 5.4
Capital owned in:
F Growing plants.............. $ 316,107 521,588 161,997
G Land ................... .. $ 40,745 34,666 45,304
H Machinery & equipment....... $. 29,008 43,139 18,409
I Buildings & improvements.... $ 62,439 109,865 26,870
J Supplies.................... $ 44,402 91,449 9,117
K Total owned capital........ $ 492,701 800,707 261,697
Capital managed in:
L Growing plants.............. $ 316,107 521,588 161,997
M Land.................... .. $ 116,924 73,793 149,273
N Machinery & equipment....... $ 29,008 43,139 18,409
0 Buildings & improvements.... $ 62,761 109,865 27,433
P Supplies.................. $ 44,402 91,449 9 117
Q Total managed capital...... $ 569,202 839,834 366,229

aValue of own plants sold--is the value of
cost of plants purchased for immediate resale.
for growing-on 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.
dCapltal 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 100.2 cents per square foot. For the larger nurser-
ies, the average was 79.4 cents per square foot, or only 79 percent of the rate
of the smaller nurseries. The average for all 14 nurseries was 83.9 cents.
When sales were adjusted for changes in plant inventory values (Table 1B +
1C), the rate for the smaller nurseries increased to 148.8 cents, up over 48J
cents. For the larger nurseries, it increased over 18 cents to an average of
97.7 cents per square foot. This was 65 percent of the rate for the smaller
nurseries. The average for all 14 nurseries was 108.9 cents, up 25 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 1F 1D) for the
smaller nurseries averaged $44,084 per acre. For the larger nurseries, it av-
eraged $29,908, or about 68 percent of the average per acre for the smaller
nurseries. The average for all 14 was $33,017.

Table 2.--Rates of production, 14 wholesale container ornamental plant
nurseries in Florida, 1981.

Average Average Average
Item Unit all 14 6 larger 8 smaller Your
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per
sq ft in prod..(Table 1A+1C) cents 83.9 79.4 100.2
SOther useful indicators
Value of own plants sold per
sq ft adjusted for inventory cents 108.9 97.7 148.8
change.........(Table 1B1iC)
Value of own plants sold per
acre in prod...(Table 1A*1D) $ 36,556 34,567 43,635
--- adjusted for Inventory
change.........(Table 1B+1D) $ 47,437 42,554 64,819
Plant inventory value per
acre In prod...(Table 1F+1D) $ 33,017 29,908 44,084

Labor Efficiency (Table 3)

"Value of own plants sold per employee" (Table 1A + 1E) was selected as
the one best measure of labor efficiency. This was $29,804 per employee for
the smaller nurseries. For the larger nurseries, the average was $22,180, or
about 25 percent below the volume per employee of the smaller nurseries. For
all 14, the average was $23,760.
Plant sales adjusted for changes in inventory (Table 1B + 1E) increased
$14,463 for the smaller nurseries to an average of $44,273. For the larger
nurseries, they increased $5,124 to an average of $27,304. This was 13 percent
below the average for the smaller nurseries. The average for all 14 nurseries
was up $7,073 to $30,833.
Production area per employee (Table IC + 1E) averaged 29,753 square feet
for the smaller nurseries. For the larger nurseries, the average was 27,950
square feet, or 1800 square feet less than the average of the smaller
nurseries. For all 14 nurseries, the average was 28,313 square feet.

Table 3.--Labor efficiency, 14 wholesale container ornamental plant nurseries
in Florida, 1981

Average Average Average
Item Unit all 14 6 larger 8 smaller Your
nurseries nurseries nurseries nursery
The one best measure
Value of own plants sold per
employee.......(Table 1A+1E) $ 23,760 22,180 29,804
----------- Other use-fu-l indicators
Value of own plants sold per
employee adjusted for change $ 30,833 27,304 44,273
Inventory......(Table 1B+1E)
Average area in production
per employee...(Table 1C+1E) sq ft 28,313 27,950 29,753

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 + 1K). This is the percentage that results
from dividing the value of own plants sold by the value of capital owned. An-
nual turnover for the smaller nurseries was 61.3 percent, meaning that annual
sales amounted to 61.3 percent of the capital invested in the nursery. For the
larger nurseries, it was 75.3, or 14 percent more sales per dollar of invest-
ment than the smaller nurseries. The average for all 14 was 71.0. Using
managed capital, the figures are slightly lower for the larger nurseries and
more so for the smaller ones.
Capital owned per employee (Table 1K + 1E) in the smaller nurseries a-
mounted to $48,642. For the larger nurseries, it was $29,459, or about 60 per-
cent of the amount of the smaller nurseries. For all 14 nurseries, capital
owned per employee was $33,449.
Owned capital invested, per acre (Table 1K ID) by the smaller nurseries
was $71,216. For the larger nurseries, it was $45,912, or about 65 percent of
the rate of the smaller nurseries. The average per acre for all 14 nurseries
was $51,462.
Managed capital tied up in plant inventory (Table 1L + 1Q) for the smaller
nurseries amounted to 44.2 percent of the total. For the larger nurseries, it
was 18 points higher at 62.1 percent.
Managed capital invested in land (Table 1M + 1Q) by the smaller nurseries
represented 40.8 percent of the total. For the larger nurseries, it was much
less at 8.8 percent. The average for all 14 nurseries was 20.5 percent of the
total.
Machinery and equipment (Table 1N + 1Q) of the smaller nurseries accounted
for 5.0 percent of the total capital managed. For the larger nurseries, it was
5.1 percent, about the same as the smaller nurseries. The average for all 14
nurseries was 5.1 percent of the total.
Buildings, fences) and wells (Table 10 + 1Q) required 7.5 percent of the
total resources of the smaller nurseries. For the larger nurseries, they were
slightly higher at 13.1 percent. The average for all 14 nurseries was 11.1
percent.

Supply inventories (Table 1P + 1Q) of the smaller nurseries took 2.5 per-
cent of the managed capital of the business. For the larger nurseries, the
figure was 10.9 percent, more than triple that of the smaller nurseries. The
average for all 14 nurseries was 7.8 percent of the total capital managed in
the operation.

Table 4.--Efficiency in use of captial, 14 wholesale container ornamental plant
nurseries in Florida, 1981

Average Average Average
Item Unit all 14 6 larger 8 smaller Your
nurseries nurseries nurseries nursery
---- -- --The one best measure

Annual turnover of managed
capital value...(Table 1A+1K)
Other useful indicators
Annual turnover of managed
capital value...(Table 1A*1Q)
Per employee
Capital owned...(Table 1K1E)
Capital- managed.(Table IQ+1D)
Per acre:
Capital owned...(Table IKID)
Capital managed.(Table 1Q+1D)
Managed capital/employee in:
Plants..........(Table 1LI1E)
Land............(Table 1M+1E)
Mach & equip....(Table 1N+1E)
Buildings.......(Table 101E)
Managed capital/acre in:
Plants..........(Table IL+ID)
Land............(Table 1M+1D)
Mach & equip....(Table 1N+1D)
Buildings.......(Table 10+1D)
Percent of capital managed in:
Plants..........(Table 1Lf1Q)
Land............(Table 1M+1Q)
Mach & equip....(Table 1N+1Q)
Bldgs, etc......(Table 10O+Q)
Supplies........(Table 1P*1Q)
Total nursery..(Table 1Q+1Q)

S 71.0

% 61.5

$ 33,449
$-.. 38,642

$ 51,462
$ 59,453

$ 21,460
$ 7,938
$ 1,969
$ 4,261

$ 33,017
$ 12,213
$ 3,030
$ 6,555

% 55.5
% 20.5
% 5.1
% 11.1
$ 7.8
% 100.0

eAnnual turnover of capital value.
dividing the value of own plants sold
1K or 1Q).

--is the percentage that results from
(Table 1A) by the value of capital (Table

75.3

71.8

29,459
30,899

45,912
48,156

19,190
2,715
1,587
4,039

29,908
4,231
2,474
6,314

62.1
8.8
5.1
13.1
10.9
100.0

61.3

43.8

48,642
68,072

71,216
99,662

30,111
27,746
3,422
5,080

44,084
40,622
5,010
7,414

44.2
40.8
5.0
7.5
2.5
100.1

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 $65,043. For the larger ones, this.expenditure was
almost five times that amount, or $291,383.
Production Supplies
Production supplies Include the group starting with "plants and seeds"
through "other production supplies". They averaged $53,698 in the smaller
nurseries. For the larger ones, they were $155,462, almost three times more.
Other Production Costs
Other production costs include "repairs" and "equipment operating
costs". They averaged $10,950 In the smaller nurseries. The larger ones had
$43,839, or four 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 $22,921 in the smaller nurseries. The
larger ones had $68,313, about three times those of the smaller ones.
Total Cash Costs
Total cash costs in the smaller nurseries averaged $152,612. For the
larger ones, they were $558,997, over three and a half 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
$48,303 in the smaller nurseries. For the larger ones, they were $155,064,
three times the expense of the smaller nurseries.
Total All Costs
Total costs in the smaller nurseries averaged $200,915. For the larger
ones, they were $714,061, or three and a half times more.

Table 5.--Dollar costs by expense category, 14 wholesale container ornamental
plant nurseries in Florida, 1981

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

Cash costs
Operator's salary.................. 27,753
Other wages & salaries.............134,293
Plants & seeds to grow on.......... 25,717
Cans & other growing containers.... 31,416
Peat, soil, shavings, etc.......... 16,897

Fertilizer & lime.................. 8,985
Pesticides & other chemicals....... 5,065
Other production supplies.......... 9,231
Repairs & maintence................ 9,241
Equipment operating costs.......... 15,804
Travel & entertainment............. 5,966
Insurance.................. ...... 5,777
Telephone....................... 2,247
Electricity ................. ... 3,952
Taxes, licenses, bonds............. 2,460
Adverstising.................... 1,788
Rent: land and/or buildings........ 7,066
Other cash expense................. 13,119
Total cash costs..................326,777

Non-cash costs
Depreciation: mach & equip.......... 7,680
Depreciation: bldgs, fences, wells. 10,777
Inventory decrease in supplies..... 829
Interest on capital, 15%.......... 73,905
Total non-cash costs.............. 93,191
Total all costs......................419,968

37,262
254,121
39,002
52,586
28,841
14,793
9,311
10,929
15,923
27,916
11,688
8,319
3,238
6,156
3,248
2,229
11,170
22,265
558,997

11,426
19,575
3,957
120,106
155,064
714,061

20,621
44,422
15.753

5,539
.7,938

=

1

4,629
1,881
7,958
4,229
6,721
1,675
3,870
1,504
2,300
1,868
1,457
3,988
6,259
152,612

4,870
4,179
0
39,254
48,303
200,915

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-
lationsips between different sizes of nurseries. But costs as a percent of the
total are useful for this purpose. These are obtained by dividing each of the
dollar expense items in Table 5 by the corresponding "Total all costs" figure
at the bottom of the table.
Salaries and Wages
Salaries and wages (includes operator) for the smaller nurseries were 32.5
percent of all costs, cash plus non-cash. For the larger nurseries, they aver-
aged 40.8 or eight percent more. The average for all 14 was 38.7 percent.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") in the smaller nurseries averaged 26.7 percent of all costs. For the
larger nurseries, they were 21.8 percent, about five percent lower. The
average for a1114 nurseries was 23.1 percent.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") for the
smaller nurseries accounted for 5.5 percent of all costs. For the larger nurs-
eries, they were 6.1 percent, or a half a percent higher. The average for all
14 nurseries was 6.0 percent of total costs.
Administrative and Overhead
These costs ("travel" through "other cash expense") for the smaller nurs-
eries amounted to 11.3 percent of all costs. For the larger nurseries, they
were 9.6 percent, or almost two percent less than the smaller nurseries. The
average for all 14 nurseries was 10.0 percent.
Total Cash Costs
Total cash costs for the smaller nurseries represented 76.0 percent of all
costs. For the larger nurseries, they were 78.3 percent of the total, or two
percent more than the smaller nurseries. 'The average for all 14 nurseries was
77.8 percent of all costs.

13

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 24.0 percent of all costs
and allowances of the smaller nurseries. For the larger ones, they were two
percent lower at 21.7 percent. The average for all 14 nurseries was 22.2
percent of all costs.

Table 6.--Percent of total costs by expense category, 14 wholesale container
ornamental plant nurseries in Florida, 1981

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

- - 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.....................

6.6
32.1
6.1
7.5
4.0
2.1
1.2
2.2
2.2
3.8
1.4
1.4
0.5
0.9
0.6
0.4
1.7
3.1
77.8

1.8
2.6
0.2
17.6
22.2
100.0

5.2
35.6
5.5
7.4
4.0
2.1
1.3
1.5
2.2
3.9
1.6
1.2
0.4
0.9
0.5
0.3
1.6
3.1
78.3

1.6
2.7
0.6
16.8
21.7
100.0

10.3
22.2
7.8
7.7
4.0
2.3
0.9
4.0
2.1
3.4
0.8
1.9
0.8
1.1
0.9
0.7
2.0
3.1
76.0

2.4
2.1
0.0
19.5
24.0
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 40.7 cents in the smaller nurseries. For the larger nurseries, they
averaged 38.4 cents, or two cents a square foot less than the smaller nurser-
ies. Thus, the average for all 14 nurseries was 38.9 cents per square foot of
growing area.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") in the smaller nurseries.averaged 33.6 cents per square foot. For the
larger nurseries, they were 20.4 cents, over 13 cents a square foot. lower than
the smaller nurseries. The average for all 14 nurseries, then, was 23.3 cents
a square foot.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") in the
smaller nurseries averaged 6.8 cents per square foot. For the larger nurser-
ies, they were 5.8 cents, or one cent a square foot less than the smaller nur-
series. The average for all 14 nurseries was 6.0 cents.
Administrative and Overhead
These costs ("travel" through "other cash expense") In the smaller nurser-
ies averaged 14.2 cents a square foot. For the larger nurseries, they were 9.0
cents, or five cents less than the cost of the smaller nurseries. The average
for all 14 nurseries was 10.2 cents a square foot.
Total Cash Costs
Total cash costs per square foot of growing area In the smaller nurseries
averaged 95.3 cents. For the larger ones, they were 73.6 cents, or about 22
cents less than the rate per square foot of the smaller nurseries. The average
for all 14 nurseries was 78.4 cents per square foot.

15

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") in the smal-
ler nurseries averaged 30.2 cents per square foot. For the larger nurseries,
they were 20.4 cents, or almost 10 cents less. Average for all 14 was 22.3
cents.
Total All Costs
Total costs for the smaller nurseries averaged over $1.25J a square
foot. For the larger nurseries, they were .94 cents, or 75 percent of the
smaller nursery costs. Average for all 14 nurseries was almost $100.7 a square
foot.
Table 7.--Costs per square foot of production area, 14 wholesale container or-
namental plant nurseries in Florida, 1981

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

--- - Cents - - -
Cash costs
Operator's salary.................. 6.7 4.9 12.9
Other wages & salaries........... 32.2 33.5 27.8
Plants & seeds to grow on......... 6.2 5.1 9.8
Cans & other growing containers.. 7.5 6.9 .9.7
Peat, soil, shavings, etc......... 4.0 3.8 5.0
Fertilizer & lime................. 2.2 2.0 2.9
Pesticides & other chemicals...... 1.2 1.2 1.2
Other production supplies......... 2.2 1.4 5.0
Repairs & maintenance............. 2.2 2.1 2.0
Equipment operating costs......... 3.8 3.7 4.2
Travel & entertainment............ 1.4 1.6 1.0
Insurance.................... .... 1.4 1.1 2.4
Telephone....................... 0.5 0.4 0.9
Electricity....................... 1.0 0.8 1.4
Taxes, licenses, bonds............ 0.6 0.4 1.2
Advertising...................... 0.4 0.3 0.9
Rent: land and/or buildings....... 1.7 1.5 2.5
Other cash expense................ 3.2 2.9 3.9
Total cash costs................. 78.4 73.6 95.3
Non-cash costs
Depreciation: mach & equip........ 1.8 1.5 3.0
Depreciation: bldgs, fences, wells 2.6 2.6 2.6
Inventory decrease in supplies.... 0.2 0.5 0.0
Interest on capital, 15%.......... 17.7 15.8 24.5
Total non-cash costs............. 22.3 20.4 30.2
Total all costs ................... 100.7 94.0 125.5

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 changed 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
27.4 cents per dollar of sales after adjusting for changes in plant inventory
values. For the larger nurseries, they were 39.2 cents, or almost 12 cents
more than the smaller nurseries. Average for all was 35.7 cents.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") in the smaller nurseries averaged 22.4 cents per dollar of adjusted
sales. Larger nurseries showed 21.0, or a cent and a half less than the smal-
ler nurseries. The average for all 14 nurseries was 21.4 cents per dollar.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") in the
smaller nurseries averaged 4.6 cents per dollar of adjusted sales. For the
larger nurseries, they were 6.0 cents, or a cent and a half more than the smal-
ler nurseries. The average for all 14 nurseries was 5.5 cents per dollar.
Administrative and Overhead
These costs ("travel" through "other cash expense") in the smaller nurser-
ies averaged 9.6 cents per dollar of adjusted sales. For the larger nurseries,
they averaged 9.1 cents, or a half cent less than the smaller nurseries. The
average for all 14 nurseries was 9.4 cents per dollar.
Total Cash Costs
Total cash costs per dollar of adjusted sales in the smaller nurseries av-
eraged 64.0 cents. For the larger nurseries, they were 75.3 cents, or 11 cents
per dollar of adjusted sales more than the smaller nurseries, The average for
all 14 nurseries was 72.0 cents per dollar.

Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") in the smal-
ler nurseries averaged 20.3 cents per dollar of adjusted sales. For the larger
nurseries, they averaged 20.9 cents, a half cent more than the cost of the
smaller nurseries. The average for all 14 was 20.5 cents.
Total All Costs
Total costs in the smaller nurseries averaged 84.3 cents, or almost 16
cents less than the value per dollar of adjusted sales. For the larger nurs-
eries, they were 96.2 cents, or four cents less than the value of each dollar
of adjusted sales. The average for all 14 nurseries was 92.5 cents per dollar.
Table 8.--Costs per dollar of sales adjusted for change in plant inventory, 14
wholesale container ornamental plant nurseries in Florida, 1981

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

- - Cents - - -
Cash costs
Operator's salary.................... 6.1 5.0 8.7
Other wages & salaries............... 29.6 34.2 18.7
Plants & seeds to grow on........... 5.7 5.3 6.6
Cans & seeds to grow on............. 6.9 7.1 6.5
Peat, soil, shavings, etc.......... 3.7 3.9 3.3
Fertilizer & lime................... 2.0 2.0 1.9
Pesticides & other chemicals........ 1.1 1.2 0.8
Other production supplies........... 2.0 1.5 3.3
Repairs & maintenance .............. 2.0 2.2 1.8
Equipment operating costs........... 3.5 3.8 2.8
Travel & entertainment............. 1.3 1.6 0.7
Insurance..... .................... 1.3 1.1 1.6
Telephone.......................... 0.5 0.4 0.6
Electricity.......................... 0.9 0.8 1.0
Taxes, licenses, bonds.............. 0.5 0.4 0.8
Advertising......................... 0.4 0.3 0.6
Rent: land and/or buildings......... 1.6 1.5 1.7
Other cash expense................. 2.9 3.0 2.6
Total cash costs................... 72.0 75.3 64.0
Non-cash costs
Depreciation: mach & equip.......... 1.7 1.6 2.0
Depreciation: bldgs, fences, wells.. 2.4 2.6 1.8
Inventory decrease in supplies...... 0.2 0.5 0.0
Interest on capital, 15%............ 16.2 16.2 16.5
Total non-cash costs............... 20.5 20.9 20.3
Total all costs...................... 92.5 96.2 84.3

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 or bill paying ability. The ability of a nurseryman to pay his bills
depends upon his cash costs relative to cash received. 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
40.6 cents per dollar of cash received. For the larger nurseries, they were
48.4 cents, or almost eight cents more than the smaller nurseries. The average
for all 14 nurseries was 46.3 cents per dollar of sales.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") in the smaller nurseries averaged 33.6 cents per dollar of sales. For
the larger nurseries, they were 25.8 cents, or about six cents less. The aver-
age for all 14 nurseries was 27.9 cents per dollar of cash received.
Other Production Costs
Other production costs ("repairs" and "equipment operating costs") in the
smaller nurseries averaged 6.8 cents per dollar of sales. For the larger nur-
series, they averaged 7.2 cents, or a half cent more. The average for all 14
nurseries was 7.1 cents per dollar of sales.
Administrative and Overhead
These costs ("travel" through "other cash expense") in the smaller nurser-
ies averaged 14.2 cents per dollar or cash received. For the larger nurseries,
they were 11.3 cents, about three cents less than the smaller nurseries. The
average for all 14 nurseries was 12.1 cents per dollar of sales.
Total Cash Costs
Total cash costs in the smaller nurseries averaged 95.2 cents leaving
about five cents to apply to non-cash costs. For the larger nurseries, they
were 92.7 cents leaving about seven cents to apply to non-cash' costs. The
average for all 14 nurseries was 93.4 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 30.1 cents in non-cash costs per dollar of sales, but had only 4.8 cents
left after paying cash costs. The larger nurseries had 25.7 cents In non-cash
costs, but had only 7.3 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, 1981.

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

- - Cents - - -
Cash costs
Operator's salary.................... 7.9 6.2 12.9
Other wages & salaries.............. 38.4 42.2 27.7
Plants & seeds to grow on........... 7.4 6.5 9.8
Cans & seeds to grow on........... 9.0 8.7 9.7
Peat, soil, shavings, etc........... 4.8 4.8 5.0
Fertilizer & lime................. 2.6 2.5 2.9
Pesticides & other chemicals........ 1.5 1.5 1.2
Other production supplies........... 2.6 1.8 5.0
Repairs & maintenance.............. 2.6 2.6 2.6
Equipment operating costs.......... 4.5 4.6 4.2
Travel & entertainment............. 1.7 1.9 1.0
Insurance ......................... 1.7 1.4 2.4
Telephone........................... 0.6 0.5 0.9
Electricity...................... 1.1 1.0 1.4
Taxes, licenses, bonds.............. 0.7 0.5 1.2
Advertising......................... 0.5 0.4 0.9
Rent: land and/or buildings......... 2.0 1.9 2.5
Other cash expense............... 3.8 3.7 3.9
Total cash costs................... 93.4 92.7 95.2
Non-cash costs
Depreciation: mach & equip.......... 2.2 1.9 3.0
Depreciation: bldgs, fences, wells.. 3.1 3.2 2.6
Inventory decrease in supplies...... 0.2 0.7 0.0
Interest on capital, 15%............ 21.1 19.9 24.5
Total non-cash costs.............. 26.6 25.7 30.1
Total all costs...................... 120.0 118.4 125.3

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 garn 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 $239,962. For the larger
nurseries, it amounted to $745,244, or over three times that of the smaller
nurseries. The average for all 14 nurseries was $455,645.
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 $98,923. For the
larger nurseries, it amounted to $188,551, or almost double that of the smaller
nurseries. The average for all 14 nurseries was $137,335.
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 invest-
ment. When the owner and operator are the same person, dividing net nursery
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 $78,302, or 29.9 per-
cent return on investment. For the larger nurseries, return to capital aver-
aged $151,289 or 18.9 percent return on investment. The average for all 14
nurseries was $109,582 return to capital, or 22.2 percent return on invest-
ment.

Table 10.--Income summary, 14 wholesale container ornamental plant nurseries in
Florida, 1981

Average Average Average
Item Unit all 14 6 larger 8 smaller Your
nurseries nurseries nurseries nursery

Value of own plants sold.......
Plant inventory change..........
Supply inventory change.........
Miscellaneous cash income......
Total gain ..................
Deduct cash costs less op sal..
Deduct non-cash costs less int.
Total deductions.............
Net nursery incomes..........
Deduct op salary or time value.
Return to capitalh..........
Rate of return to capital ..

349,986
104,180
0
1,479
455,645.
(299,024)
( 19,286)
(318,310)
137,335
( 27,753)
109,582
22.2

602,840
139,291
0
3,113
745,244
(521,735)
( 34,958)
(556,693)
188,551
( 37,262)
151,289
18.9

160,345
77,846
1,517
254
239,962
(131,990)
( 9,049)
(141,039)
98,923
( 20,621)
78,302
29.9

( )

fTotal gain--the sume of plant sales, change in plant and supply inven-
tories, and miscellaneous Income. It represents the total effect of the year's
operation, be It in the form of cash or change in inventory values.
9 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 (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.
h 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.
SRate of return to capital--return to capital divided by the value of
owned capital. It is the rate of return earned on the capital Invested.

Factors Associated With Level of Profit (Table 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 sequences
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 performances in all the areas. Nevertheless, nur-
serymen 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
or profit. Average for all 14 nurseries was $137,335. The most profitable
third of the nurseries averaged almost double this amount, or $257,422. The
least profitable third averaged only $13,382, which is but 10 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 $349,986. The most profit-
able third had $534,299 in sales, or 53 percent more than the average. The
least profitable third $193,524, or about a half of the volume of the aver-
age. 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 83.9 cents. Both the most and the least profitable
thirds were below this average at 79.5 and 53.0 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, 1981

Average Most Most
Item Unit all 14 profitable profitable Your
nurseries third (5) third (5) nursery

Level of profit
Net nursery Income (Table 10) $ 137,335 257,422 13,382
-- Factors issociited wth level of profit
Size of business (Table 1)
Value of own plants sold..... $ 349,986 534,299 193,524
Production rate (Table 2)
Sales/sq ft of area In prod..cents 83.9 79.5 53.0
Labor efficiency (Table 3)
Own plant sale/employee...... $ 23,760 22,198 20,180
Use of capital (Table 4)
Annual turnover of owned
capital value.............. % 71.0 67.2 62.6
Level of costs (Table 7)
Cost/sq ft of production area cents 100.7 96.0 72.3
Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in plant inventory...cents 92.5 86.5 126.5
Growth in the business
Increase In sales & plant
inventory over last year.... $ 144,590 290,016 18,550

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 $23,760. For both the most profitable
and least profitable third of the nurseries, sales were lower at $22,198 and
$20,180 per employee. These were 93 and 85 percent of the average.
Lower sales per employee can result during period 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
rate, 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 indicate greater sales per dollar of investment in the nursery.
Average turnover for all 14 nurseries was 71.0 percent, meaning that plant
sales during the year amount to 71.1 percent of the money invested in the op-
ertation. Both the most profitable and the least profitable third of the nur-
series had slightly lower rates of turnover at 67.2 and 62.6 percent.
Problems tha 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
expensive (though maybe unnecessary) niceties will also tend to lower the capi-
tal turnover rate.
Level of Costs
The indicator or 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 100.7 cents. This was almost 17
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 96.0 cents, which
were 161 cents more than sales per square foot. The least profitable third had
72.3 cents in costs, which was over 19 cents greater than sales per square foot
of area in production.
Problems that caused 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 operat-
ion. 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 nur-
sery 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 92.5 cents per dollar of sales after ad-
justing for changes In inventory values. Thus, on the average, sales exceeded
costs by more than seven cents for every dollar of plant sales. For the more
profitable third of the nurseries, the cost was 86.5 cents, leaving a margin of
135 cents per dollar of sales after adjusting for changes in inventory. For
the least profitable third, costs were about $1.261. Thus, this group lacked
over a quarter 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 inventory
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 nur-
seryman, other things mentioned earlier are under his direction. These Include
things that affect rates of production, level of costs, and labor efficiency.
Examples Include letting plants continue to grow after reaching salable size

without getting much if any more money for them, letting space sit vacant too
long between the time a plant is sold and another is put in its place to start
growing again, selecting varieties that grow slower or are priced low relative
to their growing time and space requirements, having disease and quality prob-
lems that reduce the yield of salable plants, failing to plan and manage for
efficient utilization of labor, ignoring needed investments in labor saving
equipment and facilities, not checking for the best price before purchasing
needs, experiencing theft or destruction of plants or supplies, practicing less
than optimum fertilizing and growing techniques, and pursuing less desirable
markets and marketing programs.
Growing 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 $144,590. This was about 41 percent of
the $349,986 value of own plants sold. The most profitable third of the nur-
series grew $290,016, -or about 54 percent of their $534,299 annual sales
rate. The least profitable third grew much less. Their growth of $18,550 was
only 13 percent of the average for all 14 nurseries, and only 10 percent of
their $193,524 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 or 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, 1981

Average 3 best 3 worst
Item Unit all 14 factor factor Your
nurseries average average nursery

Level of profit
Net nursery income (Table 10) $ 137,335 345,652 3,013
- Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold..... $ 349,986 747,959 43,998
Production rate (Table 2)
Sales/sq ft of area in .prod.. cents 83.9 262.3 39.6
Labor efficiency (Table 3)
Own plant sale/employee...... $ 23,760 38,166 16,228
Use of capital (Table 4)
Annual turnover of owned
capital value............... $ 71.0 136.3 28.3
Level of costs (Table 7)
Cost/sq ft of production area cents 100.7 52.6 284.2
Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in plant inventory... cents 92.4 78.4 143.5
Growth in the business
Increase in sales & plant
inventory over last year.... $ 144,590 412,691 (13,480)

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