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ABSTRACT

Average sales, costs and returns information are presented for 39 wholesale
woody ornamental container plant nurseries in Florida for the tax year of
1985. Average value of plant sales was $491,916. Cash costs including a
return to the operator averaged $439,206. Non-cash costs and allowances
including a 12 percent return on investment amounted to another $115,225. When
the return to the operator and return on investment were deducted, remaining
costs totaled $422,780. After adjustments for change in plant inventory value
and additions for miscellaneous income, net nursery income averaged $225,066,
and return to capital averaged $187,340 for a 23.9 percent return on invest-
ment. Comparable information is presented also for the average of the eleven
largest and thirteen smallest nurseries in the study.

KEY WORDS: Woody ornamental container nursery business analysis, income,
costs, investment, efficiency measures, Florida.

ACKNOWLEDGEMENTS

This report was made possible by the cooperating 39 woody ornamental con-
tainer plant nursery operators who made available their production and accoun-
ting records on a confidential basis for analysis and averaging. In "addition,
assistance and encouragement were supplied by Extension Ornamental Horticul-
tural Agents Terry Delvalle, Bobby Durden, Loretta Hodyss, Michael Holsinger,
DeArmand Hull, Linda Landrum, Peter Mitchell, Cathy Neal, Roger Newton, LaRue
Robinson, Robert Whittey and Victor Yingst. Acknowledgement and appreciation
of the help received, however, does not alter the fact that errors in the data
or in the interpretation of the information presented herin are the sole
responsibility of the authors.

ABSTRACT

Average sales, costs and returns information are presented for 39 wholesale
woody ornamental container plant nurseries in Florida for the tax year of
1985. Average value of plant sales was $491,916. Cash costs including a
return to the operator averaged $439,206. Non-cash costs and allowances
including a 12 percent return on investment amounted to another $115,225. When
the return to the operator and return on investment were deducted, remaining
costs totaled $422,780. After adjustments for change in plant inventory value
and additions for miscellaneous income, net nursery income averaged $225,066,
and return to capital averaged $187,340 for a 23.9 percent return on invest-
ment. Comparable information is presented also for the average of the eleven
largest and thirteen smallest nurseries in the study.

KEY WORDS: Woody ornamental container nursery business analysis, income,
costs, investment, efficiency measures, Florida.

ACKNOWLEDGEMENTS

This report was made possible by the cooperating 39 woody ornamental con-
tainer plant nursery operators who made available their production and accoun-
ting records on a confidential basis for analysis and averaging. In "addition,
assistance and encouragement were supplied by Extension Ornamental Horticul-
tural Agents Terry Delvalle, Bobby Durden, Loretta Hodyss, Michael Holsinger,
DeArmand Hull, Linda Landrum, Peter Mitchell, Cathy Neal, Roger Newton, LaRue
Robinson, Robert Whittey and Victor Yingst. Acknowledgement and appreciation
of the help received, however, does not alter the fact that errors in the data
or in the interpretation of the information presented herin are the sole
responsibility of the authors.

TABLE OF CONTENTS

ABSTRACT . . . . . . .
ACKNOWLEDGEMENTS . . . . . .
LIST OF TABLES . . . . . .
INTRODUCTION . . . . . .
PROCEDURE . . . . . .
DEFINITIONS . . . . . .
DATA AND RESULTS . . . . . .
Size of Business . . . . .
Rates of Production . . . . .
Labor Efficiency . . . . .
Efficiency in the Use of Capital . . .
Dollar Costs by.Expense Category* . . .
Percent of Total Costs by Expense Category* . .
Cost Per Square Foot of Production area* . .
Cost Per Dollar of Sales Adjusted for Inventory Change*
Cost Per Dollar of Sales* . . . .
Income Summary . . . . . .

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

Balance Sheet . .. . . . .

Current Assets . .
Long Term Assets .' .
Total Assets . .
Liabilities . .
Net Worth ....
Profitability Model . .
Margin Management . .
Asset Management . .
Leverage Management .
Factors Associated With Level of

. .
. .
. .

Profi ts

* D

*
. .
. .

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

Range of Figures . .
CONCLUDING COMMENTS . .

*These sections also contain
Salaries and Wages
Production Supplies
Other Production Costs
Administrative and Overhe

the following subcategories:

Total Cash Costs
Non-Cash Costs
-ad Total All Costs

Page

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iii

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22
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23
23
24
24
24
"24
24
26
26
26
27
28
29
29
30

. . . . 30
. . . . 31

I I I ~

LIST OF TABLES

Table Page
1 Size of business, 39 wholesale woody ornamental container nurseries
in Florida, 1985 . ... . . . . . 5

2 Rates of production, 39 wholesale woody ornamental container
nurseries in Florida, 1985 ... .. . .. ... ... .... 6

3 Labor efficiency, 39 wholesale woody ornamental container nurseries
in Florida, 1985 . .... .. . . . . 7

4 Efficiency in the use of capital, 39 wholesale woody ornamental
container nurseries in Florida, 1985 ... . .. .. 9

5 Dollar costs by expense category, 39 wholesale woody ornamental
container nurseries in Florida, 1985 . . . . 11

6 Percent of total costs by expense category, 39 wholesale woody
ornamental container nurseries in Florida, 1985 . .... . 13

7 Costs per square foot of production area, 39 wholesale woody
ornamental container nurseries in Florida, 1985 . .. . 15

8 Costs per dollar of sales adjusted for change in plant inventory,
39 wholesale woody ornamental container nurseries in Florida, 1985 17

9 Cost per dollar of sales (no adjustment for change in plant inventory)
39 wholesale woody ornamental container nurseries in Florida, 1985 19

10 Income summary, 39 wholesale woody ornamental container nurseries
in Florida, 1985 . . . . . . 21

11 Balance sheet, 39 wholesale woody ornamental container nurseries
in Florida, 1985 . .... .. . . . . 23

12 Factors associated with level of profit, 39 wholesale woody ornamental
container nurseries in Florida, 1985 . . . .... 26

13 Range of figures on factors associated with level of profit,
39 wholesale woody ornamental container nurseries in Florida, 1985 31

LIST OF FIGURES
Figure Page
1 Total profitability model, 39 wholesale woody ornamental container
nurseries in Florida, 1985 .... . . . . 25

BUSINESS ANALYSIS OF CONTAINER NURSERIES IN FLORIDA, 1985

J. Robert Strain and Alan Hodges

INTRODUCTION

This publication contains information on sales, costs, returns and produc-
tion efficiency for woody ornamental container nurseries in Florida for 1985.
Other publications in this series includes reports on South Florida foliage
plant nurseries, Central Florida foliage plant nurseries, and field grown
ornamental plant nurseries.
Purposes of the nursery business analysis series include:
1) Furnishing nursery operators with various physical and economic measures
that may be used in evaluating the efficiency of individual nurseries;
2) Supplying cooperating nursery operators with data so that they may make
more informed management decisions;
3) Providing individuals considering entering the wholesale plant produc-
tion business with an estimate of the input requirement and revenue potential;
4) and Providing Florida Extension personnel with data for conducting edu-
cational programs with nursery operators.

PROCEDURE

The information and averages presented in this report are based on data
supplied by 39 nursery operators in the form of confidential production and
accounting records. They participated in the program voluntarily and do not
represent a statistically selected sample. In fact, the nursery operators par-
ticipating in the Florida Nursery Business Analysis Program are thought to
represent some of the more efficient woody ornamental container nurseries in
Florida, rather than being typical of the woody ornamental container nursery
industry.

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

Data were -collected for the 1985 tax year. In some cases, data were
received for a fiscal year that did not coincide with the 1985 calendar year.
Data for fiscal years ending after July 1, 1984 and before July 1, 1986 were
included with the 1985 calendar year data.
Not all nursery operators drew a regular salary from their operation. In
these instances, an estimate of the value of the time of the operator was col-
lected and used in the analysis in order to provide a more equitable basis for
comparing data.' For the same reason, interest expense paid by the individual
nursery operator was excluded from the costs listed in this report. Instead,
an interest charge for the total owned investment was calculated at the rate of
12 percent per year and included as a non-cash cost.
The owned capital investment reflects the depreciated book value of build-
ings, improvements, machinery and equipment. Growing plants also are included
as a part of the owned capital investment, but at a value lower than the regu-
lar wholesale price. This is because, in a normal growing operation, most of
the plants in inventory are not of a salable size. Some will barely be start-
ed, some ready to sell, and others scattered in between. A common practice is
to value all plants, whether just started or almost finished at 50 percent of
their wholesale price if finished. However, some nursery operators use other
methods. For this report, the values received from the nursery operators were
the values used. Land included in owned capital investment was valued at the
original purchase price. While this may not represent the investment of a nur-
sery operator if he or she were to buy the land on 1985, it does represent the
investment actually involved in the operation.
The data from individual nurseries are averaged and presented in tabular
form. The tables present average values for all 39 nurseries, for the eleven
"largest" nurseries, and for the thirteen "smallest" nurseries. The largest
nurseries had plant sales valued at $500,000 or more. The smallest nurseries
had $100,000 or less in sales.
Nurseries participating in the program were located in the counties of
Alachua, Collier, Dade, Duval, Gadsden, Hillsborough, Lake, Lee, Leon, Manatee,
Martin, Orange, Palm Beach, Pinellas, Sarasota and Volusia. Nursery operators
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, the terms used in this report are thought to be self explani-
tory. However, experience indicates that some of the terms used here are less
familiar than others. They are defined as follows, and again later where they
are used:

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

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

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

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

Annual turnover of capital: the percentage that results from dividing the
value of own 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.

Total gain: the sum of plant sales, changes in plant and supply inventor-
ies, and miscellaneous cash income. It represents the total effect of the
year's operation, be it in the form of cash received of in the form of change
in values of inventories.

Net nursery income: the net effect of the year's operation. To obtain it,
all cash costs (except operator's salary), and all non-cash costs (except the
12 percent non-cash interest allowance on capital) are subtracted from total
gain. The result is the return for the time and managerial skills of the oper-
ator, 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 on capital: return to capital divided by the value of owned
capital. It is the rate earned on the capital invested.

DATA AND RESULTS

The data in the first nine tables present various size and efficiency mea-
sures. Data in Tables 10 through 13 relate to the profitability of woody orna-
mental nurseries. In the first four tables, more than one measure of efficien-
cy could be used. The first item in each table has traditionally been present-
ed as "The one best measure." It is followed by other measures that also are
useful for certain purposes or are meaningful to many growers. Where informa-
tion in the tables is presented to the nearest whole number, arithmetic incon-
sistancies from rounding may be noted.

Size of business (Table 1)

Size of business data in Table 1 is basic. When combined with cost data in
Table 5, it provides 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 1 item A). In other words, this is income from the sale of
the plants grown in the nursery. It averaged $491,916 for the 39 nurseries.
For the eleven largest nurseries, it was $1,274,747, or over two and one half
times the average. The smallest ones had $54,220, or about 11 percent of the
average. Adjusting sales for change in value of plant inventory (Table_1 item
B), the smallest nurseries had 128,031, or 20 percent of the average.
Production area (Table IC & 10) averaged 15.53 acres (676,557 square feet)
for the 39 nurseries. For the eleven largest nurseries, it was 43.52 acres
(1,895,689 square feet). The thirteen smallest nurseries had 2.25 acres (97,795
square feet), or about 14 percent of the average.
Employee numbers (Table 1E) for the 39 nurseries averaged 11.0 people. For
the largest nurseries, it was 23.4 persons, over double the average. The thir-
teen smallest nurseries averaged 2.4 people, or about a fifth of the average.
Capital owned (Table IM) averaged $782,701 for the 39 nurseries. For the
eleven largest nurseries, it was $1,927,852, or near 2.5 times the average.
The thirteen smallest nurseries had $167,477, or 21 percent of the average.
Capital managed (Table 1U) averaged $865,322 (10 percent more than capital
owned). For the largest nurseries, it was $2,153,608. Smallest nurseries had

$186,323 in managed capital. Most to the difference was in the value of land.

Table l.--Size of business, 39 wholesale woody ornamental container nurseries in
Florida, 1985.

Item Unit Average Average Average Your
all 39 11 largest 13 smallest nursery
The one best measure
A Value of own plants sold(a) $ 491,916 1,274,747 54,220
Other useful indicators of size
Value of own plants sold
B adjusted for change in $ 628,910 1,625,355 128,031
plant inventory value

C Plant production area. .. sq ft 676,557 1,895,689 97,795
D Plant production area. acres 15.53 43.52 2.25

E Average fulltime
equivalent employees(b). number 11.0 23.4 2.4

Capital owned(c) in:
F Growing plants ...... $ 568,176 1,482,495 106,511
G Land . . .. $ 47,-572 71,881 37,664
H Machinery & equipment. .. $ 49,043 134,354 5,514
I Buildings 8 improvements $ 46,291 77,990 .8,197
J Supplies .. ...... .. $ 16,800 -37,258 3,413
K Accounts receivable $ 33,850 87,812 2,261 '
L Cash/checkbook balance $ 20,969 36,062 3,917
M Total owned capital $ 782,701 1,927,852 167,477

Capital managed(d) in:
N Growing plants ...... $ 568,176 1,482,495 106,511
0 Land . . .. $ 122,898 279,455 56,510
P Machinery & equipment. $ 49,415 134,354 5,514
Q Buildings & improvements $ 53,214 96,172 8,197
R Supplies ... ... .. $ 16,800 37,258 3,413
S Accounts receivable $ 33,850 87,812 2,261
T Cash/checkbook balance $ 20,969 36,062 3,917
U Total managed capital $ 865,322 2,153,608 186,323

(a) Value of own plants sold--is the value of total plant sales minus the
cost of plants purchased for immediate resale. The cost of plant purchased for
growing-on is not deducted.
(b) Fulltime equivalent employee-is the equivalent of one person workLng 40
hours a week for 52 weeks a year J2080 hours).
(c) Capital owned--i.s the current value originall cost less depreciatLon
taken) of capital assets in the nursery operatLon. Related debt Ls not deducted
in this determination of the value of capital owned.
(d) Capital managed--is the. value of capital owned pJus the value of addi-
tional capLtal Ltems 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 I
item A divided by item C) was selected as the one best measure of nursery pro-
duction rate. The average value for the 39 nurseries was 72.7 cents per square
foot. For the eleven largest nurseries, it was 67.2 cents per square foot.
The thirteen smallest nurseries had 55.4 cents per square foot, or three quar-
ters of the average sales per square foot of production area.
When sales were adjusted for change in inventory value (Table 1B divided by
IC), the rate increased 20 cents per square foot, to 93.0 for all 39 nurseries.
Largest nurseries increased 18.5 cents to 85.7, and smallest nurseries increas-
ed 75.5 cents to 130.9 cents per square foot.
Production rate per square foot was given preference because of the ease in
comparing it with costs per square foot aspresented 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 divided by 1D) a-
veraged $36,582.- For the largest nurseries, it was $34,065, about 93 percent
of the average. Smallest nurseries averaged 30 percent more, $47,443.

Table 2.--Rates of production, 39 wholesale woody ornamental container nurseries
in Florida, 1985.

Item Unit Average Average Average Your
all 39 11 largest 13 smallest nursery
The one best measure-
Value of own plants sold per
sq ft in prod. (Table 1A/1C) cents 72.7 67.2 55.4
Other useful indicators
Value of own plants sold per
sq ft adjusted for inventory
change - (Table IB/1C) cents 93.0 85.7 130.9

Value of own plants sold per
acre in prod. (Table IA/1D) $ 31,672 29,292 24,151
--- adjusted for inventory
change - (Table 1B/1D) $ 40,492 37,348 57,028

Plant inventory value per
acre in prod. (Table 1F/1D) $ 36,582 34,065 47,443

Labor Efficiency (Table 3)

"Value of own plants sold per employee" (Table 1 item A divided by item E)
was selected as the one best measure of labor efficiency. This averaged
$44,513 per employee for the 39 nurseries. For the eleven largest nurseries,
sales averaged $54,574, or 23 percent more than the average. The thirteen
smallest nurseries had $23,078 per employee. This was about half of the aver-
age sales per employee.
Adjusting for change in inventory value (Table 1B divided by 1E) increased
the average by $12,396 to $56,909. For the eleven largest nurseries, the
increase was $15,011 per person to $69,585, 22 percent more than the average.
The thirteen smallest nurseries were up $31,417 per person to $54,495. This
was more than double the value of own plants sold per employee, and brought the
smallest nursery average up to about 96 percent of the all nurseries average
sales per employee. Thus, the smallest nurseries were making major increases
in their plant inventories.
Production area per employee (Table IC divided by 1E) averaged 61,221
square feet. For the eleven largest-nurseries, it was 81,158 square feet, or
32 percent greater than average. The thirteen smallest nurseries had 41,625
square feet per employee, or two-thirds of the average.

Table 3.--Labor efficiency, 39 wholesale woody ornamental container nurseries in
Florida, 1985.

Item Unit Average Average Average Your
all 39 11 largest 13 smallest nursery
The one best measure
Value of own plants sold per
employee (Table 1A/1E) $ 44,513 54,574 23,078
Other useful indicators
Value of own plants sold per
employee adjusted for change
in inventory (Table IB/1E) $ 56,909 69,585 54,495

Average area in production
per employee (Table 1C/1E) sq ft 61,221 81,158 41,625

Efficiency in Use of Capital (Table 4)

A number of possibilities exist for measuring efficiency in the use of cap-
ital. The one selected as the best single indicator was "Annual turnover of
owned capital value." This is the percentage that results from dividing the
value of own plants sold by the value of capital owned (Table 1A divided by
1M). Annual turnover averaged 62.8 percent for the 39 nurseries. This means
that sales for the year equaled less than two thirds of the capital invested.
For the eleven largest nurseries, it was 66.1, which was a 3.3 percent faster
turnover rate than the average. The thirteen smallest nurseries had 32.4, which
was but half of the average turnover rate.
Capital invested per employee (Table IM divided by IE) averaged $70,826 for
the 39 nurseries. For the eleven largest nurseries, it was $82,535, or about
17 percent above the average, indicating a higher investment per person than
the average. Smallest nurseries had nearly the same as the average, $71,285.
Average capital investment per acre of nursery area (Table IM divided by
10) was $50,394 for the 39 nurseries. For the eleven largest nurseries, it was
$44,299, or 12 percent lower than the average. The thirteen smallest nurseries
had $74,598, or 48 percent more than the average.-
Growing plants represented 65.66 percent of the capital managed by the 39
nurseries (Table IN divided by 1U). For the eleven largest nurseries, 68.84
percent. The smallest nurseries had 57.16 percent of their capital in plants.
Managed capital invested in land (Table 10 divided by 1U) averaged 14.20
percent of the total. Largest nurseries had about the same, 12.98 percent.
Smallest ones had 30.33 percent, or 16 percent more of their capital in land.
Machinery and equipment (Table 1P divided by 1U) averaged 5.71 percent of
the total capital for the 39 nurseries. For the largest nurseries, it was 6.24
percent, a little more. In the smallest nurseries, it represented 2.96 percent
of the total capital managed, a much smaller amount.
Buildings and installations (Table 1Q divided by 1U) averaged 6.15 percent
of all capital. The eleven largest nurseries had 4.47 percent of their capital
in buildings. For smallest nurseries, it was 4.40 percent of the total.
Supply inventories (Table IR divided by 1U) averaged 1.94 percent for all
39 nurseries. Largest nurseries averaged only 1.73 percent, and smallest nur-
series encumbered only 1.83 percent of the managed capital in supply inventory.
Accounts receivable (Table 1S divided by 1U) averaged 3.91 percent. For

the largest nurseries, this figure was 4.08 percent. The Smallest nurseries
had but 1.21 percent of their funds invested this way.
Cash/checkbook balance (Table IT divided by 1U) averaged 2.42 percent of
the total capital. Largest averaged 1.67 percent, smallest 2.10 percent.

Table 4.--Efficiency in use of capital, 39 wholesale woody
nurseries in Florida, 1985.

ornamental container

Item Unit Average Average Average Your
all 39 11 largest .13 smallest nursery
The one best measure
Annual turnover(e) of owned
capital value (Table 1A/1M) % 62.8 66.1 32.4
Other useful indicators

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

Per employee:
Capital owned (Table 1M/1E)
Capital managed (Table IU/1E)

Per acre:
Capital owned (Table IM/1D)
Capital managed (Table IU/1D)

Managed capital/employee in:
Plants - (Table 1N/1E)
Land - (Table 10/1E)
Mach/equip (Table IP/IE)
Buildings/wells (Table 1Q/1E)
A/R - (Table 1S/1E)

Managed capital per acre in:
Plants - (Table 1N/1D)
Land - (Table 10/1D)
Mach/equip (Table IP/ID)
Buildings/wells (Table 1Q/1D)
A/R - (Table 1S/1D)

Percent of capital managed in:
Plants - (Table IN/IU)
Land - (Table 10/1U)
Mach/equip (Table IP/1U)
Buildings/wells (Table 1Q/1U)
Supply inv (Table 1R/1U)
A/R - (Table IS/1U)
Cash/checkbook- (Table 1T/lU)
Total nursery- (Table lU/1U)

56.8

70,826
78,302

50,394
55,714

51 ,414
11,121
4,472
4,815
3,063

36,582
7,912
3,182
3,426
2,179

65.66
14.20
5.71
6.15
1.94
3.91
2.42
100.00

59.2

82,535
92,200

44,299
49,487

63,469
11,964
5,752
4,117
3,759

34,065
6,421
3,087
2,210
2,018

68.84
12.98
6.24
4.47
1.73
4.08
1.67
100.00

29.1

71,285
79,306

74,598
82,992

45,336
24,053
2,347
3,489
963

47,443
25,171
2,456
3,651
1,007

57.16
30.33
2.96
4.40
1.83
1.21
2.10
100.00

(e) Annual turnover of capital value--the percentage received from dividing
the value of own plants sold by the value of capital (Table 1A/1M or 1U).

Dollar Costs by Expense Category (Table 5)

Dollar costs by expense category were obtained from the annual profit and
loss statement or tax records of the participating nurseries. The cash cost
categories were grouped into wages and salaries, production supplies, other
production costs, and administrative and overhead expense. Dollar costs should
be useful for comparing the relative magnitude of the various cost items, and
as a guide to persons interested in Florida woody ornamental container
nurseries as an investment, either as buyers, sellers or lenders.
Salaries and Wages
The salary and wage group includes operator salary or time value. For the
39 nurseries, they averaged $206,131. For the largest nurseries, they were
$509,581. Smallest ones had $33,129, or one sixth that of the largest ones.
Production Supplies
Production supplies include the group starting with "plants and seeds"
through "other production supplies." They averaged $152,717.for the 39 nurs-
eries. For the largest nurseries, they were $355,527, or 2.3 times the
average. The-smallest nurseries had $22,825, or 15 percent of the average.
Other Production Costs
Other production costs include "facility repairs/maintenance" and "equip-
ment operating costs." They averaged $31,365 for the 39 nurseries. For the
eleven largest nurseries, they-were $76,247, more than double the average. The
smallest nurseries had $7,618, or one quarter of the average.
Administrative and Overhead
Administrative and overhead expenses usually cannot be assigned to any par-
ticular crop or growing activity, yet must be covered in order to remain in
business. They include the group starting with "travel/trade shows" through
"other cash expenses." They averaged $48,992 for the 39 nurseries. For the
largest nurseries, they were $118,014, or 2.4 times the average. The smallest
nurseries had $8,494, about 17 percent of the average.
Total Cash Costs
Total cash costs averaged $439,206. Largest nurseries averaged 2.4 times
this, or $1,059,369. Smallest ones had $72,066, or 16 percent of the average.
Non-Cash Costs
Non-cash costs include depreciation allowances, decreases in the supply in-
ventory (using supplies purchased during a previous time period), and an inter-

est charge for the use of the capital invested in the nursery. These costs av-
eraged $115,225. Largest nurseries had $273,828, about two and a third times
the average. The smallest ones had $24,064, or 21 percent of average.
Total All Costs
Total costs averaged $554,431. Largest nurseries averaged $1,333,197 (2.4
times the average), and smallest ones had $96,130 (17 percent of the average).

Table 5.--Dollar costs by expense category, 39 wholesale woody ornamental
container nurseries in Florida, 1985.

Item

Average
all 39

Cash Costs
Operator's salary . .
Other wages/salaries . .
Salaries and wages . .

Plants & seeds to grow on .
Growing containers . .
Peat/soil/shavings, etc .. .. .
Fertilizer/lime . . .
Pesticides/other chemicals .
Other production supplies .
Production supplies . .

Facility repairs/maintenance .
Equipment operating costs .
Other production costs .

Travel/trade show . .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes/licenses/bonds . .
Advertising . . .
Rent: land and/or buildings .
Other cash expenses . .
Administrative and overhead .
TOTAL CASH COSTS . .

Non-Cash Costs
Depreciation: mach/equipment. .
Depreciation: bldgs/fences/wells.
Inventory decrease in supplies..
Interest on capital, 12% .
NON-CASH COSTS . .

TOTAL ALL COSTS . .

37,727
168,405
206,132

44,177
37,462
27,013
14,639
11,968
17,457
152,717

12,595
18,770
31,365

3,357
8,075
2,641
5,966
3,155
5,320
8,736
11 ,742
48,992
439,206

11,684
8,974
643
93,924
115,225

554,431

Average Average Your
11 largest 13 smallest nursery
- -Dollars- - - -

70,127
439,454
509,581

77,475
94,039
70,404
35,079
33,400
45- 130
355,527

30,780
45 467
76,247

7,183
18,726
5,332
16,453
4,775
15,416
26,928
23,201
118,014
1,059,369

28,661
13,825
0
231,342
273,828

1,333,197

16,974
16,156
33,129

7,193
5,320
4,190
2,339
1,287
2,496
22,825

2,271
5,347
7,618

1,216
1,480
892
1,081
1,554
279
636
1,356
8,494
72,066

2,314
1,196
457
20,097
24,064

96,130

=P= m = = =1' I P-~ileP =~D~

----s=o~~--sns

Percent of Total Cost 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 rela-
tionships 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) averaged 37.2 percent of all costs
for the 39 nurseries. For the eleven largest ones, they were 38.2 percent, or
one percent greater than the average. The thirteen smallest nurseries had 34.5
percent, or 2.7 percent less than the average.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 27.5 percent for the 39 nurseries. For the largest nurseries,
they were 26.7 percent. The smallest nurseries averaged 23.7 percent of total
costs.
Other Production Costs
Other production costs ("facility repairs"-and "equipment operation") aver-
aged 5.7 percent for the 39 nurseries. For the eleven largest ones, they were
also 5.7 percent. The thirteen smallest nurseries had 7.9 percent, or 2.2 per-
cent higher than the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 8.8 percent of
all costs for the 39 nurseries. For the eleven largest ones, they were also
8.8 percent. The smallest nurseries had 8.9 percent.
Total Cash Costs
Total cash costs represented 79.2 percent of all costs and allowances for
the 39 nurseries. For the largest ones, it was 79.4 percent. The smallest
ones had 75.0 percent, or four percent less than the average expense in the
form of cash costs.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") are the addi-
tional costs that need to be covered eventually, though not necessarily with

cash during this accounting period. They averaged 20.8 percent of total costs
for the 39 nurseries. For the eleven largest ones, they were 20.5 percent.
The five smallest nurseries had 25.0 percent of their total as non-cash costs.
This was four percent more than the average. The largest differences were in
the percentages of total costs represented by interest on capital.

Table 6.--Percent of total costs by expense category, 39 wholesale woody
ornamental plant nurseries in Florida, 1985.

Item Average Average Average Your
all 39 11 largest 13 smallest nursery
- - -Percent- - - -
Cash Costs
Operator's salary . . 6.8 5.2 17.7
Other wages/salaries ....... 30.4 33.0 16.8
Salaries and wages ....... 37.2 38.2 3-4.5

Plants & seeds to grow on ..... 8.0 5.8 7.5
Growing containers. ........ 6.7 7.1 5.5
Peat/soil/shavings, etc ...... 4.9 5.3 4.4_
Fertilizer/lime . . 2.6 2.6 -2.4
Pesticides/other chemicals .. 2.2 2.5 1.3
Other production supplies ..... -3.1 3.4 2.6
Production supplies ....... 27.5 26.7 23.7

Facility repairs/maintenance .. 2.3 2.3 2.4
Equipment operating costs ..... 3.4 3.4 5.5
Other production costs ..... 5.7 5.7 7.9

Travel/trade shows ........ 0.6 0.5 1.3
Insurance . . . 1.4 1.4 1.6
Telephone . . . 0.5 0.4 0.9
Electricity . . . 1.1 1.2 1.1
Taxes/licenses/bonds ....... 0.6 0.4 1.6
Advertising . . . 0.9 1.2 0.3
Rent: land and/or buildings .. 1.6 2.0 0.7
Other cash expenses ........ 2.1 1.7 1.4
Administrative & overhead . 8. 8.8 8.9
TOTAL CASH COSTS ....... 79.2 79.4 75.0 __

Non-Cash Costs
Depreciation: mach/equipment 2.1 2.2 2.4
Depreciation: bldgs/fences/wells 1.6 1.0 1.2
Inventory decrease in supplies 0.1 0.0 0.5
Interest on capital, 12% ..... 17.0 17.4 20.9
NON-CASH COSTS ..... 20.8 20.6 25.0

TOTAL ALL COSTS ........ 100.0 100.0 100.0

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 area in produc-
tion figure from Table 1C, "Plant production area." This growing area only.
It does not include drives or roadways
Salaries and Wages
Salaries and wages (includes operator) per square foot of production area
averaged 30.5 cents for the 39 nurseries. For the largest ones, they were 26.9
cents, or 3.6 cents less than the average. The smallest nurseries had 33.9
cents, or 3.4 cents above the average.
Production -Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 22.6 cents. For the eleven largest nurseries, they were 18.8
cents. Smallest nurseries had 23.3 cents.
Other Production Costs
Other production costs ("facility repairs" and "equipment operation") aver-
aged 4.6 cents in the 39 nurseries. For the largest ones, they were slightly
.lower, 4.0 cents. The smallest nurseries had 7.8 cents, or 3.2 cents higher.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 7.2 cents per
square foot of growing area in the 39 nurseries. Largest nurseries were a cent
lower at 6.2 cents. The smallest ones had 8.7 cents, or 1.5 cents higher.
Total Cash Costs
Total out-of-pocket costs per square foot of production area averaged 64.9
cents. For the eleven largest nurseries, they were 55.9 cents, or 9 cents less
than the average. The smallest ones had 73.7 cents, or about 9 cents more than
the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") amounted to
17.0 cents in the 39 nurseries. For the largest ones, they were 14.4 cents, or
about 2.6 cents lower than the average. The smallest nurseries had 24.6 cents,
or 7.6 cents greater than the average.

Total All Costs
The total for all costs and allowances was about 82.0 cents ($0.82) in the
39 nurseries. For the eleven largest ones, they were 70.3 cents, or 11.6 cents
below the average. The smallest nurseries had 98.3 cents, or 16.4 cents over
the average cost per square foot of production area.

Table 7.--Costs per square foot of production area, 39 wholesale woody ornamen-
tal container nurseries in Florida, 1985.

Item Average Average Average Your
all 39 11 largest 13 smallest nursery
- - Cents - - -
Cash Costs
Operator's salary ... . 5.6 3.7 17.4
Other wages/salaries ...... .24.9 23.2 16.5
Salaries and wages ....... 30.5 26.9 33.9

Plants & seeds to grow on ..... .6.5 4.1 7.4
Growing containers. ........ 5.5 5.0 5.4
Peat/soil/shavings, etc ...... 4.0 3.7 4.3
Fertilizer/lime . ... .2.2 1.9 2.4
Pesticides/other chemicals 1.8 1.7 1.3
Other production supplies ..... 2.6 2.4 2.5
Production supplies ....... 22.6 18.8 23.3

Facility repairs/maintenance 1.8 1.6 2.3
Equipment operating costs ..... 2.8 2.4 5.5
Other production costs ..... 4.6 4.0 7.8 _

Travel/trade shows ........ 0.5 0.4 1.2
Insurance ......... ... 1.2 1.0 1.5
Telephone'. . . . 0.4 0.3 0.9
Electricity . . . 0.9 0.9 1.1
Taxes/licenses/bonds ....... 0.4 0.2 1.6
Advertising . . . 0.8 0.8 0.3
Rent: land and/or buildings .. 1.3 1.4 0.7
Other cash expenses ........ 1.7 1.2 1.4
Administrative and overhead .. 7.2 6.2 8.7
TOTAL CASH COSTS. ....... 64.9 55.9 73.7

Non-Cash Costs
Depreciation: mach/equipment 1.7 1.5 2.4
Depreciation: bldgs/fences/wells 1.3 0.7 1.2
Inventory decrease in supplies. 0.1 0.0 0.5
Interest on capital, 12% ..... 13.9 12.2 20.5
NON-CASH COSTS ........ 17.0 14.4 24.6

TOTAL ALL COSTS ........ 81.9 70.3 98.3

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

Costs per square foot of growing area are important for comparing relative
costs between nurseries, and for estimating individual plant growing costs.
However, they do not indicate the profit potential of a nursery operation as
well as do costs per dollar of sales. Adjusting sales for changes in inventory
value shows how the business is doing in total, not just cash-wise. These fig-
ures were developed by dividing the dollar costs shown in Table 5 by the appro-
priate figure from Table 1B, "Value of own plants sold adjusted for change in
plant inventory value."
Salaries and Wages
Salaries and Wages (includes operator) averaged 32.8 cents per dollar of
sales after adjusting for changes in inventory. For the eleven largest nurs-
eries, they were near the same at 31.3 cents. The smallest nurseries had 25.9
cents, or almost 7 cents below the average.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 24.3 cents. Largest nurseries averaged 21.9 cents, 2.4 cents
less than the average. The smallest ones had 17.8 cents, 6.5 cents less than
the average. Higher costs in the middle third raised the average above that of
-both the largest and smallest t-ird of the nurseries.
Other Production Supplies
Other production costs ("facility repairs" and "equipment operation") aver-
aged 5.0 cents per dollar of adjusted sales. For the eleven largest nurseries,
they were 4.7 cents, slightly below the average. The smallest nurseries had
6.0 cents, or a cent over the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") amounted to 7.7 cents
per dollar of adjusted sales. Largest nurseries had 7.3 cents, almost the
average. Smallest ones were more than a cent below the average, or 6.6 cents.
Total Cash Costs
Total cash costs per dollar of adjusted sales averaged 69.8 cents. Largest
nurseries were 4.6 cents lower at 65.2 cents. Smallest ones had 56.3, 13.5
cents below the average. Again, the middle third raised the average.
Non-Cash Costs
Non-cash costs ("depreciation" through "interest on capital") averaged 18.2

cents. For the eleven largest nurseries, they were 16.8 cents, or 1.4 cents
below average. Smallest ones had 18.8 cents, a half cent above the average.
Total All Costs
Total costs per dollar of adjusted sales averaged 88.2 cents. For the

largest nurseries, they were 82.0 cents.

The smallest ones had 75.1 cents,

over 13 cents less than the average.

Table 8.--Costs per dollar of sales adjusted for change in plant inventory,
39 woody ornamental container nurseries in Florida, 1985.

Item

Average
all 39

Cash Costs
Operator's salary . . .
Other wages/salaries . .
Salaries and wages . .

Plants-& seeds to grow on . .
Growing containers . .
Peat/soil/shavings, etc .. .
Fertilizer/lime . . .
Pesticides/other chemicals ..
Other production supplies . .
Production supplies . .

Facility repairs/maintenance .
Equipment operating costs . .
Other production costs . .

Travel/trade shows . .
Insurance . . .
Telephone . . .
Electricity . . .
Taxes/licenses/bonds .
Advertising . . .
Rent: land and/or buildings .
Other cash expenses . .
Administrative and overhead
TOTAL CASH COSTS .

Non-Cash Costs
Depreciation:. mach/equLpment

Depreciation: bldgs/fences/wells
Inventory decrease in supplies. .
Interest on capital, 12% . .
NON-CASH COSTS . .

TOTAL ALL COSTS . .

6.0
26.8
32.8

7.0
6.0
4.3
2.3
1.9
2.8
277.3

2.0
3.0
5.0

0.5
1.3
0.4
0.9
0.5
0.8
1.4
1.9
7.7
69.8T

S. T.8

1.4
0..T
14.9
18.2

88.2

Average Average Your
11 largest 13 smallest nursery
- Cents - - -

4.3
27.0
31.3

4.8
5.8
4.3
2.2
2.0
2.8
21.9

1.9
-2.8
4.7

0.4
1.2
0.3
1.0
0.3
1.0
1.7
1.4
7.3
65.2

l*. 8
1..8
0.8
0.0
14.2
16.8

82.0

13.3
12.6
25.9

5..6
4.2
3.3
1.8
1.0
1.9
17.8

1.8
4.2
6.0

0.9
1.2
0.7
0.8
1.2
0.2
0.5
1.1
6.6
5 .3

t.8
0.9
0.4
T5.7

75.1

=

~~~~za~~nac-x-~--~-~~~-~--~-a~~-~---~-~-

Costs Per Dollar of Sales (Table 9)

While total business position is indicated by costs per dollar of sales ad-
justed for changes in inventory value, bill paying ability depends upon costs
relative to cash received. These figures were developed by dividing the dollar
costs shown in Table 5 by the appropriate figure from Table 1A, "Value of own
plants sold."
Salaries and Wages
Salaries and wages (includes operator) amounted to 41.9 cents per dollar of
cash received. For the eleven largest nurseries, they were 40.0 cents, or
almost a two cents less than the average. The smallest nurseries had 61.1
cents, or over 19 cents above average.
Production Supplies
Production supplies ("plants and seeds" through "other production sup-
plies") averaged 31.1 cents per dollar of cash sales. For the eleven largest
nurseries, they were 27.9 cents. The smallest nurseries had 42.1 cents, or 11
cents above average.
Other Production Costs
Other production costs ("facility repairs" and "equipment operation") aver-
aged 6.4 cents per dollar of cash received. For-the eleven largest nurseries,
they were 6.0 cents, or nearly a half cents lower. The smallest nurseries had
14.1 cents, or 7.7 cents above the average.
Administrative and Overhead
These costs ("travel" through "other cash expense") averaged 9.9 cents per
dollar of sales. For the eleven largest nurseries, they were 9.2 cents, or 0.7
cents lower. Smallest nurseries had 15.6 cents, or 5.7 cents above average.
Total Cash Costs
Total cash costs averaged 89.3 cents per dollar of cash received. For
largest nurseries, they were 83.1 cents, or 6.2 cents lower than average. The
smallest ones had 132.9 cents, nearly 43 cents above the average, and falling
short of meeting current bills by almost 33 cents per dollar of sales.
Non-Cash Costs
Non-cash costs averaged 23.4 cents. For largest nurseries, they were 21.5
cents, nearly two cents lower than the average. The smallest nurseries had
44.4 cents, or almost double the average cost per dollar of sales.

19

Total all Costs
The 39 nursery average covered the cash costs, but lacked 12.7 cents of

covering total costs.

Non-cash costs were 23.4 cents, but funds left after

paying cash costs were only 10.7 cents per dollar of sales. Largest nurseries
met cash costs with 16.9 cents to spare, but lacked 4.6 cents in meeting all
cost and allowances. For smallest nurseries, the deficit was 77 cents.

Table 9.--Costs per dollar of sales (no adjustment for change in plant inven-
tory), 39 woody ornamental container nurseries in Florida, 1985.

Item Average Average Average Your
all 39 11 largest 13 smallest nursery
- - Cents - - -

Cash Costs
Operator's salary . .
Other wages/salaries .
Salaries and wages .

Plants & seeds to grow on .
Growing containers . .
Peat/soil/shavings, etc. .
Fertilizer/lime . .
Pesticides/other chemicals
Other production supplies .
Production supplies .

Facility repairs/maintenance
Equipment operating costs .
Other production costs .

Travel/trade shows . .
Insurance . . .
Telephone . . .
Electricity . .
Taxes/licenses/bonds .
Advertising . .
Rent: land and/or buildings .
Other cash expenses . .
Administrative and overhead
TOTAL CASH COSTS .

7.7
34.2
41.9

9.0
7.6
5.5
3.0
2.4
3.6
- 31.1

2.6
3.8
6.4

0.7
1.6
0.5
1.2
0.6
1.1
1.8
2.4
9.9
89.3

Non-Cash Costs
Depreciation: mach/equipment 2.4
Depreciation: bldgs/fences/wells 1.8
Inventory decrease in supplies. 0.1
Interest on capital, 12% . 19.1
NON-CASH COSTS . .. 23

TOTAL ALL COSTS . ... 112.7

5.5
34.5
40.0

6.1
7.4
5.5
2.8
2.6
3.5
27.9

2.4
3.6
6.0

0.5
1.5
0.4
1.3
0.4
1.2
2.1
1.8
9.2
83.1

1.1
0.0
18.2
21.5

104.6

31.3
29.8
61.1

13.3
9.8 .
7.7
4.3
2.4
4.6
42. 1

4.2
9.9
14.1

2.2
2.7
1.6
2.0
2.9
0.5
1.2
2.5
15.-6
132.9

4.3
2.2
0.8
37.1

177.3

------------------------------------- ----------------------=--

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 the money
invested in the operation. After all is said and done, it is for a payment on
his or her time that a nursery operator works, and it is for a return to capi-
tal that nursery operators and lending institutions invest funds in nursery
operations.
Total Gain
Total gain refers to the total effect of the year's operation. It is the
sum of plant sales, changes in plant and supply inventory values, and miscella-
neous income. Miscellaneous income refers to income received from sources
other than plant sales. It includes rent income, interest income, delivery
income, boxing charges, and income from the sale of fertilizer and supplies.
Total gain for the 39 nurseries averaged $647,846. Larger nurseries aver-
aged 2.5 times that amount, or $1,641,651. Smallest nurseries had a fifth of
the of the average, or $128,453.
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 it, all cash costs from Table 5 except the operator's salary, and all
non-cash costs shown there except interest on capital, are subtracted from
total gain. The result is net nursery income, or income for all the time and
capital investment supplied by the owner-operator.
For the 39 nurseries, it averaged $225,066. For the eleven largest nur-
series, it was $609,923, or 2.7 times the average. Smallest nurseries had
$69,393, or 31 percent of the average.
Return to Capital
From net nursery income is subtracted the salary or time value of the
owner-operator to obtain that part of net nursery income attributable to 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 operator and return to capital may not seem important. But
when the owners are outside investors, then accurate division is important. In

either case, rate of return is a common indicator for evaluating an investment
or for selecting between alternative investment alternatives.
Return to capital for the 39 nurseries amounted to $187,340 for a return of

23.94 percent.

For the eleven largest nurseries, it was $539,796 for a 28.00

percent return on the capital investment.

The smallest nurseries averaged

$52,419 for a 31.30 percent return on the capital invested.

Table 10.--Income summary, 39 wholesale woody ornamental container nurseries in
Florida, 1985.
3IP--------------------------=------------------------
Item Unit Average Average Average Your
all 39 11 largest 13 smallest nursery
- - -Dollars- - - -
Value of own plants sold - $ 491,916 1,274,747 54,220
Plant inventory change - $ 136,994 350,608 73,812
Supply inventory change- - $ 0 3,896 0
Miscellaneous cash income- $ 18,936 12,400 421
Total gain(f) - - $ 647,846 1 ,641,651 128,453

Deduct cash costs less op salary $( 401,480)- ( 989,242) ( 55,093)( )
Deduct non-cash costs less int $( 21,300) ( 42,486) ( 3,967)(
Total deductions - $( 422,780) (1,031,728) (- 59,060)(

Net nursery income(g)- -_- $ 225,066 609,923 69,393
Deduct op salary or time value $( 37,726) ( 70,127) ( 16,974)(

Return to capital(h) --- - $ 187,340 539,796 52,419
Rate of return to capital(i).- % 23.94 _28.00 31.30

(f) Total gain--the sum of plant sales, change in plant and supply invento-
ries, and miscellaneous income. It represents the total effect of the year's
operation, be it in the form of cash or change in inventory value.

(g) Net nursery income--the net effect of the year's operation. To obtain
it, subtract all cash costs (except operator's salary), and all non-cash allow-
ances (except interest on capital) from total gain. The result is the return
for the time and managerial skills of the operator, and for the use of the capi-
tal invested in the operation.

(h) Return to capital--the portion of net income that is left after subtrac-
ting the salary or time value of the operator. It is what the owned capital
earned.

(i) Rate of return to capital--return to capital divided by the value of
owned capital. It is the rate of return earned on the capital invested.

Balance Sheet (Table 11)

This section is a new addition to the Florida Nursery Business Analysis se-
ries. It was made possible by the collection of additional fiscal information
last year. These balance sheet figures represent the mid-year financial situa-
tion of the firms. They were derived as an average of year-beginning and year-
end figures.
Current Assets
Current assets consist of cash, accounts receivable, and inventory values.
They are cash, or items deemed convertible to cash within a year's time. Cash
on hand includes funds in checking accounts, savings accounts, and money market
funds. Average cash on hand was $20,969. Largest nurseries had 1.7 times this
amount ($36,062). Smallest ones had 19 percent of the average ($3,917).
Accounts receivable include uncollected payments from all sources; the majority
of these are trade accounts for plants sold. Generally, this figure should be
minimized. Uncollected funds pay no bills and earn no interest. They averaged
$33,850. Largest nurseries had 2.6 times this amount, or $87,812. The smal-
lest nurseries had $2,261, or nearly 7 percent of the average. Inventory
values are the investments in growing plants and supplies presented previously
in Table 1. They averaged $584,976. Largest nurseries averaged 2.6 times this
($1,519,753). Smallest had 19 percent of the average ($109;924). Total-
current assets averaged $639,795. For largest nurseries, they were $1,643,627
(2.6 times the average). Smallest had $116,102 (18 percent of average).
Long Term Assets
Long term assets are investments in buildings, machinery and land that nor-
mally would not be converted to cash within a year. Current values of invest-
ments are the original cost less accumulated depreciation. Comparing original
cost with the value remaining after subtracting accumulated depreciation pro-
vides an idea of the degree to which capital assets have been depleated. Origi-
nal investments averaged $233,004. Subtracting accumulated depreciation of
$90,098 leaves a current value of $142,906 (61.3 percent of original cost).
Largest nursery original cost was $478,655. Subtracting accumulated deprecia-
tion of $194,430 gives a remaining value of $284,225 (59.4 percent of original
cost). Smallest nursery original investment was only 29 percent of the average,
or $67,515. Subtracting accumulated depreciation of $16,140 makes the current
value $51,375 (76.1 percent of the original cost).

Total Assets
Total assets averaged $782,701. Largest nurseries had 2.5 times this amount
($1,927,852). Smallest nurseries had 21 percent of the average ($167,477).
Liabilities
Liabilities may be "current" (payable during the current year) or "long
term" (payable at some time after the current year). Current liabilities aver-
aged $35,669. Largest nurseries had 3.2 times this amount ($113,139). Smal-
lest ones had 9 percent of average ($3,201). Long term liabilities may be
notes or mortgages. They averaged $89,929. Largest nurseries had 1.9 times
this amount ($173,490). Smallest ones had 34 percent of the industry aver-
age' ($30,778). Total Liabili.ties represent that part of the nursery that
belongs to someone else. They averaged $125,598, or 16 percent of the assets.
Largest nurseries had 2.3 times this amount, or $286,629 (15 percent of the

Table 11.--Balance Sheet, 39 wholesale woody ornamental container nurseries in
Florida, 1985

Item Average Average Average Your
all 39 11 largest 13 smallest nursery
- - Dollars - - -
Assets
Current Assets
Cash on hand .......... 20,969 36,062 3,917
Accounts receivable. ...... 33,850 87,812 2,262
Inventories: Plants ...... 568,177 1,482,495 106,511
Supplies .... 16,799 37,258 3,413
TOTAL CURRENT ASSETS ..... 639,795 1,643,627 116,102

Long Term Assets
Machinery & equipment ...... 99,747 261,098 15,233
Buildings & fixtures ... ... 85,685 145,677 14,618
Land . . . 47,572 71,880 37,664
Sub-total (original cost). 233,004 478,655 67,515
Less accumulated depreciation. ( 90,098) ( 194,430) ( 16,140)(
TOTAL LONG TERM ASSETS 142,906 284,225 51,375

TOTAL ASSETS .......... 782,701 1,927,852 167,477

Liabilities and Net Worth
Liabilities
Current liabilities. .. 35,669 113,139 3,201
Long-term liabilities ...... 89,929 173,490 30,778
TOTAL LIABILITIES ..... 125,598 286,629 33,979

NET WORTH .. ..... ... 657,103 1,641,223 133,498

TOTAL LIABILITIES & NET WORTH 782,701 1,927,852 167,477
Ilpll4 PI PPO I=-I~P3=-.= P ----~

assets). Smallest ones had a quarter of the industry average, or $33,979 (20
percent of the assets).
Net worth
Net worth is the difference between "total assets" and "total liabilities".
This is what the owner owns. The average net worth of all 39 nurseries was
$657,103 (84 percent of the assets). Largest nurseries had $1,641,223 (85
percent). Smallest nurseries averaged $133,498 (80 percent of the assets).

Total Profitability Model

The Total Profitability Model combines operating statement and balance
sheet figures in three sections: margin management, asset management and lever-
age management. Together, they indicate the firm's return on net worth.
Margin Management
Figures for this section come from Table 12. From nursery total gain
($647,846) are subtracted total deductions ($422,780) plus operator's salary
($37,726) to give return to capital ($187,340). This divided by total gain
($647,846) yields an average net profit margin of 28.92 percent: Largest nur-
series averaged a net profit margin of 32.88 percent. Smallest nurseries aver-
aged 40.81 percent.
Asset Management
Figures for this section come from the asset portion,of Table 13. Current
assets ($639,795) plus long term assets ($142,906) make total assets of
$782,701. This divided into total gain ($647,846) gives an asset turnover
figure of 0.83. Asset turnover times net profit margin (28.92 percent) result
in an average return to capital of 23.94 percent. Largest nurseries averaged
28.00 percent return to capital. Smallest ones averaged 31.30.
Leverage Management
Figures for this section come from the liabilities and net worth portion of
Table 13. Current liabilities ($35,669) plus long term liabilities ($89,929)
gives average total liabilities of $125,598. This subtracted from total assets
($782,701) yields average net worth of $657,103. Total liabilities and net
worth divided by net worth gives a leverage factor of 1.19. Leverage times re-
turn to capital (23.94 percent) gives a return on net worth of 28.51 percent.
Largest nurseries had 32.89 percent. Smallest nurseries averaged 39.28 percent.

MARGIN MANAGEMENT
TOTAL GAIN'
1,641,651 KEY
647,846 E TURN TO Largest
128.45! c ^t^AL Average
3.76 I Smallest
187.340 NET PrOFIT
TOTAL COSTS 52 419 M*AOIN,
1J.101,855 88
460,506 28.2
76,034 TOTAL GAIN 40.81 %
1 641 651
7" ATE OF
47 846 ITU N To
128.43 CAPTAL
28.00 o
ASSET MANAGEMENT x 3 3 4
31.30
CASH TOTAL GAIN
36,062 TOTAL 1 ,641 ,651
20.967 CURREtNT ASSETS 647 846
3.917 1 .643.627A 1 128,453 A1 sET TUNOVE
+ 639.795 1 0.85
cCOUNs ReC 116.102 0.83
87812 0.77
3 850
2.262 + TOTAL ASSETS IrTURN ON
+ 1 .927. 852 NET WORTH
ANT INVENTOIRY 782.701 32.89 %
.482.495 167,477 28.51 %
68.177 1 39.28 %
106. 5 1 1 LONG TERM ASSETS

JPPLY INVENTORY 142.90
.37,258 51,374
16.800

x

Figure 1.--Total profitability model, 39 wholesale woody ornamental container
nurseries in Florida, 1985.

Factors Associated With Level of Profit (Table 12)

In this section, information presented earlier .is re-grouped to concentrate
attention on factors that are generally deemed related to level of profit in a
woody ornamental nursery. The factors are presented in the same sequence that
they appeared before. But here, the average for all 39 nurseries is compared
with the average for the thirteen most profitable and the thirteen least prof-
itable 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 areas. Nevertheless, nursery
operators analyzing their own operations may find this section especially valu-
able 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 39 nurseries was $225,066. .The most profitable
third of the nurseries averaged 2.7 times this amount, or $610,554. The least
profitable third averaged -$30,031. The following compares the average for
these three groupings of woody ornamental nurseries using one indicator from
most of the proceeding tables. A more complete analysis would use all indica-
tors listed for each table. For in most cases, each indicator measures things
from a little different angle.
Size of Business
The indicator of size of business selected from Table 1 was "Value of own
plants sold." The 39 nurseries averaged $491,916. The most profitable third
had $1,044,046 in sales, or 2.1 times more. The least profitable group aver-
aged $133,406, or 27 percent of the average. This does not mean that small
businesses cannot be profitable, but it does indicate that largest profits tend
to be associated with higher dollar volumes of business.
Production Rate
The indicator of rate of production selected from Table 2 was "Value of own
plants sold per square foot of total bed and bench space." In general, other
things being equal, increasing sales per square foot of total bed and bench
space should increase the profitability of a nursery operation, hence is desir-
able. The average for all 39 nurseries was 72.7 cents per square foot. The

most profitable third had 66.3, or 9 percent less, and the least profitable
third had 82.1, or 13 percent above the average. Thus, higher sales per square
foot do not necessarily predict high profitability.
Nevertheless, given a certain amount of growing space, a higher sales
volume per square foot is desirable. Lower sales per square foot of total bed
and bench space can result from a number of things, such as letting plants con-
tinue to grow after reaching salable size, letting space sit vacant too long
between the time a plant is sold and another is put in place to start growing
again, selecting varieties that grow slower or are priced low relative to their
growing time and space requirements, and having disease and quality problems
that reduce yields of salable plants. In addition, nursery layout and fertil-
izing and growing techniques can alter the time and space used for the same
crop in two different nurseries. Also, markets and marketing programs can
alter the returns received by two different nurseries for the same crop.

Table 12.--Factors associated with level of profit, 39 wholesale woody
ornamental container nurseries in Florida, 1985.

1-tem Unit Average Average 13 Average. 13 Your
all 39 most profit least profit nursery
Level of profit
Net nursery income (Table 12) $ 225,066 610,554 -30,031
Factors associated with level of profit
Size of business (Table 1)
Value of own plants sold $, 491,916 .1,044,046 133,406

Production rate (Table 2)
Sales/sq ft of area in prod cents 72.7 66.3 82.1

Labor efficiency (Table 3)
Own plant sales/employee $ 44,513 54,138 25,619

Use of capital (Table 4)
Annual turnover of owned
capital value - - % 62.9 64.9 48.8

Level of costs (Table 7)
Cost/sq ft of total prod area- cents 82.0 69.2 127.4

Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in inventory value $ 88.2 77.7 165.3

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
39 nurseries was $44,513 per person. Sales were 22 percent higher than average
at $54,138 for the most profitable third, and around 58 percent of the average
at $25,619 for the least profitable third of the nurseries. Higher sales per
employee viewed alone at this point in time might seem to indicate true effi-
ciency. On the other hand, if viewed, together with other indicators, it might
instead show less than optimum number of employees for volume of plants being
handled. This could result in tardy or untimely plant care, hence, slower
growth and lower quality plus a failure to restock empty space promptly. In
this case, other indicators such as production rate, space use intensity, capi-
tal turnover, and costs per square foot would not support the labor efficiency
indicator.
Lower sales per employee can result during periods of rapid expansion when
Extra help is needed to care for a larger numbers of plants before they begin
reaching salable size. Or it can also be the result of difficult economic
times when sales are slow, but plant care must go on. Differences between nur-
series 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 produc-
tion rate, or the result of poor management practices in the planning and uti-
lization of labor.
Use of Capital
The indicator for efficiency in the use of capital selected from Table 5
was "Annual turnover of owned capital value." This is expressed in percent.
In general, larger percentage turnover numbers are desirable, for they indicate
greater sales per dollar of investment in the nursery.
Annual turnover of owned capital averaged 62.9 percent, meaning that the
value of own plants sold during the year amounted to about two thirds the capi-
tal invested. For the most profitable third, turnover was up 2 percent, 64.9.
The least profitable third turnover was 48.8 percent, 14 percent below average.
Problems that lower turnover rate include any of the items already men-
tioned that lower production rate hence sales volume for a given nursery

investment. Low capital turnover is particularly common in nurseries just
getting started, or in nurseries that are expanding rapidly. Excessive invest-
ments in land, labor saving machinery and equipment, or expensive (though maybe
unnecessary) niceties will also tend to lower capital turnover rate.
Level of Costs
The indicator of level of costs selected was "Costs per square foot of pro-
duction area" from Table 7. This is a traditional indicator for comparing
costs between nurseries. Other things being equal, a lower cost per square
foot is desirable.
Costs for total production area averaged 82.0 cents, or 9.3 cents greater
than sales per square foot before adjusting for changes in plant inventory val-
ue. This means that sales did not cover all cash costs and non-cash allow-
ances. For the most profitable third, costs were 69.2 cents per square foot or,
which were 2.9 cents more than sales per square foot. The least profitable
third averaged 127.4 cents, which was 45.3 cents per square foot more than
sales.
Problems that cause costs per square foot to increase include inefficient
planning and utilization of labor, insufficient investment in labor saving cap-
ital items, destruction or theft of supplies and plants, 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
increased revenue. One example might be increased costs for waxed shipping
cartons in order to satisfy the requirements of a premium market.
Cost Efficiency
The indicator of cost efficiency selected was "Cost per dollar of sales ad-
justed for change in plant inventory" (Table 8). This shows how well the nurs-
ery did in total, cash plus change in inventory values. In general, lower
costs per dollar of sales are desirable.
Average for all 39 nurseries was 88.2 cents per dollar of sales after ad-
justing for changes in inventory values. Thus, on the average, the margin of
profit per dollar of sales was 11.8 cents. For the more profitable third of the
nurseries, the cost was 77.7 cents, leaving a margin of 22.3 cents per dollar
of sales after adjusting for changes in inventory. For the least profitable
third, costs were 165.3 cents. Thus, this group lacked about 65 cents per

dollar of sales after adjusting for changes in inventory value of being able to
cover all cash costs plus non-cash costs and allowances.
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 pl-ants or supplies, practicing less
than optimum fertilizing and growing techniques, and pursuing less desirable
markets and marketing programs.
Growth in the Business
Growth in sales of a business can, is normally considered to be a healthy
sign. It can be the result of all the things already mentioned that increase
sales volume or plant inventory for a given operation. To stay healthy, busi-
nesses do need to grow, at least enough to keep up with inflation. But at the
same time, growth should to be planned and orderly so that it contributes to
the profitability of an operation. By way of contrast, too rapid an expansion
program can result in excessive increases in costs and strong needs for cash
before the new plants have reached salable size. The growth indicator may look
good on paper. But tomorrow's potential sales (plant inventory) may not be
satisfactory for paying today's bills. Growth, though desirable in an economic
sense, needs to be carefully planned and executed.

Range of Figures (Table 13)

In this section, the average for all 39 nurseries is repeated for ease of
comparison. The remainder of the table differs from the-previous section in
that the three best and three worst numbers for each factor were averaged to
provide the range of high-low figures shown. In the previous section, figures
for all factors were for the same groups of high profit and low profit nurs
series. This section shows the average for the best three and worst three num-
bers regardless of the nursery or profit level to which they belong.
As can be seen in Table 13, quite a range of figures was found for most of
the factors. Nursery operators analyzing their own operation should be suspi-
cious about any of their figures that fall outside these ranges. The discussion
of things that contribute to variations in the figures in the previous section
also apply to this table.

Table 13--Range of figures on factors associated with level of profit,
wholesale woody.ornamental container nurseries in Florida, 1985

Average 3 best 3 poorest
Item Unit all 39 factor factor Your
nurseries average average nursery
Level of profit
Net nursery income (Table 12) $ 225,066 1,357.891 -164,696
Factors associated with level of profit
Size.of business (Table 1)
Value of own plants sold $ 491,916 2,548,532 24,894

Production rate (Table 2)
Sales/sq ft of area in prod- cents 72.7 498.0 27.0

Labor efficiency (Table 3)
Own plant sale/employee- $ 44,513 143,630 14,158

Use of capital (Table 4)
Annual turnover of owned
capital value - - % 62.9 132.0 12.7

Level of costs (Table 7)
Cost/sq ft of prod area- cents 82.0 42.0 405.0

Cost efficiency (Table 8)
Cost/$ sales adjusted for
change in inventory value cents 88.2 77.0 340.0

CONCLUDING COMMENTS

Nursery operators who are interested in seeing how they compare with those
participating in the Florida Nursery Business Analysis Program may calculate
their own numbers using the formulas shown and write the results on the lines
provided for this purpose on each table. Another alternative is to acquire the
University of Florida microcomputer program, WOODYNBA.BAS, for making these
calculations. Either alternative should provide some valuable insight into the
business side of operating a woody ornamental nursery. It should improve "man-
agement decisions concerning things that affect the profitability of the
nursery operation.
Nursery operators who find this kind of information useful, but have diffi-
culty finding the time or energy to engage in the tedium of doing their own
calculation may wish to consider becoming a participant in the Florida Nursery
.Business Analysis Program. If you would like to do so, contact your ornamental
agent in your nearby county Extenslon office, or contact the authors in Gaines-
ville. Nursery operators who authorize a commercial accounting firm to supply
the data required for the program can participate with a minimum of effort on
thei-r part.

	Front Cover
	Abstract
	Acknowledgement
	Table of Contents
	Main