Starting Your Own Nursery
Whether your business is big or small, you're looking to increase profits. While there are many ways to do this (add more clients, include more services), there is another avenue that may have not occurred to you. Ever considered adding a nursery to your business? It is becoming increasingly more common for landscape companies of all sizes to add a nursery to the existing business either to supply their own plant materials or to sell them to others. Or both.
Take a look at how two California companies (one large and one small) found it advantageous to start their own nurseries. Their reasons and methodologies have similarities, and differences. You may find that it'll work for you, too.
DOING IT BIG
American Landscape Companies, Inc. in Canoga Park, Calif., has over 900 peak-season employees, some $60 million in annual sales, has five divisions, 12 branch offices and 275 distinctive orange trucks. It also has 100 acres in nursery land. The company has had its own nursery for 30 years.
Why? Jeff Strauss, general manager of American Wholesale Nurseries, Inc., the nursery division of American Landscape, says the nursery started when the landscape division had some plants left over from a job. A small nursery grew from that and “snowballed.” Now it is a profitable part of the parent company, doing some $5 million in sales and employing 51 people in three locations.
“It gives us a little bit of an edge,” Strauss says, “both financially and logistically.” Although it grows only a small fraction of the plants for its parent company's landscape business, what it grows can be extremely beneficial to both the financial and installation aspects of the business.
“We grew thousands of trees when we landscaped Ontario Airport,” Strauss says. Contract growing (for specific jobs) is one of the most beneficial elements of having a nursery. Of course, you can only implement this strategy when you have enough lead time (a year or two), but that's not uncommon with large, commercial jobs. In addition to the Ontario Airport job, the company has also landscaped Los Angeles International Airport, the Jurassic Park Ride at Universal Studios and the Reagan Presidential Library.
On those contract-grow jobs, the nursery division can give a definite price break to the parent company and avoid a search for certain plants that may be pricey elsewhere. That can range from trees to annual color. But that window of opportunity has to be there. Up to 35 percent of the nursery's plants go to American Landscape.
The other benefit is in easy accessibility to plants for any job the company has going. For example, Strauss says that he keeps a line of annual color growing year-round, and much of it goes to American Landscape jobs in Los Angeles County and surrounds. He can respond quickly to any demand, and he also trades plants with other nurseries to give the facility the capability to provide most any plant material.
A BUSINESS IN ITSELF
But don't think of the nursery division as an afterthought of the company. It, in fact, is run as a separate and profitable entity of its own, and about half of its business is in sales to small to mid-sized landscapers, as well as gardeners who just come in to pick up a few flowers or shrubs. Another big part of his trade is to schools and municipalities.
The nursery has 65 acres of land in Simi Valley, 28 acres of growing ground in Moorpark and a small plot in Newhall, which also serves as a distribution and retail center. Both Newhall and Simi Valley sell retail — the nursery sells at three levels of wholesale as well, rewarding wholesale buyers with volume breaks. The nursery does about $5 million in sales annually.
Taking advantage of its proximity to urban Los Angeles, American pushes its retail trade. By selling on-site, it can beat the prices of the independent garden centers and compete with Home Depot and other large retailers on an equal footing.
“The margin is definitely there,” Strauss says of retail sales, which bring him more than double the wholesale price for most items. Retail accounts for about 10 percent of his volume but about 25 percent of income.
Strauss is proud of his operation, and that it can be supportive of the parent landscape company and yet make a profit on its own. He grows what he calls a “one-stop shop” of plants, meaning that, if you want it, he will either have it or find it for you. That could be a flat of begonias, a one-gallon rosebush or a 48-inch boxed olive tree. He swaps plants with 16 other nurseries as needed, and often grows plants for other nurseries that have limited land.
Another benefit to American Landscape is that the nursery can also provide other services. For example, the nursery mixes and sells its own soils, and that can be of major value when landscaping a job. Strauss also has two semi-trucks that haul all the company's heavy construction equipment around the state — having 100 acres of land gives him that kind of space.
TO EACH ITS OWN
As far as accounting goes, the nursery operates as a separate entity with its own sales and accounting staff. Final accounting and payroll are done at American Landscape's Canoga Park corporate office. Strauss says it's a simple matter to charge the parent company for the plants it buys.
“It's all under one umbrella,” he says, and it can be a financial boon to the company to have a thriving and profitable nursery in a year in which landscaping profits are more scarce. And vice versa.
KEEPING IT IN-HOUSE
Oakridge Landscape, Inc., on the other hand, has a tiny nursery plot on its property in North Hills, Calif. No wholesale, no retail. No sales at all. All the plants here are those the company — which has 125 employees and does up to $12 million in sales annually — uses in upcoming jobs.
Company president Jeff Myers says that the plot, situated on the company's 2-acre headquarters property, was established for nursery use soon after the company started up four years ago. They had a job landscaping Glendale Community College, and they had a lead time of more than a year. They decided to grow some of the plants themselves when they saw that the job required over 700 sizeable plants, most of them shrubs.
“There were some trees, too,” Myers says. With that kind of grow-in time, the company made a decision to buy small-sized plant materials and grow them to the contract size. The savings were sizeable.
Typically under such circumstances, the company buys 1-gallon plants and grows them to 5-gallon size. A shrub that costs $2-plus in the gallon costs $5.50 in the 5-gallon. It's even more for trees. A 15-gallon tree costs the company about $32, and when that tree goes to a 24-inch box, it's worth about $110.
Multiply some variation of that by 700, and you see the kind of cost savings realized in having a bit of nursery ground available. Obviously, there are other costs, though.
“You have to buy a box, soil and the labor to shift it,” Myers notes. Then the tree or shrub has to be maintained in a skillful manner for a year or two, and you have to have a skilled employee who does the transplanting to larger containers. Even after all that, the company counts a significant savings — which it can figure into the profit of the job. “Everything has to line up correctly before we'll do that.”
The other use for the nursery space is for plant materials left over from a job or acquired in odd ways. Rather than having to cart them back to the original nursery for a refund, or disposing of the plants in some other way, Oakridge can keep them on hand for other jobs or replacements in their small maintenance division.
For example, he often bids a job based on on-center plantings. But often a sidewalk or other construction interrupts the plantings, and he has plants left over. “We do get some projects, smaller ones, where we'll use that plant material,” he says. Without the nursery space, he couldn't do this kind of swapping. He will even design in certain elements specifically because he has the plants available at the nursery.
The company also lays a lot of turf — some 40 percent of its overall work is turf — and sometimes leftover sod is stored at the nursery. If a need for that sod comes up before it has to be disposed of, it can be pulled from the nursery.
What made this little nursery more plausible was the fact that Oakridge already had a small mulching operation behind the office, using plants taken from maintenance or demolition. And he has an employee who does the mulching, which doesn't take up all of his time. So the nursery came without the addition of another employee.
“There's a cost-savings there as well,” Myers says of the mulching. He doesn't have to dispose of the plant waste, and he saves money on mulch that he uses as topdressing on jobs. Having a small nursery makes sense in the context of having ready space, employee and complimentary operations going on.
Don Dale is a freelance writer who resides in Altadena, Calif.
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