Starting a Plant Nursery or Greenhouse Business
Richard Regan, Extension Horticulturist, Oregon State University
Chip Bubl, Extension Agent, Columbia County, Oregon State University
Nursery crops are intensive, requiring culture and management somewhat different from other agricultural enterprises, including patience and perseverance. Some crops take two or more years before they are sold. You must invest a substantial capital outlay and it usually takes 5 to 10 years before your operation breaks even. During the first few years, your earnings may need to go back into the business. Investigate and learn all you can about the nature of your business, its financial needs, organization, and profit potential.
Should you grow only one type, a few types, or an assortment of plants? As a specialized grower, you have the advantage of becoming an expert in all phases of producing and marketing a few types of high quality plants. Specialization may be a less costly way to start your business. Specialization allows small growers to compete more readily with larger nursery operations (most of which tend to diversity). Also, the small grower is more likely to be growing a particular plant in sufficient quantity to fill buyer orders. The disadvantages of specialization are the advantages of diversification. If the market for your specialty plant(s) becomes "soft," you have nothing else to pick up the slack. As a new grower, you may find an advantage in growing a few kinds of plants at first, expanding this and becoming more diversified as you gain knowledge, experience, and financial strength.
Most nursery owners are able to minimize risks and hazards through prudent planing and good organization. You should establish your short-term and long-term goals for the nursery and plan for the future accordingly. Consider the legal form of organization of the nursery carefully as each form has advantages and disadvantages. You must also develop a functional management approach that efficiently utilizes people's talents and their support systems (tools and machines, production systems, supplies, etc.).
No one will lend you money to start a nursery without a track record of production. One advantage of nursery growing as an agricultural enterprise is that it can grow incrementally as skills and production increase. Good record keeping is a necessity, both from an internal management standpoint and to eventually show a lender when the time comes to make a major jump in capacity. Most nurseries run into problems when they can't manage cash-flow over the year (they owe more at certain times than they have dollars to cover the debts). A good sales and production cash need projection is often the difference between success and failure of a business. You have to anticipate that things will not go as well as planned and prepare to financially weather the problems. Nevertheless, many nurseries have started very small on their own capital and developed into million dollar operations.
The basis for pricing should be the cost of producing the specific plant to be sold. Production costs include not only supplies (i.e., fertilizer and pesticides), labor, equipment, soil preparation, growing media, containers, irrigation and other cash costs, but also depreciation on equipment, general overhead expenses, taxes, dues, licenses, fees, insurance, payroll expenses (social security, workers compensation), interest on land and capital, plants not sold, and a return to management. Some growers suggest pricing stock high enough to include services provided (such as tagging and shipping). Once costs are determined, the grower can add the expected profit to arrive at a selling price. It's not wise to price your plants below those of your competition. Dumping low quality or distressed stock at below market prices is especially damaging to a grower's reputation.
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