fuel cost per unit

gourddy(ny4b5a)January 27, 2008

Hi Everyone

I own a small nursery and am wondering how other growers are determining what fuel cost to add to the cost of each unit for sale.

For example, if I have 5000 containers to sell for the season I would divide my fuel cost by 5000. But what if I have a bad year and only sell 3000 units? Id be losing money that way.

Does anyone have a formula that works for them. What is everyone else doing?

Thanks in advance for you ideas and help!

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gardengal48

I don't have an answer for you, as I am not a grower but a buyer of finished goods. But I do have a question. How is this any different from assigning any other related costs of doing business to the product? Surely you factor in the costs of soils, ferts, seeds or plugs, the containers, overhead, labor, etc. to each unit to determine a base price. Assuming this is true, if you don't sell all the units each season (and can't/don't hold any over), then you are still faced with a loss. Hopefully there is also a profit margin factored into the pricing as well and this is the cushion that determines whether you lose money or simply don't make money. In other words, a breakeven point that you target for.

    Bookmark   January 28, 2008 at 10:49AM
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gourddy(ny4b5a)

Hi gardengal48
Thanks for the response. I'll try to answer your question.

Its different for me because I have such a variable amount in my heating usage. Its not a definite amount like a container or medium. If we have sunny days and no frigid nights I will use a lot less fuel than if we have overcast days and night temps in the single digits. This is only my third season so I only have the past two years as a guide. Between the weather variable and my sales variable I think it leaves an opening for a miscalculation. For a small business like me a miscalculation of even 100 gallons or so has a big impact. If I cost it out using my worse case scenario, I may price myself right out of business. This is probably an overstatement as I havent sat down and done the math yet, but it seems like it could happen with a relevant miscalculation.

Im just trying to cover my bases. Im wondering if I am thinking about this the right way. Maybe someone else in my situation looks at entirely different.

    Bookmark   January 28, 2008 at 5:17PM
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donnaz5(Z5 NY)

gourddy...i grow perennials in upstate new york, and rely only on good mulching and wind protection for the winter. Seems to me that it would be VERY cost prohibitive to try to grow and sell anything that you would have to heat through the winter. Not trying to tell you what to do..but perhaps you could think about restructuring your business to better fit in the climate that you're in, rather than trying to create a climate with sky high costs no matter which way you do it? personally, for me..it works out great to have my cuttings for the next years season put down and growing well by winter..that way I can take the winter off and devote it to research or marketing strategies, or whatever I choose. Just a thought..Donna

    Bookmark   January 28, 2008 at 5:30PM
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watergal(z6/7 Westminster, MD)

I'm not a grower either, but I do relate to painfully high utility bills lately!

One slightly helpful suggestion from a related field. I was talking to a friend in a large and successful landscaping company. They do a lot of work for shopping centers and commercial property management companies. In winter, work is very slow, but they do snow removal. The kicker is that they never budget any income for snow removal, because you never know what you will or won't get. So if it snows, that's just bonus income. It seems to work for them.

    Bookmark   January 29, 2008 at 12:15AM
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rachel_z6(7)

I don't treat heat as a per unit add-on, because it's so variable. It's more like 'a cost of doing business' expense. probably not so smart, but like you, i'm not sure of how else to do it. heating is necessary but treated like any other business expense when i'm trying to keep my overhead low. until i can afford the solar panels to run the greenhouse I cut corners, improvise, and try to conserve. so, akin to what donna said, I try to be smart about my heat usage: I don't heat the GH until February, and even then I keep it lower than average* (using a propagation tent inside the GH with a small heater for when i need higher temps); I make sure cuttings and starts made during the summer are well rooted before winter sets in; I don't grow things that I can't maintain in the above conditions.

* My plants get a lot of tough love, but they're stronger for it. It takes several weeks longer to grow things on at cooler temperatures, but energy is conserved and the plants are healthier. you'd have to decide if this would negatively affect your schedules--probably depends on what you grow and if quick turnover is important.

    Bookmark   January 30, 2008 at 9:05AM
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gourddy(ny4b5a)

Thank you rachel, I feel much better now. Im doing pretty much what you are doing. Im in the process now of setting up my propagation area. Its a greenhouse inside a greenhouse. I will start heating around Valentines day and start propagation. I heat until the beginning of June. I was trying to get as much paperwork as possible done now because when I start propagating I will not have time to do office work. I open the weekend before Mothers Day. I will have a pretty good idea of my fuel usage by the time I have to set my prices which is before Mothers Day. I was trying to get that time consuming task done now. Oh well. Hope you have a great season.

    Bookmark   January 31, 2008 at 5:05PM
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rachel_z6(7)

I suppose so many people have a "fuel surcharge" now, but I don't think that would fly if we tried to add it on our plants. We still have to be competitive, but explaining to people (who ask) that prices have been raised because of the rising cost of heating fuel will make sense to most people. One day we will have to say the same thing about peat.

I don't know how many commercial growers do this, but this year I'm trying the "winter sowing" method - I've already got flats of cool season crops in the unheated greenhouse (aquilegia, delphinium, lavender). I thought it'd be a way to start some things early without needing to spend money. we'll see how it goes.

Hope you have a good season too!

    Bookmark   February 1, 2008 at 10:07AM
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sandy0225(z5 Indiana)

I go even lower tech with my winter sowing. I have these stupid echinachea that don't do well no matter how I grow them in the greenhouse, but the things reseed themselves like crazy in my garden. So I go out there in the fall when things get slower around here, and "collect" them with a screwdriver and pot them up.

    Bookmark   February 2, 2008 at 11:10AM
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