couple questions re:purchase of existing gard. cntr/nurs biz

berrytea4me(Z5 CO)November 29, 2007

I've lurked here for awhile, came across a couple questions not answered elsewhere.

I'm exploring a career change. Would like to buy an existing business in the green industry- probably garden center/nursery (or combination w/landscaping, wholesale/retail, etc) that is not distressed but where the owners are retiring or making a change for other personal reasons. Ideal is something where the present owner is willing to consult/train/work for new owner for a period of time and where a person with strong business background may have opportunity to take it to the next level.

In looking at biz brokerage sites, there seem to be viable opportunities that fit what I'm looking for. Of course, that's before looking under the covers so to speak.

1. One thing that's been difficult to find for private companies is what is a typical debt/income ratio for this industry? I know where to get this data for large public companies but not for small private businesses. I know some industries, just by the nature of their business need, to carry more. Normally I would look for 2. What states do you find to be easiest to run a small business in? For example, which are more ag. biz friendly? Which are more small business/employer friendly? Which have the most horrendous beauracracy so you'd never want to run a business or have an employee there again?

My experience is in managing/growing high-tech R&D startup business w/in a larger high-tech company. Business knowledge will transfer to about any industry given a little tweak on specifics. I've gardened/landscaped as a hobby all of my life- have a good deal of plant knowledge. I've worked front line retail & production in the past. Find a great deal of satisfaction when I propagate, grow, design a space with plants, grow & process my own food, etc.

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heptacodium

Right now, the laws to consider are most likely employment laws. Horticulture is a labor dependent field, and the status of immigration debate in this country is leaving a lot of hort/ag businesses in a serious pinch.

From what I have run across, I'd not purchase a nursery/landscape business in Arizona...one hiring violation and the state suspends you business license. Two, and it is permanently revoked. I'm sure this is going to work it's way through the courts, but until something a little more reasonable is found, I'd be leary.

I'm not aware of where to find the income/debt ratio info you seek. Nearly all nurseries are privately owned so the requirement to file financial reports just isn't there. Hines Horticulture is probably the largest public company I know of that deals primarily with nursery products (CA headquarters, I think).

Another is Calloway Gardens (GA). Ames Seed (IA). Frank's Nursery and Crafts (MI), recently went defunct through bankruptcy.

The greenbeam publication editors (Nursery Manger, Greenhouse Mgmt & Production, Garden Center Products & Services) might be able to head you in the right direction. Also try the Nursery Retailer and American Nurseryman publications.

I know I heard a report from Dr. Dale Herman, North Dakota State University that highlighted some of the profitability potential in the industry.

ANLA (American Nursery and Landscape Association) and ALCA (Association of Landscape Contractors of America) may be able to help you. Individual state nursery/landscape associations would be a good place to start as well, although some are more organized and helpful than others.

I hope this was helpful.

    Bookmark   December 2, 2007 at 8:36AM
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Embothrium(USDA 8 Sunset 5 WA)

Yes: in addition to web sites look for a facility with a good assortment of trade publications - probably a nearby college library - and look at articles and reports in those. Trends and challenges are often featured subjects. Looking through back issues can turn up discussion of very specific topics, with leads on sources of more information.

Here we have the Miller Library at the Center for Urban Horticulture, with a full line of industry journals maintained as part of the periodicals collections. If a university or community college near you does not have these, perhaps there is a library with such materials at the Denver Botanical Garden.

    Bookmark   December 2, 2007 at 5:50PM
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berrytea4me(Z5 CO)

Thank you both for your replies.

Yes, very informative and helpful information. I appreciate your insights.

Bboy, all of my family are up in western WA State and I'm trying to arrange a visit in the next few months. I'll try to sneak in a visit to the Miller Library. Is it located in Seattle area?

    Bookmark   December 3, 2007 at 1:57PM
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berrytea4me(Z5 CO)

I received an e:mail reply to this post and thought I'd put it here so that if someone else has similar questions they in the future they can follow the discussions.

********MESSAGE***********
Subject: Buying Someone's Business
Date: Mon, 3 Dec 2007 20:52:58 -0500

It is my experience that anyone wanting to sell a viable business will be asking more than it is worth. You say you would expect a 30 % Profit ratio and I know that would be required for the investment you would be required to come up with. I think a person would be better off starting our with a new start up but have the objective of not having to hire so much labor and incur all of the expense that that goes with it. I have operated a wholesale/Retail Nursery with the minimum amount of labor with profits much higher that the 30 percent you say you would expect/must have. I developed a process where I sold other growers plants and netted more than 50 % profit per sale, had the plants in my possession for a average of 2 hrs. but never in inventory on my property. I also have developed a process where I myself can Propagate/Grow/Sell 3 gal. plants for $1.00 ea., yes you read it right, $1.00. Can I assume you know the retail Garden Centers Selling Price for the Average 3 gal. size Plants? If you can find anything less than $19.95. Lets look at typical 3 gal. size plants where your production cost is $1.00 ea. and you would be willing to sell such plants to the general public for $15.00 ea. ( $1.00 production Cost times 1,400 percent = $14.00 and as with any/all produced products the production cost is always added in to come up with the selling price, so $14.00 + $1.00= $15.00 the stated selling price. You may notice you got your $1.00 investment/Production Cost back when you sold the 3 gal. plant and you made 1,400 % return on that investment that makes your 30 % pale compared to this. You sold the Plant for approx. 1/4 less that the G/Centers but your profit ratio is much greater. Maintaining the same or better quality along with a lower selling price is what people are looking for and the word will spread. Ok you would like to not even have to shell out the $1.00 production cost, so you set about to also propagate/grow/sell some 3 1/8 inch pot size herbs, perennials, flowering etc. plants that the customers buying the 3 gal. plants would also buy for say $2.00 ea.----Production Cost in this example cost me $.10= 10 pennies ( Production Cost = $.10 times 1,900 percent $1.90 and add in the $.10 prod. cost= $2.00 the stated selling cost. Now take $1.00 of the $1.90 profit and grow a 3 gal. gal. plant where your real dollars profits come from, and get your 10 pennies back to produce other such 3 1/8 inch size plants and you made 90 cents but now your profits on the the 3 gal. plants are actually $15.00 vs. $14.00. You just try to figure out the overhead cost of operating a Retail Garden center along with what debt you will be severing to buy a fully operating G/Center. If you want to know the in's/outs of starting from the ground up I have intro. info. I can e-mail you and Multi Pages of directional info. based on 30 + years of doing what you say you wish to do. No Greenhouse required if you are growing/selling Hardy Outdoor Plants and you can even sell tender plants for warm season sales. RG in Va. Beach Va.

*******REPLY****************
RE: Buying Someone's Business
I'm sorry, are you responding to my post on the gardenweb professional gardener's forum? Why didn't you respond there? I'll post this there for others so that if someone else comes to that site with a similar question they will be able to follow the discussion.

I assume so due to content of your message. I think you mis-read my post. I did not state that I'm looking for a 30% profit, I stated I was looking for the industry standard for debt/income ratio (30% in many industries) which indicates whether an owner has become heavily indebted on their business. It has nothing to do with the profit margin of the products they sell.

I also did not state that I would limit myself to considering retail garden centers.

While many businesses offered for sale are overpriced, there are many more that are viable opportunities. Just like when you buy a car or a home it is the buyer's responsibility to research an accurate valuation on ANYthing they are considering purchasing- and then counter offer based on a fair assessment of it's actual worth.

I have considered a startup business, however, decided that I am not in a personal situation where I can wait 3-5 years on my investment (and working 2 jobs so I can feed my family) before turning a reasonable profit.

Best regards

"She selects wool and flax and works with eager hands. She is like the merchant ships from afar. She gets up while it is still dark; she provides food for her family and portions for her servant girls." Proverbs 31:13-15

    Bookmark   December 4, 2007 at 6:06PM
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ian_wa(Sequim)

I can't offer opinions on owning businesses in various states, but I'd look at places where the economy is healthy but the cost of living (especially real estate) hasn't gone through the roof yet, if you can find such a place. You're more likely to be able to find and keep good employees without them moving on to other, higher paying fields.

The Miller Library is part of the Center for Urban Horticulture adjacent to the University of Washington Campus.

I can think of a few retail nursery/garden centers here in Washington that are ripe for selling at a reasonable price - a couple are good places and a couple are 'rescue operations'.

    Bookmark   December 9, 2007 at 10:59PM
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