On target

You know the cost of doing business keeps going up, but which item in your budget is standing between you and profitability? We surveyed readers and asked what they spend on typical production items each year, and what they spent on their last big-ticket item purchases. How do your costs compare to the averages, the lows and the highs? Learn more about managing expenses on page 26. We asked readers about confidence in the market, as well as projected profits and sales. Find out what readers revealed on page 28. Hint: Sales projections are encouraging, and profit projections aren’t too shabby. Make sure you’re tweaking the budget throughout the year to reflect changes in your business. To learn why static budgets are not good for business, as well as budgeting tips, see page 30. Need financing help? Turn to page 32 for answers. We also asked about hourly wages for certain nursery positions. While regions and company size are deciding factors for wages, it’s helpful to see how your company compares to the averages. Turn to page 36 to view selected wage rates.

Counting the cost

It’s no secret that the cost of doing business is increasing. Nearly 75 percent of growers claimed they spent slightly more on production items in 2014.

Unsurprisingly, plant material makes up the largest average cost, at $150,000. Propagative plant material came in second, at about $60,000. Those two together dwarf everything else, with growing media (premixed and components) trailing as the next most costly item.

Pots are big business, too. The average annual spend on plastic containers was about $45,000. How do these costs compare with your nursery?
 

On track

10 tips for managing small business expenses.

By Rieva Lesonsky

Are you properly tracking and managing your small business’s expenses? Recording and reviewing your business expenses helps you pinpoint unnecessary expenditures, cut costs and be better prepared come tax time.

To improve the way you track and manage your business expenses, try these 10 tips.

1. Get automated. Accounting software such as Quickbooks simplifies tracking and managing expenses. Choose the same program your accountant uses or one that is compatible; this makes it easy for you or your accountant to import information directly to your tax return. Microsoft Office also offers spreadsheet templates you can use to track business expenses.

2. Prepare for tax time. Be sure to record expenses you plan to deduct on your business taxes, such as travel and entertainment, business use of vehicles, office equipment and supplies, association fees and charitable contributions.

3. Never mingle business and personal funds. Avoid using personal cash, checking accounts or credit cards for business expenses. Even if you reimburse yourself or employees for these expenditures, commingling funds adds unnecessary complexity and can expose your business to IRS scrutiny.

4. Watch your cash. Petty cash expenditures can create problems if not adequately tracked. Limit the use of petty cash to times when it’s absolutely necessary.

5. Save receipts. You’ll need receipts to document tax-deductible expenses in case you’re ever audited. Jot down the purpose of the expense on each receipt. Save storage space and hassles by using a scanner or your smartphone to create PDFs or photos of receipts and file them digitally.

6. Be timely. Record expenses as soon as possible after they occur so you don’t end up with piles of receipts. Regularly documenting data saves you time in the long run.

7. Give yourself credit. Using business credit cards streamlines expense recording, because business credit card statements typically break down your spending into categories.

8. Harness technology. There are mobile apps and cloud-based solutions that track expenses wherever you are and categorize them to the appropriate project or client.

9. Monitor results. Using your accounting software, create weekly and monthly reports to examine your expenses and revenues. Develop a monthly, quarterly and annual budget based on past expenditures. Regularly monitor your expenses to see if they’re in line with your budget.

10. Trim the fat. If your expenses are outpacing your budget, look at each expense to figure out where to cut back. Start with those that don’t directly contribute to the bottom line.
 

Rieva Lesonsky is founder and President of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Follow her at Twitter.com/Rieva and visit her website SmallBizDaily.com.

Source: California Small Business Development Center. For more small business help, visit http://smallbizla.org.

Pricing structures

One of the most reassuring items to come out of this report is that growers raised prices this year. With the price of goods continuing to increase, a new pricing structure for plants is necessary for profit.

To successfully raise prices, you’ve got to do more than simply cover the cost of what you have in the plant. You must add value to the plant through better production techniques and improved marketing. Don’t resist raising prices out of fear of losing sales. You may lose some sales of units, but you stand to gain profitability when plants are priced correctly. Raise the price of one or two items at a time and see how the market reacts. Make marketing adjustments accordingly.

Sales and profits

Projected sales and profits numbers from respondents are encouraging, but there’s certainly room for improvement.

Four months ago, we asked readers for our State of the Industry report (see the November 2013 issue) about their confidence that the nursery market would grow. Last fall almost 70 percent of respondents said they were “somewhat confident,” almost 20 percent said they were “very confident” and about 12 percent said “not confident at all.” The tides have turned a bit. We asked the same question for this report. Going into spring, more people are saying they’re “very confident” about the growth of the nursery market. Unfortunately, more people also said “not confident” compared to our results last fall.

We asked readers if they share profit and loss results with employees. Some 62 percent of respondents do not share that information. If you fall in this category, think about the reasons why you keep those numbers a secret. Can your employees truly embrace your goals if they don’t know the health of the company?
 

Nursery wages

The inconsistency of wages throughout the nursery industry is a given due to the regional markets. But as business owners and managers, it’s interesting to see the averages, highs and lows represented in this report.

In the wages section, a handful of respondents answered none or zero followed by the term “family” or “myself.” If you fall in that category and don’t pay yourself a salary, small-business owner Caron Beesley (who is the author of our budgeting story on page 30) has some advice for setting your salary as a business owner.

“It’s hard to forecast your profits for an entire year, so if you’ve been in business a few years, review your past performance and use it as a benchmark,” she says. Determine what an appropriate percentage of that figure would be, after factoring in your business costs, taxes, and future growth plans, and set that as your tentative salary. Most small businesses limit their salary percentage to 50 percent of profits.

If you are still in startup mode and have no profit history or aren’t turning a profit yet, you might want to set your salary by reviewing your own personal costs, she adds. What do you need to support your modest, startup lifestyle? Defer everything above and beyond that.

Factor in employee pay and what you give your business. Remember that the time you invest in your business may vary considerably from the hours of your key employees. And while you don’t want to overpay yourself, don’t limit your salary because you feel that your hourly earnings are more than your number two employee. Your salary needs to reflect the elasticity of your time investment. If you’re using your hourly commitment to help determine your pay, make sure you account for the extra hours when you do your calculations.

Read more of her salary advice at http://1.usa.gov/1lqOeZw.

H-2B legislation in the works

From Craig Regelbrugge, senior vice president of industry advocacy and research at AmericanHort: Rep. Andy Harris (R-MD) has introduced H-2B legislation that would address the cap and problematic H-2B regulations. H.R.4238 would do the following:

Re-instate an expired provision of law that would exempt from the 66,000 cap returning H-2B workers who have complied with the terms of their past H-2B visas;

Require employers to reimburse H-2B workers mid-season for their transportation and subsistence costs from the U.S. consulate or border crossing to the worksite, or from the previous worksite to the new worksite;

Streamline the H-2B recruitment process and permit “staggered entry” to allow employers to bring workers in on multiple dates as they ramp up for their busy seasons;

Clarify the “prevailing wage” methodology that should be used for setting H-2B wages to ensure that wages are fair and reflective of economic realities; and

Clarify that H-2B rulemaking authority rests solely with the Department of Homeland Security.

In other H-2B news, at the end of March, the Department of Labor issued a Federal Register notice stating that it will soon issue a new proposed H-2B wage rule for public comment. The existing 2013 interim final rule will remain in effect until a new wage rule is finalized. Watch the Federal Register and NurseryMag.com for updates.