Misconception #4 – It is better to ‘Bootstrap’ than to borrow or wait until we make enough profit and keep capital investment low.

(Read time approx. 3 minutes.)

This is the third misconception in a series of six. The concepts being discussed here will likely be counter to your beliefs. The comments left on the previous posts are quite interesting so you may want to go back and read them. Click HERE to go back and begin with the first post related to this series.

Don’t get me wrong. I’m all for frugality, living within your means, and saving money where it doesn’t compromise quality. But when it comes to investing in an income producing business being frugal for the sake of being frugal can put a lid on income and profitability. It is a hard economic reality that the number one cause of business failure is under-capitalization. No business will ever outperform its level of capitalization.

There are several major reasons people in our industry are often led to invest less than they should in their business:

1. Under-capitalized passion meets unknown real needs. A passionate for horticulture is often matched with a lack of understanding of the principles of business and how those effect the outcome of our business investment. it is common to try to do more than we should with what we have to work with. For example, trying to sell gift items in a greenhouse defies all retail merchandising logic and also typically increases inventory expense, slows product turns, lowers margins, and results in lower profit. There is nothing left to reinvest in improving the facilities to make more money from the core product plant categories.
2. It is easier though not less expensive to pay to operate rather than to pay to own. There are often additional monthly costs related to heating, cooling, and repairing older and less expensive facility. When these costs exceed the additional monthly payment on a more energy efficient facility profit drains from the P&L. There are other hidden costs to be considered as well. An inefficient facility will require more labor to use. Perhaps the most critical factor will be the marketability of the facility and the capacity to produce income. However, it is still easier to accept status-quo than it is to think and plan to develop a more effective facility.
3. Fear of THE BANK. There is a feeling of intimidation, a natural aversion to dealing with a bank that keeps plans smaller than they sometimes should be. Having a realistic expectation of the potential of the business, the facilty requirements to take advantage of the opportunity, and the knowledge, wisdom, and patience to generate more profit to increase borrowing power.

I have one client who was complacent with their situation. Their growth rate was rapid because the community was under-served. Being happy with the growth they ignored the opportunity to invest more in a facility better matched to their opportunity. Meanwhile, a competitor who was not complacent saw the potential in their market and built a new garden center nearby. The competitor had established strong banking relationships, planned well and borrowed the money to build a multi-million dollar facility from scratch on raw land. The competitors new facility commanded attention and handled the pent up consumer demand in the marketplace. In addition, the new facility offers an expansive parking lot, is perceived by customers to be offer entirely covered shopping during inclement weather, has efficient receiving docks, and is shopper friendly because the site was leveled prior to construction, Looking backward, the owners of the smaller garden center recognized that they lost all opportunity for future growth of their business because the new competition clearly leap-frogged their potential. Their only potential for growth is to either add another location, or to relocate in another yet under-served market.

New Belief #4 – The size and financial health of a business is in proportion to the capital invested in it.

Begin With Smaller Thoughts

My advice is always to make money to grow, rather than grow to make money. This means that you should first figure out the opportunity to increase profits in your existing business so you generate additional cash flow and net profit to reinvest in further improvements.

A few small improvements to consider:

1. Cinder blocks and pallets cost more to own because they cost more to move (therefore they don’t get moved when they should). They also tend to devalue the product displayed on them rather than meet the retail objective of adding value to everything you sell.
2. Cheap looking inventory attracts cheap customers and repels higher income customers. When the buying budget is spread across too many product categories and items there is often no clarity to the customer. Instead choose categories where you can command expertise in the marketplace. Choose items that inspire customers rather than trying to carry a little bit of everything.
3. Invest proportionately in your marketing. Word of mouth is the most effective form of marketing, but poorly located garden centers go broke waiting for enough word of mouth to happen to make money. If you are in an out of the way location marketing is much more difficult and expensive than if you are in a high traffic location. Get over it and get on with it.
4. Eliminate bottlenecks that cause your business to under-perform its potential. Begin with your checkout lines. When customers stand in line you lose big time. A customer in line is deciding whether they have time to come back in the future. Even if they might have come on your slowest day of the year they are picturing that line they will have to waste time in. They are also thinking about how dumb it is that your checkout process is so slow and causes them misery. And they are plugging up a parking space another customers could be in.

This is a simple view of a complex but common business problem. Take time to consider if the problems of your business are related to inadequate capital investment. This is a situation that can only be improved by specific actions, not a “good season”.

Misconception #3 – Garden Centers Should Employ Horticulturists with College Degrees Full-Time, Year-Round and Pay Them Professional Salaries with Comprehensive Benefits

(Read time approx. 3 minutes.)

This is the third misconception in a series of six. The concepts being discussed here will likely be counter to your beliefs. The comments left on the previous posts are quite interesting so you may want to go back and read them. Click HERE to go back and begin with the first post related to this series.

Disclaimer: While I focus on the business side of the horticultural business my education, training, and experience is broad in the green industry including plant production and retail garden center with Scarff’s Nursery, landscape services with Horticultural Advantage, and marketing and sales of plants with Bailey Nurseries, and Sunrise Marketing. Let it be known that I am all in favor of the future success of the many educated and knowledgeable horticulturists in our industry, especially those that are effective in carrying out their responsibilities.

Necessity is the mother of invention. When the facts are laid out and we discover that it is simply not possible to 1) do what we once did, 2) do what others do, or 3) do what we would like to do, then why not open our horizons and explore opportunities we previously ignored? The title of this post is designed to get interest and discussion going rather than to discount the value of horticultural expertise. So please, read on then leave a comment.

The Blended Workforce: A workforce today may include people who have recently launched or are well along in a lifelong career in the garden center business blended with others who have very different expectations. It really has always been this way, but now we depend on it more than ever with high school and college students. It has become more difficult to recruit quality high school and college students, but other resources are increasingly more available.

Career Opportunities are Different for Different People. The times have been changing for quite some time and it is easier than not to lag behind on adapting with our own changes.

There are many people who are looking for opportunities that PREFER NOT to have a full-time year-round job and place little value on the costly employer obligations provided along with it. In most areas of our country there is an abundance of retirees and professionals from other industries (as well as horticultural professionals) who are not looking for the traditional full-time, year-round career. Among the benefits many of these folks offer are often maturity, experience from previous careers, in-the-garden experience, and the ability to engage consumers and help them translate the benefits of our products and services in a way they understand themselves. Many garden center customers are among this potential workforce that often places higher value to a generous employee discount than they do to other benefits.

The presence or lack of a college degree is not the issue at all. The issue is really all about affordability for the garden center, which is amazingly enough connected to effectiveness and productivity. However, providing correct information, products, and advice to the customer is always necessary. For years, garden centers have been exceeding their financial ability to pay for the expense associated with those they choose to employ. The determination of who was on the payroll was based more on horticultural knowledge and education than other factors. The hard economic reality is that we cannot afford to employ anyone we cannot afford to employ. Even more difficult is the fact that we cannot afford to employ people who are not effective just because we are willing to pay for them rather than deal with their ineffectiveness.

“What will we do without them?” This concern is always related to people who are already known to be of marginal contribution to the profitability of the company. The real question should be, “Can we do anything with them?” And of course the answer to that question is sometimes yes, and sometimes no. People who are in question are in question. It is really not more complicated than that. It is just a matter of time, but the result is always the same. Eventually the person in question will be gone. Either they will become an effective person or they will leave on their own accord or because a clear decision is made that the business is better off without them than it is with them. If you can’t afford to carry ineffective people now, you certainly won’t be more able to afford to carry them in the future. Why wait. Or are YOU the problem?

The days of accountability for workforce productivity are ALREADY here.  But what have we done about it? Are our people effective?

For a long time our industry has operated with the assumption those fine folks who had the same last name as the owner, or had “earned” a college degree majoring in Horticulture or closely related subject matter also had the requisite knowledge, experience, and ability to lead and perform functions of merchandise management, marketing, accounting, finance, and other tasks. But it wasn’t always so was it?

Who we REALLY need:

Our industry needs people who are not only knowledgeable, but also effective. Knowledge without initiative is ineffective. Efficient people get things done. Effective people get the right things done efficiently. We can afford only effective people, however, we can afford effective people only if we do not “carry” ineffective people along for the ride.

NEW Belief #3 – Effective Leaders Develop other Effective Leaders. (This is also an Executive Principle taught in our Executive Advantage program.)

Consider these traits of effective people:

1. They define the desired result. This is not always the best possible result, as effective people understand that there is a diminishing return on investment and effort and that good is sometimes required, great is often better, but perfection takes too long and very few customers will pay for it.

2. They map out a process. Planning is a tool used by effective people. Unfortunately planning can be a crutch for some who plan perpetually but never initiate their plans. Don’t throw the bath water out just yet.

3. They strive to reach agreement or consensus. Effective people do not try to live as if they were in a bubble. They recognize their inter-dependence on others whether it be those who provide resources to, or those they provide resources for – their customers.

4. They communicate progress. One of the least understood yet most critical tools of leaders is the feedback loop, also known as the communication loop. And what company have you ever heard of that did not have a communication problem? A communication problem is also a leadership problem as well as an impediment to effectiveness.

There are other traits of effective people of course but these are some that are invaluable and often missing from the pool of incumbent players in many companies. Unfortunately effectiveness traits have not been required to receive horticultural expertise or college degrees. They are learned through continuing education, personal development, mentoring, coaching, training, application, and experience. In other words they are developed over time with specific intent to do so. And that is exactly why and how we offer our Advantage Development System.

I don’t know who to give credit for this but one of the wisest people related concepts I’ve heard lately is, “If you can’t change your people, it is time to change people.” But remember the instructions you hear before the plane takes off: “place the oxygen mask on yourself first, before assisting other passengers.” We can begin by helping ourselves as well as our people become more effective by providing direction, a feedback loop for accountability, and the training and development they need for our companies to succeed. As a result we too will be more effective. This is the most direct route to profitability and business sustainability.

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Misconception #2 – Garden Centers Should be ‘Full-Service’ - Says Who?

(Read time approx. 3 minutes.)

Who says a garden center has to be ‘Full-Service’, and WHO DO THEY THINK THEY ARE to tell YOU?

Hint: (It’s NOT the consumer.)

Why fly your flag at half mast?

What would happen in your garden center if you were to do the things you must do to raise the flag of ‘annuals’ (for example) all the way up to the top of your flag pole?

Should you be building  taller flag poles for your core product lines?

“It is not enough to do our best. Sometimes we must do what is required of us to actually succeed.” – Winston Churchill

What is ‘Full-Service’ anyway?

It depends on whom you ask. Part of the original concept was to provide a ‘One-Stop’ shopping experience so customers didn’t have to make trips to the greenhouse, the nursery, and feed mill to do their gardening. (Yes, consumers responded to the concept, often telling us they ‘like it’, but not always shopping often enough to actually make it a viable business model.) Expanding the year-round shopping potential and increasing the number of items and sales categories so the customer could spend more on each shopping visit seems like a good idea, unless it isn’t when the final results are tallied.

If you ask vendors many of them would tell you a one-stop, full-service garden center needs to have complete departments for Annuals, Perennials, Shrubs and Trees, Fruit Trees and Small Fruit, Vegetables, Herbs, Houseplants, Flower Bulbs, Garden Seeds, Lawn Seed, Fertilizers, Chemicals, Tools, Wild Bird, Water Gardening, Gifts, Silk & Artificial Floral, Pottery, Christmas Greens & Trees, Artificial Christmas Trees, Christmas Decor, Firewood, Hardscape Supplies, Topsoil, Mulches, Cafe, Produce Stand, and I could probably think hard and add a few more. Well I better add the service part of full-service. What about Floral design, landscape design, landscape installation, container gardening service, gardening service, deliveries, etc.

All of these could be noble pursuits for some garden centers but can also become a death sentence for others. Unfortunately, too many of the one-stop full-service garden centers have not been able to make the concept financially viable. But until now, no one has yet given  garden centers permission not to go there, or to pull back if they over-expanded.

So what’s wrong with being a ‘Full-Service’ garden center?

Nothing is inherently wrong with ‘Full-Service’ – IF you have the critical mass of sales volume from an ample customer base, the facility to support it all, and personnel with adequate knowledge to purchase, display and fulfill the Merchant Advantage Merchant’s Mantra - “Never buy anything you cannot sell all of before you have to pay for it.” (With few exceptions.)

The big problem with the concept of a one-stop, full-service garden center is that it encourages stretching of resources and poor execution of the core business. A garden center that does not provide well located, weather-protected and properly ventilated covered shopping areas for their core product categories should not even think about even experimenting with  product categories that are on the fringe and unrelated to gardening.

Doing it all comes at a great cost.

If your market, facility and staff cannot support a ‘one-stop, full-service’ concept why choose to self-inflict the Stress, Complication, Investment, or Risk upon your business?

It is SIMPLE – you cannot afford to do anything you cannot afford to do.

“There is nothing so ridiculous as doing that which should not be done in the first place.”

If you are not already making a lot of money, reduce your temptation to go hopping down bunny trails trying to find new ways to make money. First take better care of your core business. Many garden centers would not be wasting time and money for little to no return with products that are on the fringe and unrelated to gardening if they were doing as well as they could (and should be) at their core.

Can you improve your core categories of annuals, perennials, nursery and the supplies to grow them with?

When we begin working with a client the first thing we do is address the performance level of all areas of their business. When they I think more of them would be doing this if they only knew where they were and were not making money. There is nothing wrong with the core business except poor execution. This means providing a comfortable and inspiring shopping environment, truly high quality product, providing benching, flooring, lighting, signage, and the space and time necessary to maximize the opportunity.

Accelerate Your Learning

If you want to improve the core of your business there is a cost involved. The first cost is that of learning what you must do. Find out who is doing the best at the core categories and examine what they are doing. Airport parking lots fill up every morning and empty every evening because corporate America goes out to fix problems and take advantage of opportunities in their companies. Sometimes this means they are visiting competitor stores as Sam Walton did on every one of his store field trips. Our industry provides plenty of opportunities to do this in low-cost compared to the benefit. Unfortunately I see too many attendees at the tours looking for new ideas and completely ignoring the opportunity to find ways to improve their core business. Actually you should look at an investment to accelerate your learning as being less costly than continuing to do what you are and continuing to miss out on the time value of money you could earn from  increases in competitiveness and profitability.

Here are some Accelerated Learning Questions to take along with you:

• Who is doing better at the core business than you are?
• What are they doing better to get better results?
• How can you do the same?
• What must you give up?
• Who must come along?
• Will you do it?

NEW Belief #2 – We are developing a franchise, a store concept – a brand experience.

If you focus first on building your store concept the temptation to listen to the “call of the wild” will fade. You will be able to focus more on what you must do and not feel you are missing out on all sorts of things that may not be right from you. Once you have found the path to make “real money” in the core of the garden center business you can experiment all you want.

“The primary mission of top management is to build powerful brands, which is what marketing is all about.” – Rance Crain

Misconception #1 – Garden Centers Should be Open Year-Round – Oh Really?

(Read time: approximately 3 minutes.)

Are Krispy Kreme's Hot NOW?

(Garden centers may be violating the Scarcity Principle)

A correct statement would be closer to this:

Belief #1 “In certain conditions garden centers should be open year-round, and in other conditions they should not be.”

The conditions for being open fall primarily into three categories.

1. The market the garden center is located in is year round. I recognize there are some markets that are year-round and this post may not apply to those situations.
2. The garden center has a particularly strong product niche and is located where there is sufficient daily store traffic to support a profitable sales level. There are a few garden centers that are in high traffic locations and have successfully integrated non-core product lines to be profitable nearly every day they are open.
3. The garden center has incurred financial burdens including operating expenses and personnel obligations that require it to be open although contribution to profits are at, marginally near or below the point of diminishing return. Still, even in dire financial conditions the best approach is almost always to generate more revenue when the business is in peak demand and lower expenses all the time – especially when the demand is diminished.

In my experience a large majority of garden centers fall into the third category. However, there are two major misconceptions related to being open year-round that often add justification to this mistaken precept of running a garden center.

• “We’ll lose ground because our customers will forget about us while we’re closed.” I’m not going to tie up space here going through the entire litany of excuses and justification related to this here. The reality is that if you become less relevant to your customers lives they will begin to forget about you. Being open doesn’t mean you’re relevant and you can measure that with store traffic, sales dollars, and profit from those sales.
• “We’ll lose our experienced staff of knowledgeable professionals.” In my experience garden centers that have taken the step to close during the winter season have been able to retain associates to the satisfaction of the owner and the customers. This does not mean that every associate is retained. Some embrace the closed period, others accept it, and in certain circumstances owners find ways to compensate employ mission-critical associates even though the business is closed.

My point is that making these assumptions and not considering the possibility of being closed when your customers aren’t voting with their pocketbooks that you should be open is not wise. Explore the possibilities and consider making a decision to close when the return is not there.

Once a company has expanded and incurred obligations it is very difficult to dig out of such a hole. While the effort of remaining open year-round is futile, it may feed necessary financial obligations. However, do not blindly accept being open when you don’t absolutely need to be.

It may not be a coincidence that the peak sales and profit generating time of year for a garden center is when its consumers suffer “Spring Fever”. Consider the situation of Krispy Kreme Doughnuts Inc. While the company that makes these famous doughnuts has suffered many and varied problems I submit that one of those is the ubiquitous availability of them.

Krispy Kreme's Famous Sign

Krispy Kreme violated the “Scarcity Principle”, a principle that drives consumption, traffic, and brands in our business as well when expanded their wholesale business rapidly and allowed their famous HOT NOW sign to appear in the windows of convenience stores.

Most garden centers do not use the scarcity principle to their best advantage, or even attempt to do so, or are willing to think about it. But there is one good example I know if that I would like to bring to your attention. I will not give their name because I don’t want to tip off their local competition to what they’re up to. This company I speak of was seeking advice on expanding to offer more products and services. Upon learning about their business I discovered that they open about April 15 each year in a Zone 4 market and sell primarily annuals and perennials that they grow along with some fertilizers, soils, containers, and a few decorative garden accessories directly related to growing the plants they sell (such as trellis). Then they sell down the product until time to close at July 4th. Yes, remaining inventory is discounted the last week they are open. They re-open late in August when their mums begin to peek color, and close again on the day their mums sell out. They re-open when the Poinsettia reach sufficient color, and close again when the last one is sold. I asked this company to consider how profitable they were compared to other retail growers, and how great their lifestyle was compared to others. After thinking on this they agreed that they should not go where they were thinking of going. Instead, we have begun working on expanding their core business by making improvements to their capacity to serve when demand (and profitability) are highest.

I said all of this to say this, the Scarcity Principle may be your friend. Think about it.

Belief #1 – “In certain conditions garden centers should be open year-round, and in other conditions they should not be.”

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