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All you believe about making money in the garden center business may be ALL WRONG

(Read time:  approximately 2 minutes.)

"What gets us in trouble is not what we don't know. It's what we know for sure that just ain't so." - Mark Twain

"What gets us in trouble is not what we don't know. It's what we know for sure that just ain't so." - Mark Twain

Part One – This is the first in a series of posts that will address Six Mistaken Beliefs many of us have about making money in the garden center business.

I have arrived to the point of developing Six New Beliefs that may be unpopular among some of the “old-guard” establishment in the garden center business. Switching from the mistaken beliefs to the new beliefs may make the ground shake (like during an earth quake) beneath some of your own current beliefs. Some of our supplier friends may find this truth troubling to the future of their businesses. Others may embrace it and thrive.Although it wasn’t their doing, the success of many of our North American, and the worlds largest garden centers has been romanticized by others who wrote about them, read about them, told of them, visited them, and tried to emulate their size, scope and perceived success. Did we not assume those retailers were profitable and expanded to earn even greater profits? I’m sure some of them were profitable as they expanded.  I am also certain that some of them do not continue to reap the same levels of profits. We have been led to believe that some very expensive endeavors some garden centers have pursued were necessary ingredients of success. Is it possible that in reality some of those expansions were unprofitable and unnecessary.

We can assume that some garden centers incurred increasing debt as they have added to their operations, and that they may not have added to their net worth or profitability in the same proportion. There is one very clear thing about this and any business – if you haven’t seen the P&L and Balance Sheet do not assume that greater profitability and net worth result from growth.

Despite our mistaken beliefs THERE IS PROOF that some of what most garden centers strive to do is the very cause of their failure to provide income . Meanwhile others thrive and experience such benefits such as less stress, less complication, more flexibility of the owner’s time, lower investment and reduced chance of losing money by NOT doing what others believe they must do.

Doing those things that we believe to be necessary when they may not be necessary is often not profitable, not affordable, and not business-sustainable.

Stay tuned for Part 2 and the rest of the series.

7 Responses

  1. Like you say, this is true in any business. In the web world, wild “successes” are often romanticized in the media. In most cases, these successes are measured by growth in visitors, not revenue. At the end of the day, a site may be popular, but there’s no guarantee that popularity translates into profitability, and in many cases the exact opposite is true.

    Growth is a means, not an end. There has to be some sort of goal other than just “getting bigger.” Otherwise, you’re just going to drive yourself crazy while burning money faster than ever before.

  2. Thank you Micah for bringing the Internet into the picture. I love your line, “Growth is a means, not an end.” Right on!

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  4. I am looking forward to your continued thoughts on this subject, although the timing is somewhat in question, maybe a few years late and hind site is always better, however never 20/20.

    Many businesses in our industry and others survive only by expanding and increasing debt. Both the businesses and banks had adopted this model in past years to hide or avoid the truth in the numbers. No longer is this ‘delay’ in acceptance of reality a choice with falling asset values and revenue.

    Debt is toxic to business, particularly in seasonal businesses. We have been taught for years that debt was almost a requirement in business. We should be looking back to a time when additional debt was not the means to expansion and growth, when expansion was to meet demand and not a tool of survival.

    If we are not careful as an industry, if we do not come together with a common effort to raise the value, increase the need of our products and services, we may be allowing others to gain a larger share still away from independents.

  5. I am not sure what you mean by growth. If you maintain the overhead expenses and increase sales and have margin dollars at present I am not sure how you cannot make more money with increased sales.

    The problem comes in when you grow overhead above the rate of sales growth. Normally it should get lower as a percentage as you grow.

  6. Thanks for the wise comments very well stated Don Eaton.

  7. Ed you guessed what I meant right. The trouble is that it is far easier to increase operating expenses and wages as a result of growth as it is in pursuit of growth – and those increases often exceed the additional margin dollars from the increased sales resulting in less profit. That can be fine as a means to an end but it tends to become an uncontrolled bad habit – or it did until the banks quit lending so freely on rising asset values. It is better to first increase sales without increasing those operating and wage expenses if it is possible to do so. It is also better to reduce operating expenses and wage costs to increase profits. And of course if you can increase margins by reducing shrink areas or increasing prices where products are valued below the customer’s perceived value. Increasing perceived value and prices accordingly where possible is another winning strategy. TRUE growth comes from developing a mature organization that grows in all of these areas with balance and responsibility.

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