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Why Accurate Plant Pricing Is Good for Everyone

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Are we getting the best plant for the best price?

Purchasing the best plant material for the best price--that’s what we all want. And the best field production growers are driven by a desire to produce and sell high value plant material for a fair price.

At each stage of the sales process -from grower to buyer to residential or commercial customer- everyone has the same questions: Are we getting the best plant for the price? What makes this one worth more than the others we were considering? Can I get something nearly as good for less?

Getting the Best Plant for a Fair Price

We all want the best for our customers, but there are budgets to contend with. Landscape designers are all too familiar with that dance in which they attempt to balance the free flowing aesthetic aspirations of a landscaping project against the hard edges of the budget.

For growers specifically, the challenge is to figure out how we give the most value at a price that reflects the true cost of producing our products--and at a price point that is acceptable to the customer. That means the landscape designer or plant buyer must  be able to make the case to their customer that a better plant may cost a bit more than they expected it would.accurate-pricing-thuja-degrootIn both cases however, we must clearly define the concept of value--especially for the higher priced material, the specialty material, the hard to find material. And that is a good discussion to have with customers because it brings transparency to an issue nobody is eager to talk about. 

The first thing we need to understand is that many growers do not price correctly. And that makes it difficult for all of us to establish a standard that infuses the question of price with an understanding of value as it relates to price. If we were selling widgets on Amazon, it would be different. But we are not selling commodities. We are selling works of art. A landscape design is a work of art. A fully finished, meticulously cared for landscape plant is a living work of sculpture. Pretentious? A little bit, maybe. But think about it. What we sell to our customers is beauty and enjoyment that has lasting value to them. We are not in the commodities business and our interactions are not purely transactional. 

We all stand to benefit from high value plant material sold at prices that honestly account for what it takes to produce that value.

We hope that, by reading this short ebook, you will gain a fresh perspective on what goes into the making of a valuable landscape plant, and gain the insight needed to assess that value with confidence. 

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Pricing Based on Fuzzy Math

Stuck in the death spiral of steady but imperceptible losses

With every type of business there are risk factors that influence the potential for success or failure. Selling plants for a profit has to be near the top of the list for risk along with restauranteering or commercial fishing. You are out there on your own when heavy weather or  equipment breakdowns interrupt your flow. Plants can get frozen, dried out, or overwhelmed with pestilence in one unlucky instant. Or a nursery business could die a slow death due to imperceptible but steady losses (from under charging) over time until its time runs out.  

Of all the random threats to a nursery business, under-charging for the product would seem to be the most controllable. And yet....

If you were to casually ask around among growers about their system for setting prices, you’d probably hear an assortment of light-heartedly vague responses like:

  • “It depends on market conditions”
  • “Price depends on the customer”
  • “Prices reflect my competition’s catalog prices”
  • “We are making money so my prices must be about right”
  • “It's impossible to figure out the exact cost…too many factors”
  • “Nobody complains about our prices”

What you will never hear is, “my prices accurately reflect my cost of doing business based on a detailed accounting of all the steps involved”.

In the “good years”, when demand is strong, the incentive to deal with that fuzzy math tends to be quite low. It’s too easy to ride the rising tide of volume sales--that is, until growers hit bottom in the next economic downturn and slide back into losing money ‘imperceptibly’.

Why Accurate Plant Pricing Is Good for Everyone

If grower's prices don't accurately reflect the real cost of production, it becomes difficult to make the connection between price and value when evaluating plant stock.

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Learn to understand pricing criteria

Fair Pricing Reflects the Cost of Doing Business

 

Understanding how a grower should be setting prices

Plant pricing among field production operations is cloaked in mystery.  When you browse the catalogs, you find such a broad disparity in prices that it can’t be based on any rational scheme.  And yet, aside from the financial impacts of local regulations and growing zones, costs associated with field production are the same for many growers and can be calculated using hard numbers.  

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LAND VALUE

To begin, the grower must assign a value to the land that is in use. What is the cost of ownership for each block? Simply stated, if the market value of a parcel of land is $10,000 and it is in production with 500 plants for 5 years, we would divide $10,000 by 500 plants to arrive at an overall cost per plant per acre per year. In this formula it would be $4 per plant. Even if your mortgage is paid off, it is important to consider the value of land in production because land is an investment that appreciates in value.

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PEAK INVENTORY

Peak inventory is calculated by counting the total number of plants in production including those that may never sell or are scheduled for destruction because all of it represents a portion of the total cost. Taking inventory is a daunting task and if it is based on guesswork, the numbers will be distorted.

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OPERATING EXPENSES

To be fair to the buyer as well as themselves, growers must take into account the line item costs for each block of plants including but not limited to

  • Administrative
  • Marketing and sales
  • Time - how  much time is a parcel of land needed to bring a block of  plants to saleable size? Each  year adds to the cost.
  • Liners -  costs range from $5 if produced in house  to $30 or $40 if purchased outside - the value comes from reputable suppliers that have a proven track record. 
  • Irrigation - system maintenance and adjustments require unwavering vigilance
  • Pest management - some plants require multiple treatments, others none
  • Field care - some plants require 2 or 3 prunings a year, others none

The point is to be able to collect all the information needed to price different plants according to their differing costs of production. Some are fairly easy to produce. Others are risky and take more effort. It is imperative to have the facts in hand to make that distinction, rather than bundling it all up into an average cost that does not accurately reflect the individual value of individual plants.

When the grower has clarity on these basic items as they relate to specific groups of plants in their inventory, it becomes possible to price each according to what they actually cost to produce. Obviously,  insects, disease, drought, too much rain, or other weather-related effects can put a dent in the best of pricing strategies. These wild card factors are important to acknowledge but no excuse for ignoring the question of fair and accurate pricing. Inaccurate pricing does a disservice to all of us.

Grower inconsistency is one of the biggest issues that is talked about in the industry. Buyers want a clear expectation year over year ordering the same plant. It should be as good this year as it was the year before. When a grower is able to achieve that, the price of the material takes second place to the value. There is tremendous value in that consistency that more than justifies the price.

Indicators That a Grower is Asking a Fair Price

Seeing value independently from price

It is important to develop the ability to see value separately from price--and there are only two ways to do that. Examine the plant at a show, or see it in the field during a nursery tour. And in both cases, interviewing the grower and asking the right questions is essential. 

When you speak with a grower, you will want to ask about how they manage inventory and the role that automation or technology plays in their operation. Indications of efficiency and a well- organized, systematic approach to all phases of production is what you want to hear. You’ll want to ask about...

How do you take inventory? Inventory is a massively time consuming endeavor that can involve many staff persons.  The results can be adversely affected due to multiple steps in the process being executed by different people who may not all be working from the same playbook. At Waverly Farm we found we were able to consolidate tasks and improve efficiency by contracting to have a cellphone application developed. Now, when we take inventory in the field, it  is uploaded directly to our website database.  Instantaneously, our inventory process became more streamlined and less time consuming. The margins for error were greatly reduced and the results more reliably  accurate. 

How do you manage productivity? When the correct equipment is chosen to reduce manpower, it offsets the negative effects of increasing labor costs and decreasing labor availability.  Planting, harvesting, and culling tasks can be accomplished more effectively and in less time. Larger growers can easily justify large investments in mechanization.  Smaller growers may feel they cannot play the game but with thoughtful integration of machines over time they can increase efficiency and productivity.

How do you ensure consistency?  It is a good sign if a grower has made investments in technology to make operations more efficient and sometimes more failsafe. At Waverly Farm we made the decision some years ago to invest in a remote-controlled wireless irrigation system. The system allows us to produce better plants while reducing water consumption and labor costs.

 

Characteristics of a High Value Plant

The grower’s process: all plants are not equal

You’ll want to find out as much as you can about the growing process. Once again, the only sure way to get this background information is to carefully quiz your grower at a plant show or, better yet, on a nursery tour.

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TIME IN THE GROUND

A plant cannot be rushed into doing something it isn’t ready to do. A five year plant may be ready in 4.5 years or it may not finish until 5.5 years. If it is forced to be ready in three years, it may reach the sellable size but it won’t be fully formed.

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FIELD CARE

In the absence of pruning at the right time and to the right degree, time in the ground alone won’t get a plant to its full potential value.

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IRRIGATION

Unfailingly well-managed irrigation spanning multiple growing seasons is critical to success.

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VALUE DRIVEN LINER STOCK

If the liner is inferior it won’t develop into the plant you want to buy -- this is especially true of trees. With shrubs it is possible to prune them into shape and overcome an inferior liner. Not so with trees.

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LIVING SOIL

Well-prepared planting beds that protect the soil profile and the living organisms underneath--that goes a long way toward producing consistently great plant material.

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VIGILANCE

Is there someone out there running the rows everyday observing progress, looking for signs of trouble, and heading them off before they turn into full blown problems?

You all know a beautiful well formed plant when you see it. But what you really want to know is can you get that quality every time, every year. That’s when the background knowledge helps you out. Knowing how the plant is produced and knowing how that grower operates is the key to valuation.

So. That plant that’s caught your attention--is it worth it? If your selection criteria is based on your customer expectations, the project specifications, and first hand knowledge of the grower you are ordering from--yes.

It is worth it because you aren’t just making a one-time purchase. You are counting on consistency, being able to return to that same grower each year and expect plant material of equal value.

Why Accurate Plant Pricing Is Good for Everyone

If grower's prices don't accurately reflect the real cost of production, it becomes difficult to make the connection between price and value when evaluating plant stock.

why-accurate-plant-pricing-is-good-for-everyone-ebook-cover

Understanding Pricing Criteria