Gearing up for the future, Brown plants three trees and shrubs for every one he sells. That's expensive in labor and procurement. He starts some trees from seed, but it makes sense to buy some small trees at $10 to $15 each. By 1993, however, he will have 9,900 trees and 66,500 shrubs ready to sell. At that point, he will have to expand his sales territories in Washington State, Utah, and South Dakota. But he can't lock in more sales there yet because he can't supply the product.
"We initially saw a business of $250,000, but now we know we could do twice that if we had the plant material," Brown says. "We have not yet found our limitations. The only limit now is how fast we can grow the plants."
To make room for that growth, he has expanded the farm from 20 acres to 70. He leases the additional 50 on adjacent farmland, paying $100 an acre a year, with 10-year contracts and options to buy some of it.
"I always heard stories from people about how growth killed them," Brown says. "I laughed and said no way would that happen to me. And I will say now positively that that is the challenge. To make this profitable, I have to take the growth rate we've got now and plateau it out so that costs are stable while revenues continue to swing upward. But because we are growing the stock longer and growing more of it, and because we always seem to need something like the warehouse or the tractor, it's very hard. Unless you watch it carefully, though, you end up with ballooning overhead."
Brown can control at least some of the variables. Water flows from his own well at 300 gallons a minute. He goes very light on chemical herbicides and pesticides. And he still handles the selling himself, trying to visit each of his customers at least once a year. That remains a marketing strength and a cost saving, but it's very questionable how long he can or should keep up that pace.
Other factors bearing on his company's success exceed his grasp. The landscaping business, for one thing, is tied closely to housing starts and commercial construction. Growth in the Northwest has remained steady, but if it falters, Brown's sales are likely to tumble. Then there's the weather. Unpredictable, brutal cold or a severe hailstorm could cripple his inventory at any time, and crop insurance, while available, is prohibitive.
As it stands, Brown thinks he's still three years from the return he had in mind when he started: an income close to what he'd be making running a farm for someone else. He's just glad he didn't have more money to sink into the company. "Having so little capital to start with made me extremely frugal," he says. "Pulling myself up by my bootstraps has made me a much better businessman."
* * *
EXECUTIVE SUMMARY
THE COMPANY:
Glacier Nursery
Kalispell, Mont.
Concept:
Grow premium-quality trees and shrubs for garden centers and landscape contractors in the northern Rockies, using Grown in Montana hardiness as a marketing edge in cold-weather states
Projections:
First break-even year in 1991 on sales of $285,000; pretax profit of $20,000 on 1993 sales of $450,000
Hurdles:
Sales that are closely tied to housing starts and commercial construction; severe weather that could decimate or entirely destroy the crop; stabilizing expenses while increasing sales; anticipating market demand for products that need two to five years to mature.
THE FOUNDER:
Brad Brown
Age: 36
Family: Married; two children
Source of idea: Lifelong dream to run his own nursery
Personal funds invested: $15,000
Equity held: 100%
Salary: $10,000
Workweek: 60 hours
Education: B.S., ornamental horticulture, University of Illinois
Other companies started: None
Last job held: Foreman of a Christmas-tree farm in
Kalispell, Mont.
His role: Handles all sales, schedules crew assignments, does all planning
* * *
FINANCIALS
GLACIER NURSERY
Income Statement 1989 1990* 1991* 1992* 1993*
Revenues $170,924 $250,000 $285,000 $370,000 $450,000
Expenses 190,835 260,000 285,000 360,000 430,000
Profit (loss) (19,911) (10,000) 0 10,000 20,000
Balance sheet
Assets $137,605 $135,000 $140,000 $145,000 $150,000
Inventory 231,500 491,500 625,000 725,000 750,000
Liabilities 113,310 130,000 135,000 140,000 130,000
Net worth 255,795 496,500 630,000 730,000 770,000
*projected
WHAT THE EXPERTS SAY
CUSTOMER
GARY EPSTEIN
Co-owner, Fort Collins Nursery Inc., a garden center and plant retailer/wholesaler in Fort Collins, Colo.
For the past couple of years, Brad Brown has provided us with plants that are as good as any others in the industry, and he has delivered them when I requested them. I'd like to buy lots of plants from him. The problem that Brad has, and that I have also, is that I may want to buy from him but I have to be competitive in the marketplace, too, and watch my costs. My primary supplier now gives me a 12% rebate just because of the volume I'm buying.
Brad can't match that supplier in inventory -- he doesn't have as many varieties or sizes. But the big downside is simply dollars. How competitive can he be against a company from which I'm buying $40,000 worth of plants, when I'm buying only $3,000 or so from him? You are talking about only a 5¢ or 10¢ difference per plant, but our business is very competitive. And spread over 40,000 plants, that's a real piece of money for a small-business owner like myself. I can't afford to let go of it just to be a nice guy. So he has to make it work from his end. His pricing structure needs to be more competitive.
