How to profitably close down (or liquidate) a Nursery or Horticultural Business.

 At the end of 2018 in Northern Illinois a large nursery was foreclosed upon and liquidated by a bank.  This was managed by a company with an obvious lack of horticultural experience.  They tried to position the inventory, equipment and property for the bank that was foreclosing using an auction format… it fell flat.  The bank took a huge loss it didn't need to experience.
 
Auctions at one time were a way to liquidate or close a horticultural business.  It no longer works.  You have to have a large pool of aggressive local liquid buyers to make an auction work.  That is no longer is possible.
 
IF a nursery or a horticultural business requires liquidation there is an orderly pathway that will yield the highest return IF executed properly.  It requires adequate time (Two Years) to accomplish this task for the highest net return.  The speed of liquidation is inversely proportional to potential return.  The more rapid the liquidation needed, the less will be returned.  Management will be needed.  That cost offsets the revenue to some level, but not as much as one would think.
 
5 Steps to Conduct a Closing or Liquidation
1. Get a clear defined listing in detail of all inventory and equipment.  You can't sell what you can't define.  What is it, how many are there, the size they are and what they look like (photos). No special pricing on this for now.  That will come later.  Do the same with equipment.
 
2.  Since this liquidation requires some execution, retain enough equipment short term to harvest premium product. The rest of the equipment can be offered for sale.  Not as an auction.  Price it.  Publicize it.  Price it aggressively.  There is plenty of public information on the values available.  This is what we do; create values on nursery stock and equipment.
 
3.  Offer the most desirable product at nearly full price first.  Offer to dig for those high value customers that buy early.  Use the company's equipment and hire an experienced dig crew on a contract basis as Piecework.  Take Credit Card payments for this.  Do not extend credit unless you are very confident you will be paid.  Everything changes when a company is shutting down.  People stop paying.
 
4.  Dutch auction rules go into effect after the first wave is sold at nearly full price, then less, then less, then less.  In a year you will be nearly sold out of desirable product.  Then have a LIVE auction for the rest.  Aggressive publicity will bring out the buyers.  On-line auctions have not proven to work well.. yet.  The live auction is where you sell the balance at whatever price you get.  In ground, as is, where is.  They will have a 6 months to clear off the product they buy.  This assumes that happens early in the year.
 
5. Container goods in liquidation need to be marked at half the price others are selling.  Look at a few competitors and create a matrix of prices.  Then publicize the inventory at half that price. After 6 weeks drop the price to 1/3rd and last month to 15%.  Discard the rest at the end.  Start early in the year, February, March, April, May and discard the balance in June. Allow for booking if they pay for it in advance.  The carry cost on containers is expensive.  You don't want to put them away in the fall.  You don't want to pay to keep them weeded and watered during the summer season.
 
The Decision
If a decision is made at the end of the year (December), you can expect to be in the process for all of the next year and the spring following.  So a decision now means you will begin Fall of 2019, Spring of 2020 and Fall of 2020 for an in ground auction of the remainder.  It will require several months to do this well.  Then the buyer will be required to have the product off by June of the following year.  2 years from Start of the liquidation to completion.  From the time of the decision to liquidate, 30 months.  You will need 6 months preparation before publicizing the action you are taking.
 
We do this:
We have conducted orderly liquidations for lenders, for companies closing, for a man who was terminally ill and in behalf of a lender.  You can't game the system.  It must be done properly or it will fail. No flat percentage discount can to be applied across the board.  It depends on what you have that is desirable to the market that drives the return.  Knowing the business makes it work.  That's why the people that conducted the liquidation in Northern Illinois that ended so badly.
 
If you wonder what the likely return would be and the cost to complete the liquidation leading to net proceeds might be, we can help.  It's what we do.

Gene Redlin 630-513-5105

Dark at the end of the tunnel

It has been a great couple years in the nursery business.  Business has been brisk.  But there are storm clouds and to whistle them away means one must have blinders on or believe in flying unicorns. 

Here's what has happened.  Pent up construction has slowed.  Money is still flowing but there is a lull in new starts for large projects.  Money for large form federal projects is no longer being allocated.

At the same time in response to the prior shortages in the market, there is a surplus of nursery stock finishing right now.  Product ready to dig but not yet finding a buyer.  There are still spot voids, right now in the 3" brackets but things grow and soon that hole will be filled as well.

Growers of liners are singing a happy tune that they are sold out.  It's a lot like the car dealer who lets it slip to his potential customer that they are overstocked on used cars and have to move them.  Never heard that before have you?

So now we enter a new phase in the supply demand cycle.  It's expected, it is normal, knowing it and responding to it properly is what management is all about.  Some are full tilt on and hoping things will hold up.  They could be right but probably are not.  I was asked in 2016 how long we had to enjoy these markets.  I said that we had two maybe three left.  It's still true.  It's a 7 year cycle peak to peak?  So we are on the back of the peak swing.

There will be a sag in the economy.  Probably about the middle of 2020.  There are a lot of factors that lend to this reality.  I won't bore you with all of them here, but globally there are not just storm clouds but rain.

This won't last forever. When it gets dark, then it's time to put in SMALL liners and let them grow.  Stop trying to line out for cash flow.  It only works in a high sales price market.

I'm not hanging crepe, I'm just letting you know that there is going to be a lull and when it comes it's not the end of the world.  That's not been scheduled for a while yet. 

 

 

The value of a penny

I stole this, but it was so good I needed to share.

From Matthew Chappell

 My grandfather never passed a penny laying on the ground that he didn't pick up. I'd like to say I didn't either, but I've been known to when I'm in a hurry. I was recently conducting a Cooperative Extension program and had a group of nursery folks all standing in a cold frame with black landscape fabric covering the floor. I noticed a shiny penny sitting right there in plain view. Do you think anyone picked up the penny? Nope … until I walked back in and did so.

But first, we exited the cold frame and I stopped them and asked, "Who saw the penny on the floor?" Of 16 participants, 12 said they had. I asked why didn't they pick it up? I received two responses: "It's only a penny" and "I didn't want to interrupt you."

Both of these, while interesting and valid, were also quite disturbing. First, a penny is equal to a 1% profit laying right there on the floor. If your contracting firm or nursery has a gross profit of $100,000, that penny on the floor is now equal to $1,000. Is it still unimportant? I certainly hope not.

Second, sometimes a business needs to disturb the peace to make that extra 1% profit. No business has ever grown market share without disturbing (negatively) a competitor. If someone wants to leave that 1% on the floor, you better believe someone is going to see the value in it and bend over, regardless of who's watching. I'd hope that person is you. At some point in the life of a business, it will separate failure and success. 

 

Spring has a Way.. and what a way it has been

Two weeks ago everyone was jumping the gun.  It seemed like there would be an early and productive spring.  Then the hammer down came.  It was 16 degrees here this morning.  In St Louis it has been below 25 for 48 hours.  This means a lot of flowers aren't going to be there.  Forsythia is gone.  Some pears.  Some crabs. 

It's going to be a less showy spring.

And some nurseries who jumped the gun were burned.  This cold did no one any good. 

It's a wild and woolly spring..  and it looks like shortage will be the name of the game.

OH WELL..

If work and risk are four letter words to you... this isn't the business to be in. 

 

 

What I have seen in the last few weeks on the Farms of America

I have been traveling a great deal on assignment.  That means that I get to tour nurseries everywhere.  I also get an inside look at production.

Here's a truth some may not want to hear.

There are a LOT of young trees in the ground right now.  I saw whips to 1 1/2" everywhere.  The crop looks good.  There is land being put into production that has been out for the last 5 years.  Old overgrown trees are being removed by bulldozer.  The land is being reclaimed and new stock is going in.

In Tennessee's McMinnville area which had been pronounced dead, is very much alive.  And expanding.

And the quality is up a great deal.  All this means that pressure on supply that kept product in shortage is about to change.  We are about to see that old bugaboo surplus hit the fan again.  Not for a year or two but that train is already on the track and moving.

So, do your best, keep up the narrative but be ready to move with the market as it moves.  It will.

Bob Dylan just won the Nobel Price for Literature.  Well deserved.  I"m a fan.  But he has a comment on the nursery stock shortage... "The times they are a changin"

 

 

It's been a Year like we haven't had for a while

 Lots of product being moved.  But the pipeline is filling up.  I see a train a-coming, coming round the bend.  There are going to be more sales and consolidations. 

Recently I was involved in the Marketing and Sale of the Former Anna Nursery to Schowpe

Brothers Tree Farms.  It was a 6 month project.  From time to time I am hired as a nursery marketing arm.

Here's a little more on this in this article. 

I think the next several months will see a shift.  The election in a bit more than a month will tell a tale.  I won't tell you who to vote for, but I want to see America Great.... again.

So..

Keep your eyes open and your ears clear.  We are about to go thru a transition.

 

Race to the TOP always leaves people at the BOTTOM

It's amusing and sad at the same time to watch the circus and have to take part in the center ring when things are like they are. 

Product is short, mostly, people are planting too much too fast, Prices are goofy. 

What makes it worse is the tendency to think this will go on forever.  Or the occasional sale to an entity that has no common sense in buying indicates the market.

Just because one guy bought 100 trees 2" at $250 doesn't mean everyone will.  So the insanity ensues.

Waiting right now is the best strategy.  Wait until things get normalized.  Yes the day of the $95 2" Red Maple is gone.. but so is the fantasy of the $250 2".

I have people ask me how long before we enter into the next inevitable cycle down in price up in supply.  I have been saying 3-5 years with emphasis on the 3.

So enjoy but don't extrapolate this to be a permanent condition.  Save some money and in 5 years at the bottom, buy a bunch of smaller liners and plant like crazy.  You'll be ready next time.

OH, and how do I know all this?  First we do this all the time in the nursery trade.  Second the economy isn't that robust. IF we elect a conservative to the White House and keep the House and Senate there will be a restart and it will be painful.  That will put a clamp on the economy for a little while.. THEN if we are smart.. it will be katie bar the door for the next move.

Cue the clown theme