Thursday, September 27, 2018

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. 

Wednesday, September 26, 2018

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.