The increased business that headed to horticulture during the COVID shutdown has resulted in a high level of working capital. Nurseries are flush with cash, but what are they spending it on? It’s a good problem to have, but many growers don’t have much experience with this particular problem. Business owners are looking for a prudent course of action.
Saunders Brothers is nestled in Piney River, Virginia, under the shadow of the Blue Ridge Mountains. Tom Saunders manages the wholesale container nursery at his family’s business. He says Saunders Brothers had a record year in 2020.
“We hit a little slow spell in April/May due to the pandemic and then the wheels came off,” Tom says.
The Virginia grower is known for boxwood, and the Saunders Genetics branch of the business has developed two boxwood blight-tolerant and leafminer-resistant cultivars under the NewGen name: Independence and Freedom. Demand for boxwood has been strong but Saunders is making adjustments to its other offerings.
“While Buxus sales are through the roof, we’re continuing to tweak our total product mix,” Tom says.
The nursery chose to use some of the cash from its pandemic windfall to invest in automation. Saunders Brothers bought some potting equipment and some pruning equipment that would help them get more done with fewer hands to do it.
“We were concerned that if we lost our H2A’s we wanted to be more labor efficient,” Tom says.
Expansion isn’t in the cards for Saunders Brothers, and Tom sees some challenges heading into 2022. Chief among them are the costs associated with supply and transportation.
“All input prices are up as well as freight and it’s hard to find trucks to move our product,” he says. “Because input prices have increased, we’re raising our prices.”
Jeff Burch, managing director of Southwest Food & Agribusiness at Bank of the West, says growers in his region are spending their increased profits on facilities, including equipment and other improvements. The decision to spend cash on those types of projects are tied to increased labor costs and the continued struggle to find enough workers, he explains.
“Companies are now finding equipment purchases to be more cost effective. Most employers are looking anywhere they can to reduce labor needs these days,” he adds.
Burch also heard from some operations that elected to purchase previously leased warehouses and other buildings, while others made improvements to provide better conditions for labor or to better protect crops.
“One operation built an employee lunchroom with lockers and televisions to try and improve working conditions for the labor they need to retain. Another client improved their growing yards given weather conditions, such as heat and high wind, seem to be becoming more extreme. I had another client pay to tie into city water as a backup in case their well water dries up or if they have a problem with their pump.”
Burch says to be strategic with spending, including paying down debt or, if a grower is struggling with labor, look at investments that either lessen the need for more labor or improve working conditions.
“Don’t bet on growth. Always make sure you have the sales and are not exposing yourself by putting out large amounts of plant volume betting the sales will come,” he says.
Belmont Nursery in California also had two of its best sales years ever. But owner Jon Reelhorn doesn’t want to expand his business.
“We don’t want to get bigger; we want to get better,” he says. “We're continuing to work on efficiencies. Perhaps now I can afford some equipment that I could not before.”
Like Saunders, he’s looking for ways to become more labor-efficient -- to be able to get more done with fewer or the same amount of people. After a close look at where the automation upgrades would help most, Jon decided to purchase a new pruning machine and a few more conveyors.
“We’re just a little guy, but those are significant for us,” he says.
With the global supply chain shortages, there is a backup on equipment like this. But Jon still decided to move forward knowing it might be a while before he’s able to get those machines up and running.
He’s also aiming to patch up some holes in his company culture that developed during the pandemic. His staff did a great job while they were busy reinventing their business on the fly. They were all-in to make Belmont Nursery succeed however they needed to, whether it was running product out to the curb for a COVID-friendly curbside pickup or shopping for customers over the phone. But as the new reality of business in the age of COVID protocols dragged on, his employees that burned so bright at the beginning of the pandemic began to burn out.
“We did it on sheer adrenaline in year one,” he says. “Then year two hit and we thought it was going to back off. But it didn’t, and we couldn’t hire people fast enough. And so our company culture took a hit. Because we're so busy selling, we forgot to maybe say thank you to our staff or reward them well enough. Or maybe they're just tired.”
Halfway through spring 2021, Jon really began to notice and decided they needed to get back to basics. They needed to bring back the onboarding process for new employees and recognition ceremonies for five years of service – all the little things that they stopped doing because they were so busy selling, but when taken as a whole, add up to the kind of company culture that makes employees feel valued. Jon wants to invest in his company in ways that make it a good place to work. As such, he’s bringing consultant John Kennedy in to help him implement The Great Game of Business at Belmont. This business strategy, based on the best-selling book by Jack Stack and Bo Burlingham, educates your employees, rallies them around a common goal and engages them by giving them a stake in the success of the company.
“I've always wanted to do this, but it's a big lift,” Jon says. “Sharing information with the staff and engaging them in decision-making, and as John would say, holding them accountable.”
Jon has been a fan of Kennedy’s since seeing him speak at an ANLA Management Clinic years ago, but he believes Kennedy’s energy will be key to re-igniting his employees’ spark.