Financing the Industry
While visiting a Wisconsin greenhouse last week, I had an
interesting conversation about financial management that started me
thinking...who's really financing our industry? Who really owns the buildings
we work in and the plants we produce? What happens to unpaid bills in a slow
season? And how do you determine what everything's worth to even be able to
answer any of these questions?
The whole subject came up because the grower I was talking
to was owed money on a crop grown for another greenhouse. It was November, and
they were still owed almost $100,000 on a crop delivered in the first quarter.
This customer was not under bankruptcy protection; it did not have a
disreputable owner; and no one was trying to disavow the debt. The bill was
simply not being paid. When the two owners finally spoke in person, my friend
learned the reason for the late payment: "We haven't been paid." That
operation had not been paid for their deliveries and, in turn, had not paid for
anything delivered to them. I kept thinking why is this anyone's problem but
their own? I certainly wouldn't get many more hours of cell coverage if I told
my mobile company that I would have to delay my payment until I received some
more working capital.
The grower I was visiting described the problem accurately:
Our industry finances itself. Many greenhouse operations do not have a line of
credit with their bank, and most don't even work with a bank enough to consider
it "their bank." They go into the local branch every few years when
their business needs a major capital investment for new greenhouses or
environmental controls or whatever else they need that costs more money than is
in the account. And that's too bad because a good banking relationship is the
cornerstone of any successful business. A line of credit allows you to pay
bills on time and without penalty; it allows you to order supplies during early
order for maximum discount; and most importantly, it keeps the business running
smoothly during rough periods.
I've heard the arguments before about how banks don't
understand our industry, about how we get lumped in with agriculture as high
risk. And it might be true that some banks are initially skeptical of
horticultural lending, but remember the purpose of the bank is to make money.
If you come to them with a solid business, if you keep them informed of current
operations, if you can demonstrate to them that you are not high risk, the
relationship will develop. And when one green business falls on lean times, the
ripple will stop being felt throughout the industry.
Back in my October column, I wrote about the start of GPN's
weekly e-newsletter, "GPN Weekly." Well, as I write this, we have
over a month's worth of issues under our belt and are already getting some
great input from readers about additional things they'd like included in next
I don't want to rehash everything that was said about the
newsletter only two months ago, so I won't go into detail about it's contents.
For those of you who read about the newsletter with best intentions to sign up
but still have not, get online and do it. For those of you who are reading
about the newsletter for the first time, you can go to www.gpnmag.com to sign
up for our free weekly news alerts. This is a whole new approach to the
industry, and you don't want to miss it.