Now or Later?

April 18, 2003 - 09:59

How to know when it is time to expand and what steps to take when planning the expansion.

The day the first seed was planted was the first day your
business began to grow. Whether it is a first- or fifth-generation growing
facility, business growth is the goal. Sure, for a short time production will
increase with tighter aisles, closer plant spacing and tiers of hanging
baskets, but the realization will surface that growing flats under the benches
just isn't practical, and the quality is suffering.

Indications of needed expansion

Product is sold out before the season is over. style='font-weight:normal'> If you are out of product before the season is
over, you aren't maximizing your potential. While surplus is not desirable, telling
your customers you are sold out is an open invitation for your customers to
work with the competition. What if your customers like them better? What if
they deliver faster? What if they always have what you do not? Don't let it get
to this stage.

You have little competition. If your customers are loyal and you dominate the market, capitalize.
Chances are, your customers will follow your lead. When you offer more product,
they will buy more product. Whether it be a new product line or expansion of current
products, your customers will not only sell more but word will get out that you
can deliver. Now you can be the fear of your competition since customers will
like you better. You will deliver faster and always have what the competition
does not. Once you have won market share, be sure to keep it.

The competition you do have is expanding style='font-weight:normal'>. If the competition is expanding, should you? They
are taking the opportunity to better serve their, and maybe your, customers.
Don't give them the chance; persuade your clients to move.

Increased demand for your product style='font-weight:normal'>. Your name is out! Since you always have what the
customer needs and do not grow flats under the benches, your product is high
quality, and customers are willing to pay for it. The better the quality, the
higher the demand.

Growing methods are affecting your plant quality style='font-weight:normal'>. You have tried to place plants on tighter spacing,
add one more tier to the hanging basket run, and yes, you have tried to grow
flats under the benches. You also learned that this results in leggy,
bug-infested plants that don't sell. This is a sign it is time to expand, space
plant material properly and offer the quality your customers deserve.

Current space prohibits multiple turns style='font-weight:normal'>. Multiple turns are not accomplished in your current
facility simply because there is not enough space to plant a new crop as the
previous one moves out the door, or your staff is not available to plant.
Multiple turns can make a big difference. With more space or automated
equipment, just one more turn will increase profits.

Your staff can no longer handle the daily tasks within a
reasonable time frame.
The nature of the
horticulture business is alternating peak and slow seasons throughout the year.
However if your staff is working 80 hours a week watering and pulling orders,
leaving them unable to plant the next turn, expansion might be the next step.
Automated pot fillers, transplanters and watering tunnels, paired with
irrigation booms, hanging basket systems and automated controls allow your
staff to make more money for you in less time. This addition may or may not
require expansion of the current structures, but surely qualifies as an
expansion of your business.

Expansion steps

Determine what product line you will introduce or expand style='font-weight:normal'>. Which product line will have the highest demand,
highest return on investment and, therefore, greatest profitability? This may
entail the introduction of a new product line or a simple expansion of current
offerings. Remember to consider all costs, including plant material, containers
and soil, as well as additional staff, increased delivery trucks and utilities
to name a few.

Prioritize your needs for the products to be grown style='font-weight:normal'>. Different crops have various needs. Prioritize the
needs of the crops you have considered. Revert back to the category above in
this analysis, as a glass glazed house may be required for one crop while a
polycarbonate glazing may be sufficient for another. This will have an impact
on the return on investment and profitability of the crop selected. In
addition, consider automation, including irrigation booms, hanging basket
systems and automated controls. These items may or may not be priorities,
depending on the crops grown.

Determine layout/design.
Assess the current layout of the facility. If adding structures, determine what
structure your facility will accommodate. Consider size, orientation and use.
Consider the flow of tasks, including propagating, production, packing and
loading. If adding equipment, consider the strength of the current structures.
Will additional structural materials be required to install irrigation booms,
hanging basket systems or other systems? If transplant machines or automation
is considered, take into account the potential need for a headhouse to
accommodate any or all of these additions. Consult with others in the industry
to determine structure and equipment vendors to serve you.

Costs. Consult with
manufacturers and suppliers of greenhouse structures and automated equipment.
What you think you need may not fit the bill. Discuss your greenhouse or
equipment expansion project with more than one supplier. You will receive
different viewpoints and suggestions for your expansion. You may begin with
several potential suppliers, but will most likely end up with just one. Be sure
to compare and analyze what has been offered. While structures and equipment
may appear to be the same, features such as durability in both equipment and
structures, ease of use in equipment, and simplicity of installation of booms,
etc. may differ.

In addition to the cost for structures and equipment,
solicit pricing for earthwork, electrical, mechanical and plumbing as needed.
Permits, taxes and other applicable charges should be considered. style="mso-spacerun: yes">

Secure financing / leasing. Secure financing from your financial institution or leasing company.
Leasing in the greenhouse industry is gaining popularity. Your vendor of choice
can provide the necessary information and advice on leasing.

Build. Sign the
contracts and get the structure in operation. The excitement of the new
facility or equipment will have you and your staff generating that return on
investment with energy!

Marketing. Now that
you have made the decision to expand and invest your time and money in the
expansion, don't fall short -- market yourself. This is another opportunity to
invite current customers (and competitors' customers) to see what you are all
about. There is always excitement with anything new -- show off the new place
or equipment with an open house or other marketing events.

Sell. With the added
space, your high-quality plant material is nothing but the best; new and old
customers will be enthusiastic about the new offerings. style="mso-spacerun: yes">

Although growth may induce excitement, it will likely be
paired with some element of fear. Careful analysis of your current facility,
equipment and staff will guide you to make the right decision on expanding your
business. Proper growth is the key to success. Expand too early, and the
increased expenses may hinder your growth. Expand too late, and your customers
may have already experienced the competition.

About The Author

Sara Grosser is marketing director at Rough Brothers. She may be reached by phone at (513) 618-7214 or E-mail at sgrosser@roughbros.com.

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