Starting a Nursery Business: Cost Analysis

Today's post is going to be a bit geeky.  I hope you can get past that because I think one of the most important parts of running a successful nursery business (or any business) is good financial management.  No matter how much you enjoy gardening you don't want your business to lose money.  Planning on the front end for the expected costs will help to give you some idea about your potential profit before you even start.

What Are the Costs With Running a Nursery Business?




Land

It doesn't take much land to get started. We all dream of owning acres upon acres of land for our nursery businesses but you have to start somewhere.  I have a 1.3 acre property in a residential area and I know of another person nearby who has about a quarter of an acre doing the same thing. Depending upon where you live it land prices can range from very affordable to selling your firstborn!  Since we're just starting out we'll assume that you are using land you already own or have land you can use.



Greenhouses


Many plants can be grown seasonally without the use of a greenhouse so if you are just starting out don't think that this is a necessity.  Winter sowing is a great way to grow many plants without use of a formal greenhouse.  What you do need is a place to start the seeds or cuttings.  Our seeds are started indoors on a wire shelf with heat mats and under lights.  If a greenhouse is in your budget it is a very good thing to have.  It helps with hardening off plants, growing the plants, and giving the plants a protected place from animals.  The downsize is the expense.  Formal greenhouses are expensive but you can build very cheap hoop houses from materials like PVC pipe, Cattle Fence Panels, a little lumber and some plastic.


Soil


Your potting soil is one factor that many people don't think of right off the bat but needs to be considered.  Do you buy it already mixed or make your own?  Pre-mixed soil blends are good to use but can be much more expensive than mixing your own.  Generally soil mixes use peat (or coir), compost, perlite, vermiculite, sand and amendments.  For amendments I use organic materials but many growers use slow release fertilizers.  The advantage of slow release fertilizers is that the can extend the fertilizer benefits over the course of the season.


Pots


What pots are you going to use for your plants?  For my vegetables and herbs I use coir pots which will degrade over time but for ornamentals I use recycled pots from other nurseries.  Most of the time people I know give me their left over pots for me to use.  This results in a hodgepodge of different sized pots but it has one huge benefit - it costs me nothing!  If you don't have enough pots then you will need to buy some.  Take note of the per pot cost because that will contribute to the profit you get from each plant.


Plant Materials


Do you use seeds or cuttings?  Seeds are very cost effective.  A single packet of seeds could give you 10 plants or it could produce 100's.  It depends on the variety but in most cases the seeds will cost you around $2-$4 per packet.  Analyze how many plants you get from this to help determine the cost per plant.  If you are doing cuttings from plants you already have then your cost for this number will be determined by other materials like rooting medium, rooting containers, and rooting hormone cost which is more complicated to get an exact figure but is very low.



Putting it all together - Production Cost Per Plant 



To determine your production cost per plant take the amount of soil you need to fill a single pot.  First take your soil volume convert it into inches.  2 cubic feet of soil will be 12 x12 x12 x 2 which gives us 3456 cubic inches of soil.  How much did your soil cost?  Keep that in mind and we'll reference in later.  Let's assume for these calculations that we're at $4 per 2 cubic feet.

Assume you have a 3" x 3" x 3" square pot whose volume will be 27 cubic inches.  Here you can divide the total amount of soil by the pot volume to find how many post you can fill with 2 cubic feet of soil.  For that figure we can fill 128 3" pots.

Now divide the cost of your soil by 128.  This gives us how much it costs to fill each pot which in this example is $4 / 128 which equals about $0.03 per pot.

Next we need to know how much each pot costs.  When I buy my coir pots in bulk they cost about $0.20 per pot including shipping.  Which puts our plant production cost up to $0.23 per pot.

Factor in your most expensive seed and the number of plants you can realistically expect to germinate.  Plan on about a 75% germination rate.  For this lets assume we have some special pepper like the Bhut Joloka that costs $3 for only 15 seeds. We can expect about 11 to germinate and so our cost per plant here is $3 / 11 which equals $0.27.

Together the cost per germinated seed and the cost per pot will be about $0.50.  I set my prices at about $3.50 per potted 3" organically grown plant which nets me $3 per plant profit.

How many plants do I need to make ends meet?  Take your total expenses from the land, greenhouse, equipment, water bills, electric bills etc. and see divide that number by my $3 figure.  This is just the break even cost.  With my business it was important that I not go into debt.  I'm very debt averse and never spend what I don't have - mostly.  Those plant sales get me sometimes!

If you want this to become a full time income plan how many plants you will have to sell in order to achieve your goals.  Just divide the desired income by the cost of plants and you will know how busy you will have to be!

Keep track of all your expenses as some of them will be tax deductible business expenses.

I think one of the biggest issues with nurseries and garden centers succeeding is managing the money.  You have to be able to account for all your expenses with your products.  Over the last several years the economy has taken out many nurseries because the demand for plant products did not exceed the production expenses.

More from the Starting a Nursery Business Series from Growing The Home Garden

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