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Pricing Dilema
I have been having a problem figuring out what to charge for the plants that I grow...especially the ones that I start from seed and cutting. I am only accounting for the cost of materials that go into producing the plants and I'm not accounting for my time or anything else. My price per plant ends up way below everyone else's.
How do you account for your time per plant when you are growing thousands?
How do you account for your time per plant when you are growing thousands?
Replies to This Discussion
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Permalink Reply by J R Pandy on -
A wise man once taught me price what the market will bear...he also said you can never go up but can always come down. Price at perceived value and remember the laws of supply and demand. You can only make hay when the sun shines so why not make a lot of hay when you can. Hope this helps...sounds pretty philosophical after I read it.
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Permalink Reply by Frank Giglia on -
Cost of material is only a part of plant cost. Cost of the assets for the environment to grow the plants also needs to be included. Not knowing your operation it is difficult to give you advice. A book on basic cost accounting will give you the tools you need to determine the cost per plant. To give you a good idea of your actual cost go for and average cost per plant; total cost divided by total plants.
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Permalink Reply by Annie M. Hall on -
I don't have much in the way of overhead. I grow without heat for the most part, but starting the plants is done under lights,heat, etc..I have no way to figure the cost for that..we are not billed separately as this is done on our farm.
There is no water bill. So eventhough we do use electric for propagation and heat, I have no way of knowing how much of the total bill should go towards the plant operation.
Frank Giglia said:Cost of material is only a part of plant cost. Cost of the assets for the environment to grow the plants also needs to be included. Not knowing your operation it is difficult to give you advice. A book on basic cost accounting will give you the tools you need to determine the cost per plant. To give you a good idea of your actual cost go for and average cost per plant; total cost divided by total plants.
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Permalink Reply by Frank Giglia on
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You may have only incremental cost involved (the overhead would be there anyway) and this is great. This is adding value to your existing assets. I would have to agree with the previous reply and set your price at market rate for you quality level. Good luck! If you want to talk about cost accounting you can call me at 863-665-3792.
Annie M. Hall said:I don't have much in the way of overhead. I grow without heat for the most part, but starting the plants is done under lights,heat, etc..I have no way to figure the cost for that..we are not billed separately as this is done on our farm.
There is no water bill. So eventhough we do use electric for propagation and heat, I have no way of knowing how much of the total bill should go towards the plant operation.
Frank Giglia said:Cost of material is only a part of plant cost. Cost of the assets for the environment to grow the plants also needs to be included. Not knowing your operation it is difficult to give you advice. A book on basic cost accounting will give you the tools you need to determine the cost per plant. To give you a good idea of your actual cost go for and average cost per plant; total cost divided by total plants.
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Permalink Reply by Michael Pawelek on -
Annie, A lot of overhead I believe is missed by smaller operations that take the view ,"I was going to have to have that anyway" so it does not need to be added to the cost. For example, I am a one man operation that maintains 16,000 feet of greenhouse space, start and grow approx. 40,000 containers a year of 6" and gallon perennials and a crop of 6,000 Poinsettias. At first glance one would think I could just add up the cost of the seeds, cuttings, containers, soil, fertilizer, fungicides, insecticides, PRG's etc. and come up with my cost per plant. The variables that are hard to figure in are costs that have to be averaged out over many years and many folks skip these and invariably go broke. I went for years without water well costs and then in one year had both wells go down and had an 8k extra cost that year. My 55k standby generator had to have a mother board replaced a few years back at an extra 1800. I did not count on. Fan motors and cooling pads replaced. Benches repaired. Cash registers, injectors, computer and printers replaced. Due to two Hurricanes in the last three years I have had to change all my greenhouse plastic way ahead of time at extra expense. Also, due to increased sales I had to have a new drive way and parking area installed at a cost of 26,000 dollars. Taxes, propane and electricity have increased greatly in the last 10 years also. I know that not everyone has the same overhead but you have to add into consideration input that many would forget or you'll end up with a really expensive hobby where you will lose money and your time. If you are a charitable organization that is a different matter all together.
Michael Pawelek
Pecan Hill Nursery
www.pecanhillnursery.com
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Permalink Reply by Annie M. Hall on
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There are many things that I don't account for and "expensive hobby" sounds like a good term for it. I additionally made the switch to organic and it's taken me 3 years of experimenting with various products to come up with a system that produces a nice, marketable plant. So, I am applying certain organic foliar feeds more often instead of just applying the Nutricote or Osmocote and leaving it at that.( I don't use Nutricote/Osmocote anymore) I don't have any container costs because use all recycled containers, but there is a certain amount of extra labor that goes into getting them ready for planting...this extra labor is what I don't account for and I guess I basically work for free.
And what the market will bear around here is pretty much the big box store prices...and people complain about them being too high too.
..to make a long story short...I think I need to find a consultant..........but wait a minute...I can't afford one!
Thanks for the response!
Michael Pawelek said:Annie, A lot of overhead I believe is missed by smaller operations that take the view ,"I was going to have to have that anyway" so it does not need to be added to the cost. For example, I am a one man operation that maintains 16,000 feet of greenhouse space, start and grow approx. 40,000 containers a year of 6" and gallon perennials and a crop of 6,000 Poinsettias. At first glance one would think I could just add up the cost of the seeds, cuttings, containers, soil, fertilizer, fungicides, insecticides, PRG's etc. and come up with my cost per plant. The variables that are hard to figure in are costs that have to be averaged out over many years and many folks skip these and invariably go broke. I went for years without water well costs and then in one year had both wells go down and had an 8k extra cost that year. My 55k standby generator had to have a mother board replaced a few years back at an extra 1800. I did not count on. Fan motors and cooling pads replaced. Benches repaired. Cash registers, injectors, computer and printers replaced. Due to two Hurricanes in the last three years I have had to change all my greenhouse plastic way ahead of time at extra expense. Also, due to increased sales I had to have a new drive way and parking area installed at a cost of 26,000 dollars. Taxes, propane and electricity have increased greatly in the last 10 years also. I know that not everyone has the same overhead but you have to add into consideration input that many would forget or you'll end up with a really expensive hobby where you will lose money and your time. If you are a charitable organization that is a different matter all together.
Michael Pawelek Pecan Hill Nursery www.pecanhillnursery.com
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Permalink Reply by Michael Pawelek on
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Annie, When you finally hire a marketing consultant be sure to add their fee into the cost production of your plants!!! :) :) :)
Michael Pawelek
Pecan Hill Nursery
www.pecanhillnursery.com
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Permalink Reply by Dean Chaloupka on -
Annie - You mention that you also have a farm. If you have use an outside accountant for taxes or managing the farms financial books or work with a bank for funding, they may be able to also help you with the tracking of costs associated with your growing operation. I won't repeat the advice given by others about capturing all costs as it was sound guidance. Since you are sharing resources with the farm, you may want to also tap the farms accountant or banker to help you.
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Permalink Reply by Helena Vogel on -
Hi, Very difficult to figure out cost. Our water plump just went out after 4 or 6 years, it took us over $900 to replace it. We have to spend money on drive way repair, thinning big trees, fill in more gravel, etc. One of our electrical carts needs to be replaced again, and it will cost us over a few thousand dollars!
We have to spend a lot of money for labor pulling weeds, too!
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Permalink Reply by Sherwood Botsford on -
You're the new kid on the block. Charge 20% under what comparable quality is elsewhere.
An easy, not very accurate way to price your misc expenses, is to divide the total expenses by the total number of plants sold that year. That gives your cost of production.
For a value on your time:
I'm coming to the conclusion that I spend only 1 day in 4 making money. These are activities that I can actually put a number to a plant. E.g. Pot 400 #2 willows. They will eventually sell for $10 each. So in a sense that day I made 4 grand -- or at least increased book value of my inventory by that amount. I can put a rough figure on weeding, watering, die-off and so on, but it's very rough. E.g. A lot of my weeding is done while irrigating -- After I move sprinklers I'll notice a block needs doing so I take 20 mintues and weed 300 spruce.
1 day making plants to sell.
1 day maintaining my inventory.
1 day building infrastructure.
1 day selling.
1 day learning.
So to get $8 per hour, my 'making money' days have to do better than $40 an hour.
My goal is that the making money days are closer to $120 an hour.
I've gotten close to that at times. Spruce harvested to order: 25 five foot spruce sell at 40 bucks each.
They take me about 3 hours to dig and wrap for the load. Add another hour farting around with them unloading, and watering. I give a verbal guarantee of 90% survival rate, and I will take up to an hour with a customer talking to him about how to plant, and how to care for the tree after. 5 hours time for $1000 is good return. These spruce are a special case: I can harvest wild spruce on a neighbours power line right of way, so I don't have to plant, weed, water. This spring I probably sold 150 spruce this way. It's good enough that I'm putting in field spruce myself this summer in my own fields. My time to plant them will be returned by a shorter drive and an easier dig.
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Permalink Reply by Jerry Montgomery on
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You have to establish a cost basis for all prodcution. The best starting point is to add up all of your costs including a salary for your work but excluding your cost of goods i. e. seeds, plants, pots, soil and labels. and then divide inot that number the number of sq. ft. of growing area. That will give the cost of a cost sq. ft. for a year.
Then divide that number by 52 to give you a cost of operation per sq. ft. per week. Let say you grow a plant for 20 weeks and your cost per sq. ft. is $0.18 per week then your growing cost would be $3.60 then add in your cost of goods you purchased for that item, let say $1.50. So your total cost is $5.10 and the averge gross margin for the industry is 40% so you divide $5.10 by 0.60 to establish a selling price of $8.60 then add in any costs like freight out, pot covers etc. But before you finalize your price you should check out the market price to make sure your not too far below the going price. If you are add enough to be at or just below the market leader.
Jerry Montgomery
Marketing Consultant
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Permalink Reply by Michael Pawelek on
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One huge problem with figuring costs are that some of the variables are so variable. On my Poinsettia crop which is grown at my location between August 20th. to December 12th. every year the difference in propane prices and volume I use runs the whole gammit depending on Fall weather. I've had Novembers so warm my propane use was under $200 for the critical month for color up and on one occassion years ago a November that cost me $12,000. That particular November was so cold and overcast with almost no sunshine that the heaters literally ran 24 hours a day.The whole crop is ordered and prices set in August so how might one account for such huge ranges in energy costs? Two hundred dollars and twelve thousand dollars are a world apart and if I set my prices every year at the high figure I would have been out of business back in 1972 when I started the nursery!
Michael Pawelek
Pecan Hill Nursery
www.pecanhillnursery.com
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