Here are some factors to consider before you decide to stand pat or make the big leap.
The Impetus for this Article
We were recently contacted by Digger magazine for an article on opening multiple nursery locations:
“For this story, we would like to talk to people who have been there, done that and lived to tell the tale — both those who succeeded, and those who tried and thought better of it. Obviously you fit in this category, so I am reaching out.”
The interview never happened, but the article that was published was so one-sided that I felt there was a more interesting story that needed be told. If you don’t have time to go and read it, the article focuses on Al’s Garden Center just in time for the grand opening of their fourth location in Wilsonville. A side benefit of being a big guy is that your dollars tend to both directly and indirectly buy promotional “stories” in horticultural magazines. Ironically, stories about the big guys aren’t very interesting to small nurseries or startup nurseries because we can’t or won’t do business like they do, yet they receive the lion’s share of free publicity. The article then goes on to give advice on things you should think about before expanding and ends with:
“There are good reasons to expand and add locations and there is potential for pain and struggle. The best motives and reasons to expand in the world won’t be overcome with the wrong new location decision. So don’t make the wrong decisions.”
The Untold Story
Which brings me to the untold part of the story. If everybody listened to the author’s advice and only expanded when they were “a value adding business, that is stable and profitable” and they could afford a fabulous prime location, no one would ever expand. Often in life and in business we are forced to make decisions based on where we are now, not where we hope to be in the future.
We expanded Harvest Nursery to a new location because we were forced to by various life factors. Our Portland location was just over .5 acre, and the Spring of 2015 we had production, plants and greenhouses covering every square foot that wasn’t house. We were limited on sales by our ability to produce and store plants. We were also in a residential zone since a backyard hobby had become a booming nursery, which meant limited parking. So we set out to find land within a 20 minute drive that we could use for production, fully intending to have a production location and a retail location. It didn’t take long to realize that anything close in was either out of our price range or had restrictions. Which is how we ended up with 40 acres and a rundown farmhouse in Molalla. Since we had decided to move ourselves to Molalla, we now had an hour commute every day we went into the nursery. Luckily for us, we had an amazing team and we were able to only come into town twice a week. It didn’t take long for us to realize, however, that, even twice a week, commuting sucks. Mother Nature then threw us the curveball of extreme drought which killed nursery sales for almost everyone from May 2015 well into fall. We had chosen the wrong year, weather-wise to move and now the double overhead while we setup production in Molalla was killing our profitability. We waited until after the Spring season of 2016 to make the final decision, but the writing was on the wall already the previous Fall. It was in our best interests both personally and financially to close the Portland location. Unfortunately, our current location wasn’t the most ideal one for retail, but it was what we had and we went for it.
Looking at Your Current Location
So, if we had read the Digger article, would the author’s expert advice have saved us time, money, or been beneficial in any way? Absolutely not. While our first retail location may not have been profitable enough to open a second retail location, it was capped in profitability by its limitations. And the answer to those limitations had nothing to do with the answers provided. Let’s break down his answers and why they are not accurate.
- Heavy Discounting. To big ag we are probably considered heavy discounters. However, we are not selling anything at a loss and are certainly not trapped by any sale events, discounts, or gimmick cycles and our profits have risen every year. Instead we actually listen to our customers. We know that our customers see through the lies and bullshit of corporations. They appreciate that we sell them plants at a reasonable price with full service and a staff knowledgeable in permaculture and edible gardens who actually has the time to answer their questions. Nurseries buy our products and then sell them to customers at triple our prices. The customer is paying for the convenience of shopping close to home. But if they don’t want to pay for that convenience, we are here. We also know of nurseries that burn stock at the end of the Spring Season in order to protect prices. We think that is unconscionable in a world where people go hungry and that fruit tree they burnt could be producing food for someone who has none. We call bullshit on the idea that we have to charge what everyone else is charging in order to make a profit and that it is a decreasing profit death spiral.
- Too Many Fixed Expenses. While we disagree with the implication that family-owned and run businesses are losing money because of inefficient family employees, this is obviously not true of all family run nurseries because the focus of the article, Al’s Garden Center, is family run. And while too many fixed expenses may have been a big factor in our decision to close our Portland location, they didn’t exist until after we had bought our second location and suffered through a drought.
- Excessive debt burdens. This one is easy, our only debt when we decided to close Portland was our new mortgage on our Molalla location which didn’t exist when we made our decision to expand.
Deciding When More is More
So none of that helpful advice would have been helpful to us in making the decision to open a second location. In fact, if we’d listened to that kind of advice we would have killed our business. We would have been just another tiny Portland nursery in a not so great location (for Portland) charging way too much for plants, unable to expand production due to size limitations.
Evaluating Your Options
So, let’s look at what we were supposed to evaluate according to the Digger article after we made our decision to expand, to see if that would have kept both locations open.
- Location, Location, Location. It must be nice to have so much money that you can afford to study the demographics of a location before you purchase. If, unlike Al’s, you live in the real world where you’re just hoping to find something that meets your needs and is in your price range, you get the best property you can afford in the best location you can afford. For us, since this was 2015, and we didn’t have 70 years of business profits to fund our purchase, that meant Molalla. And while time and gas are valuable, people are actually willing to drive further for better service and less expensive plants. Oops! That discounting idea just went up in flames. Of course, this was also meant to be production not retail, so location was less important.
- Consider Your Talent. This one is pretty obvious, and certainly was problematic for us as we lost great employees because they could no longer bike or take the bus to work. However, that is business. You don’t need to move for that to happen.
- Have Strong Processes In Place. If we had tried to immediately replicate the processes we had in place in Portland here in Molalla, we would have gone out of business. While processes are good, you have to be flexible enough to adjust your processes to your location. What works in a small location probably won’t work in a larger one. Again this is normal business practices, if you need an article on expansion to tell you this, you’ve got bigger problems.
- Know The Market. Sorry, but duh! Did anyone really need this article to tell them that?
- Have a Business Plan. As my 10 yr-old would say, Double Duh! If you don’t have a business plan yet, you shouldn’t be thinking about opening a second location.
To sum up the Digger article, make sure you are a rich big box nursery (like Al’s, 7Dee’s or Portland Nursery) before considering opening a new location, permaculturists shouldn’t even consider it and if you’re not a rich nursery (the owners of which don’t base their decisions on Digger articles, btw) then you should go to a Business 101 class at your local community college in the hopes that one day you too can be like Al’s. Despite the fact that if Al’s had to start from scratch today they wouldn’t have 70 years of name recognition and customer loyalty to fall back on and would probably fail miserably because their business plan can’t compete with Portland Nursery or 7 Dee’s.
So what was our decision based on? Having a business plan, knowing the market and knowing our customers.
- People are looking for edible plants, they’re a form of food security. If you are not selling edibles, you are probably losing business.
- People are looking for real people who will answer their questions. If you hire minimum wage employees who don’t have time for customers, you are probably losing business.
- People find businesses by word of mouth, the internet and social media. If you don’t have a good website, aren’t on social media and don’t have customers gushing about you to their friends, you are probably losing business.
- And finally, perhaps most importantly, people are looking for honesty, integrity and earth conscience. If you are using deceptive advertising, treating the earth like your garbage pit for toxic chemicals like roundup, miracle gro, or GMOs, you are definitely losing business.
The Final Analysis
How is our less than ideal location in Molalla working out for us? Despite a late Spring start because of the insane weather, better than we could have imagined. We’re averaging weekday sales that we only saw on weekends in Portland. So I’d say location doesn’t matter much when you have a great business plan and if you listen to big ag nurserymen who can’t be bothered to write anything more than a free advertisement for a 70 year-old nursery that doesn’t need free advertising and operates on a scale most of us can’t even imagine, you’ll never have a great business plan. I dream of a day when Digger Magazine focuses not on the few multi-million dollar nurseries in Oregon, but on the many small and medium size nurseries that are the lifeblood of this state. Big ag stories don’t apply to us and never will because they operate in a corporate world that is hell bent on sucking the 99% dry, perhaps our dues could go to supporting the 99% instead of the 1%?