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Thursday, April 17, 2014 Vol. 77 No. 12

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Cover Story
High-Hanging Fruit
| Chris Beytes
>> Published Date: 12/30/2013
Let’s assume you’ve plugged the leaks in your greenhouse, updated your heating system, maybe installed an energy curtain. You’ve got rolling benches for space efficiency, drip irrigation for watering efficiency, carts and conveyors for plant movement efficiency, and you keep up with the latest IPM (integrated pest management) practices to avoid wasting chemicals and labor. You’ve even installed CFL (compact fluorescent) bulbs in place of incandescent bulbs anywhere possible.

In other words, you’ve harvested all the obvious low-hanging cost-saving fruit around your business. What’s left? Is there anyplace else to save some dough?

We think so. We’ve dubbed it high-hanging fruit—not because they’re out of reach, but because they’re often small things that don’t seem worth the bother. But added together, high-hanging fruit can result in real savings—maybe not as much as an energy curtain, but in this day and age, every little bit helps! In a Short Course talk titled “More Money For Me,” Green Profit columnist Bill McCurry pointed out that, “if your business is operating on a 30% average gross margin, then one dollar saved in expenses equals $3.33 in increased sales.” And, he added, “it often requires less effort and no expense to generate one dollar in cost-cutting versus trying to generate $3.33 in sales gains.”

The following tips come from Bill McCurry, plus Bill Swanekamp of Kube-Pak Greenhouses, Pat Bellrose of Fahr Greenhouse, Wayne Mercer of Mercer Botanicals, Doug Cole of D.S. Cole Growers, Mike Gooder of Plantpeddler, Thomas Van Wingerden of Metrolina Greenhouses, Art Parkerson of Lancaster Farms and Michael Geary of AmericanHort. A special thanks to all.

In the greenhouse
Evaluate your potting media for certain crops. In 2012, Pat Bellrose switched to a peatless soil mix (40% compost, 40% pine bark and 20% rice hulls) for his 30,000 8-in. mums and summer annuals and 16,000 poinsettias. He says the cost per yard was $38 delivered, and that it was very uniform and high in microelements. A side benefit: Thanks to all the microorganisms in the mix, he says he didn’t have to apply any fungicide drenches on his recent poinsettia crop. You’ll of course want to test any new mix before switching in a large way. And you’ll want to be extra-careful on high-value crops where a mistake would be more costly.

Check your electrical service. If it’s undersized, you could be buying more electricity than you need. At D.S. Cole, they noticed some voltage drop towards the rear of their facility. Explains Doug Cole, “Turned out that the main wires coming in from the road were slightly undersized and the transformers on the pole were also borderline.” He says the power company paid for the changes and his electric bill went down more than 25% a month. “I didn’t believe it was real until many months went by.”

Shade fabric instead of whitewash. Wayne Mercer of Mercer Botanicals in Apopka, Florida, reports that whitewashing their greenhouses in the spring and cleaning it off in the fall costs 9 cents per sq. ft. per year. That doesn’t include the loss of greenhouse productivity when the workers are on the greenhouse instead of in the greenhouse. This spring, he’ll be covering an acre of greenhouse with 50% Aluminet foil shade fabric, which he says can be installed or removed in four hours compared with several days for painting and cleaning. He expects payback for the fabric will be 30 months. Plus, protecting their poly with shading (either paint or fabric) gives them five years of life from their four-year poly, saving $9,000 per acre over five years.

Shop for used equipment on the Web. Golf carts are one example, but you can find other deals, too. Recently, Kube-Pak purchased a used 200-gal. John Bean sprayer for $500 on the Internet. Brand new, that sprayer sells for $7,000.

Analyze your fertilizer program. To control his fertilizer cost, Pat Bellrose has increased the amount of controlled-release fertilizer and reduced his use of liquid fertilizer. Plus, he’s switched to a lower-cost urea and potassium nitrate blend. Combined, he says he’s reduced his fertilizer expenditures by 30%. Says Pat, “Our industry tends to solve nutrient problems by over-applying an element verses correcting the underlying problem.” Another place he saves money: switching to food-grade citric acid instead of sulfuric acid in his fertigation program.

Kill the rust. Keep ahead of maintenance on your steel greenhouse components and equipment by investing in Gempler’s Rust Converter ($51.15/gal.) and Rust-Oleum paint. Wayne Mercer says they use it on the gutters of their 20-year-old Nexus structure and figure it’s good for another 20 years. “When the gutters [on a greenhouse] go, well, you put a price tag on that one,” says Wayne.

To save on diesel fuel, install a 10,000 gal. (or larger) above-ground storage tank. Buying in bulk can save about 25 cents per gallon. For Kube-Pak, that’s a savings of $12,500 per year. Cost of installation was negligible, says Bill, because they already had the tank.

Shop at cash-back fuel providers. Plantpeddler gets 3% back on fuel purchases from one supplier and steers all their drivers to using that station when possible.

Still using thermostats because you can’t afford to upgrade to step controllers or an environmental control computer? Wayne Mercer says they’ve installed 24-hour Intermatic Mechanical T-101 clocks on every bank of fans and boilers throughout the facility. Wayne says that they have to manually change the on/off times to adjust to the season and override boiler cutoffs when daytime temperatures aren’t cooperating. However, they save money by keeping the boilers off in the morning and taking advantage of the free solar energy coming into the greenhouse. Plus, says Wayne, “I never find a bank of fans that someone has turned down to 30F running at 3:00 a.m.!”

Give your employees a lift. At Lancaster Farms in Virginia, employees need to prune trees that are about 12 ft. tall. In the past, says owner Art Parkerson, they used ladders or stepstools, which were awkward, slow and had to be moved and adjusted constantly. They considered mechanized lifts, but they were expensive, hard to maneuver and slow—overkill, really, he says. The solution turned out to be plasterer’s stilts, which lifts them 2 to 3 ft. “With a little practice, they easily can move around the trees and can see to prune the tree. It’s actually safer than using a ladder. We have fewer falls and tips.” Beyond the safety factor, Art estimates their annual labor savings at $23,000 based on 50,000 trees and cutting the pruning time in half. As Art puts it, “High-hanging fruit, indeed!”

In the office
Bid out your garbage collection services every two years to keep your vendors honest. You’d be amazed how much you can save. For instance, Kube-Pak Greenhouses contracted with Waste Management about four years ago for their weekly cardboard recycling. Says Bill, “They quoted us a price of $75 per month for a weekly pickup. We were okay with that amount. Two years later they doubled the amount. We complained to our salesperson and they came back to the original rate.” Bill says the same thing happened to the rate for their 30-yard Dumpster. The fee went from $200 to $400 per dump. Bill got quotes from other vendors and Waste Management matched them, bringing the rate back to $200.

Do the same with your phone and other service providers. Mercer Botanicals asked their telephone provider for a cheaper plan and cut their bill by $75 per month. Plantpeddler switched accountants and saved $1,000 per month—and got better and faster service, they say. They also saved 40% on credit card processing fees by switching merchant processors (tip: watch out for hidden fees; Plantpeddler used a broker who found them the best rate and went to bat for them when the processor tried to raise the fees).

Sell your scrap cardboard. If you’re lucky enough to be in an area that doesn’t have a glut of cardboard, you might be able to sell it. D.S. Cole Growers in New Hampshire has a large roll-away container that they use for the job. “We don’t have a compacter, so we don’t make much profit on it,” says Doug Cole, “but we get a few bucks [$100 to $200] when it’s picked up and at least we don’t pay for disposal.” (In New Jersey, where Kube-Pak is located, there’s a glut of cardboard, which is why they have to pay to have it hauled away.)

If you’re not a heavy user of cardboard boxes but still need them occasionally, use overrun or recycled boxes. Pat Bellrose normally buys poinsettia cartons for 10 cents per plant. Boxes from companies that deal in overruns, rejected or reused boxes cost 5 cents per plant. The one downside is planning ahead: you need to contact companies about six months ahead so they can find the exact size you need, he says.

Install a programmable thermostat to reduce the office temperature nights and weekends. According to “Energy Savings through Thermostat Setbacks” by Nelson and MacArthur, on average, if you turn the thermostat down one degree F for eight hours every night, you’ll use about 1% less energy. So a 10 degree F reduction should equate to 10%. However, in practice, savings are often less than that, because users tend to increase the temperature when they’re home (or in the office). So to achieve true savings, make sure you select your set points carefully and then leave them alone.

Credit cards can save you money in several ways:
  • Offer smaller customers the opportunity to pay by credit card rather than extending them credit, to reduce bad debts, says Bill McCurry. Granted, there’s usually a fee of about 2.3% for accepting the credit card, but you’re guaranteed to have your money in three days. Usually, the fees cost you less than the bad debts incurred each year.
  • Rather than an airline or hotel credit card, use a business credit card that pays you cash back. It’s generally better to get money than frequent-flyer miles. Plus, if you have a credit card for hotel or airline points, it’s likely those points have devalued over the last few years. Review your card options—it’s probable that a card with cash rewards will yield a better return today than one offering airline miles or hotel rooms.
  • Use that credit card to buy everything you can except in cases where you would lose a discount for paying by cash or check. The use of the credit card gives you about a month in which to float the purchase without paying any interest.

Bill Swanekamp suggests to convert your invoices from two- or three-part forms to plain paper that you can duplicate on a copier. Pre-printed invoices are about 15 cents each versus 2 cents per sheet of printed copy paper.

Check your property tax bill. Investigate on your own or hire legal counsel to review your property tax bill, suggests Mike Gooder of Plantpeddler. He saved $25,000 by reviewing and fighting his property tax assessment. Although it varies state by state, when possible, you want to be treated as an agriculture enterprise versus commercial real estate.

Evaluate closely for the accuracy and valuation of all improvements. If the valuations look inaccurate, you may need the property to be reappraised and request a tax hearing to have your tax valuation amended. This is important because your town or county will probably never come to you offering to reassess your property and lower your taxes. You have to ask.

Pay early or pay cash. Some suppliers will give you a few percent off your invoice for paying early or with cash. Others that don’t normally take credit cards might agree to in order to get the guaranteed fast payment from the card company. Few vendors will advertise their flexibility in this area, so check with them regularly to see if they’ve changed their policies or are open to payment options.

Take advantage of association membership. Most offer member discounts on popular business services. For instance, according to CEO Michael Geary, your AmericanHort membership qualifies you for the following:

  • Credit card processing (discount rate varies by member based on their sales volume; members are currently saving hundreds to thousands of dollars on processing fees)
  • Complimentary legal consultation (some members can receive expert consultation on labor issues—including OSHA compliance—as well as employment, horticultural and tax laws; savings come from not having to engage your own legal counsel)
  • APPI Energy Solutions (savings depend on usage, but there are members saving over $10,000/year on their electric bill)
  • Industry Job Board (save at least $100 off job postings on our job board)
  • Collections by CST Co. (savings depends on volume of usage)
  • Shipping and supply discounts through PartnerShip (savings include up to 27% on FedEx Express; 70% on LTL freight on a variety of carriers, including UPS)

Raise your prices. Even a slight incremental increase in your prices fall directly to the bottom line. Provided your customer will pay (and an abundance of anecdotal evidence says they will), this is one of the best—and most commonly forgotten—method of bringing more cash into the business.

Cart Safety Saves 296 Work Days
At Metrolina Greenhouses, they’re fighting the common injuries caused by casual or improper use of shipping carts and electric carts with some common sense rules and tools. A small investment reduced lost work days from 296 to 0. Thomas Van Wingerden outlined the steps they took:

  • Require work boots. This prevented the heel injuries caused when employees pull the shipping cart into the back of their heel or if a cart accidently rolls over their foot. That reduced foot injuries by 50% the first year. When we instituted the policy, we gave employees a $40 gift card to pay for the boots. Now they’re required for employment.
  • Next, to prevent injuries caused by employees riding on the edges of electric carts and getting their legs or feet injured, we made in-house people movers that keep their limbs inside the car. Cost to make: about $2,000. We have 20 and are making another 20.
  • Finally, to combat injuries stemming from improper driving of golf carts (stepping on the gas while getting in and losing control, or leaving one foot hanging out of the cart and injuring it), we installed a pedal that has to be depressed by the left foot to make the cart operate. Cost: about $60 per cart.

According to Metrolina’s safety director, in 2011 and 2012 Metrolina had seven injuries as a direct result of electric carts. Those seven injuries accounted for 296 lost work days and 684 restricted work days. In 2013, after the safety changes, they had one electric cart injury that accounted for 0 lost work days and just 28 restricted work days. GT

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