Friday, January 2, 2009

Business - Action Points in a Down Economy: Controlling Costs

It is always necessary to track costs in any business but is even more critical during tough economic times. The following are some cost control considerations for horticultural businesses.
  • Know your costs. Your business profits depend on having good information on the costs of doing business. Know what it costs to produce a nursery or greenhouse plant; know what it costs to provide a landscape or lawn care service. Costs involve both variable inputs and overhead. Make sure that both are accurately accounted for.
  • Once you know your costs, try to lower your break-even cost, that cost at which you pay for all your variable and overhead expenses. Reduce waste, reduce overhead, make only absolutely necessary expenditures, manage with less labor, etc. Be careful though - do not sacrifice quality or service with your cost cutting measures.
  • Lock in energy prices at lower rates. If you can buy fuel and store it, now it the time to do it. If you can lock in some low prices with your energy supplier (they do the storage) do that now.
  • If you ship products, look at long-term distribution options to reduce freight charges. If you receive products, look at the lowest cost freight options.
  • Greenhouses, nurseries, and garden centers should consider buying in pre-finished materials now and "turn the margin". Many plants are in oversupply currently and can be bought for a low price. It is therefore often cheaper to buy in finished material rather than producing your own.
  • Apply other cost cutting measures that are practical. Avoid unnecessary inventory, use labor more efficiently, look for the best prices on inputs, take advantage of low interest rates, etc.
  • One area you should not reduce expenditures on is marketing. Marketing is even more important in a down economy.

Information taken from a presentation by Dr. Charlie Hall, Texas A&M University.

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