No Time Like the Present to Spend Conservatively

Sales Great in 2020 but Pandemic’s Future Impact Uncertain

In late April, when Sunland Nursery President Lynn Payne, NMCNP, started to see restrictions on his business operation and sales due to government responses to the COVID-19 pandemic, he started to think about the rest of the year.

“I thought: what are we going to do if sales don’t improve? I went through all kinds of what-if scenarios,” said Payne. “I decided it was best to stand by on the sidelines and watch things go by for a while.”

Young plants rooting in at Sunland

Fortunately, the wholesale grower in Las Cruces, N.M. saw a big surge in all sales areas, both to garden centers and landscape contractors. With huge sales increases in the nursery and greenhouse divisions, the company had to stop taking orders for some plants because they were sold out.

This summer, Payne is looking to the future and asking himself and others what they think is going to happen to the economy in 2021. The general consensus, he said, is that pandemic-related issues are going to get a whole lot worse before they get better.

“Americans tend to feel privileged and safe. There are so many stories circulating about people not wearing masks and not social distancing,” he said.

So, if economic conditions get worse, the real estate market and construction industry could be adversely affected, which could trickle down to landscape contractors. Then, growers like Sunland that sell more than 50% of their products to landscapers may see a drop in sales.

“If COVID-19 cases rise and the government forces people to stay at home more, consumers could be making a lot of garden center purchases, which is positive for the green industry. However, the stay-at-home orders could affect construction and landscaping negatively,” he hypothesized.

In this scenario, overall sales revenues would decrease for wholesalers since landscapers buy higher-ticket items like trees, while the average garden center customer buys lower-priced products like vegetable starts and annuals.

A bright and shiny new computer

Payne has always identified himself as a conservative business man, and thinks he may be turning into an ultra-conservative business man during this period of extreme uncertainty.

His company spent money on upgrading computer hardware and software this year. He admits they could do more equipment upgrades, have the money available, but are hesitant to spend it.

“I think now is a good time to buy equipment. The economy is a little sluggish, and there are good buys out there,” he explained. “If I do spend the money and the economy gets worse, I think I will regret that decision. I would rather wait and spend a little money next spring rather than not be able to sleep at night all winter.”

This year, he was also looking at buying new delivery trucks, but decided to lease monthly. Though more expensive than annual leases, he wanted the freedom to return the trucks and reduce expenses whenever he wanted. A delivery vehicle purchase is still being considered, but he may buy used instead of new to keep more money in the bank.

Trade shows have always been really important to Sunland, and everyone in the industry, he said, because of the opportunities to network, listen to others, and make decisions based on everyone’s comments.

“I don’t think we’re going to be attending many trade shows so they may end up having little or no impact on my decisions about spending at the end of this year,” he said.

He has noticed some shows cancelled this year, and thinks others may not be well attended due to the uncertainties.

“We will have to gather information in another way, may be a lot of phone calls and emails asking what others will be doing next year and whether they have any other suggestions like what we can grow for them,” he said.

He has always been a strong believer in budgets as useful tools for understanding sales trends, and analyzing income and expense history to develop future spending plans.

“After I meet with management, we all go our separate ways to work on numbers for certain products and get input,” he said. “The more people who are included in the budget process, the more people believe their opinions are important to the company. They take more ownership, and it really is important to get that input to get a more accurate picture.”

Color products from petunias to flowering shrubs sold like crazy at Sunland Nursery this spring, and he expects consumers will be back for anything with color next year, too. Still, this uptick is not enough for the company to invest in building more greenhouses.

“I think we would focus more on the timing of crops and maybe growing crops in slightly larger sizes so we can get a little bit higher price. That would be my strategy based on the sales velocities I saw this spring and summer. I could easily make the decision to build more greenhouses but if things don’t go as planned, it’s not going to be a smart decision,” he explained.

He noticed shortages in all business sectors this year, and anticipates shortages next year, saying, “It’s just the world we live in right now.”

Shortages were exacerbated by supply chain disruptions due to a lack of employees, who were laid off when businesses shut down temporarily or permanently due to the pandemic. Some employees did not return to work when doors were opened again, preferring to continue to collect unemployment payments.

“We are seeing shortages of bagged goods like mulch and bark and some of the hard goods. The pandemic has really set our economy upside down, and it will take quite a while to unravel everything,” he said.

Typically, he would be more willing to wait and see if what happens over the summer makes him feel more optimistic about future spending, but he doesn’t believe his opinion will change that much this year.

“In two months, I think I will be just as conservative and concerned about the winter months and the future as I am today,” he said. “Years ago when I was in retail, I used to buy extra in the winter if we had extra money, so I could get it delivered and displayed early. Now, I will let that money sit somewhere and collect dust, because it won’t be collecting interest!”