Industry Sector: Garden Centre

Introduction

You have decided that you want to run a garden centre - now you need to decide on how you will achieve this. Will you:

 buy an existing business  start up a new business from scratch

The course of action you choose will affect the costs you will incur and may also affect how soon you start to receive income from the venture.

This Business Guide will help you to complete your cash flow. The topics listed under Income and Expenditure relate to fields in the cash flow section of the Business Plan.

Cash sales

'Cash sales' means all income from your main business activity which is received at the time of sale. While some customers will pay you in cash, remember that Cash sales can also include:

 debit and credit card payments  gift tokens (if you accept these)  cheques

To prepare your cash flow, you will need to estimate how much income you'll receive over the next 12 months (including VAT if appropriate). To do this you will need to estimate how many plants and related items you are likely to sell and at what price.

There are a number of things to consider when you make your estimates:

Type of business

 who will your customers be? Will you target members of the public exclusively or will you also aim to supply other businesses such as landscape gardeners or forecourt retailers  will you sell by mail order and over the internet  where will your premises be? You may need to have a main road frontage to attract large volumes of customers  how large will your premises be? This will affect the range of plants and other goods you will be able to stock  what security measures will you put in place to protect your stock  how many outlets will you have

 what will your opening hours be

Your product ranges

 will you grow any plants yourself  will you target a particular type of customer - for example, young families  will you aim to stock a wide range of plants or will you specialise - for example in herbs  what other non-plant ranges will you stock  will you offer services such as garden design  will you allow other businesses such as swimming pool installation, conservatory or shed erection to operate from your site on a concession basis  will you offer any catering to customers  how will you make sure your plants are healthy and disease-free  what will you do with 'leggy' unsold plants past their peak  how will you minimise wastage  are you prepared for seasonal variations - most of your sales are likely to take place between March and June or July

Pricing

 what will your pricing policy be (don't forget, you must be able to cover your costs, overheads and drawings)  how often will you review your prices  will you offer special prices if customers buy more than one of a particular item  will you try to offer plants in all price ranges  how much discount will you offer your trade customers (if you have any)

Staff

 will you be able to find experienced and knowledgeable staff locally  what will be your policy on staff discounts

Competition

Independent garden centres face strong competition from supermarkets and from the national garden centre and DIY chains, which operate from very big sites, stock vast ranges of plants and non-plant products and offer customers an enjoyable day out with plenty to see and do.

This can make it hard for the independent to compete. It's very important to make sure that your garden centre will offer something special that will attract customers to you rather than to your competitors.

Buy an existing business

You might decide to buy an existing garden centre rather than start your own venture from scratch. Buying a going concern can mean that:

 the premises, shop fittings and equipment are already in place  there are established customers  the business can generate income immediately  suppliers have been identified and relationships established with them  the business has a track record which can help if you are looking for finance  staff may already be in place

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.

Other matters to consider include:

 the state of the premises, equipment and so on. Will you have to spend money refurbishing or replacing assets  the condition of any stock you are buying - particularly plants. Check this over carefully before agreeing a price  existing staff rights  how to retain key personnel once you've taken over  does the business owe money that you will be responsible for  if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her, the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.

Market research

Estimating demand

As a first step, give some thought to who will buy your products. Bear in mind that your business is likely to be very seasonal, with high demand in the spring and early summer and a much lower level of demand during most of the rest of the year.

As far as possible, match your perishable plant stock to the level of demand you estimate you will have. To achieve a reasonable level of sales, your 'catchment area' must contain a sufficient number of potential customers and not too many competitors.

Catchment area

Although the majority of your customers will visit you by car, most will not want to travel too far to reach you. Ideally your garden centre should be located in, or very close to, a major centre of population with many residential areas.

Identify the different types of housing within, say, a 15 mile radius of your garden centre. You could even try to estimate the number of households there are. Make a note of the size, nature and appearance of the gardens. This will help you to decide on the range of plant and other products you might sell. For example, you might do well to concentrate on bedding plants for patios, window boxes and hanging baskets if your catchment area includes many flats or houses with very small gardens.

Checking out the competition

Plants, seeds, bulbs and other garden products are available from many different sources such as:

 other nurseries and garden centres - many of these are part of garden centre chains and offer customers a very comprehensive service  florists  DIY 'sheds'  supermarkets  petrol filling stations  mail order and internet retailers  greengrocers, variety stores and even convenience stores

So you will need to decide whether there is room for another outlet selling garden products in your area. Count how many competitors there are already and identify the range of goods they sell. If some of these are garden centres note down whether they are independent or part of a chain. Think about the range of plants they stock - is it a little bit of everything or do they specialise, for example in herbs. Make a note of the condition of the stock too.

Trade sales

You might be planning to supply plants and other products to other businesses, such as:

 landscape gardeners  petrol filling stations and other local retailers  hotels and nursing homes  your local authority (for parks, municipal gardens and so on)  building contractors

If you plan to target trade customers you could:

 count the number of suitable businesses and other organisations in your area  work out what product ranges to offer them  decide on the discount you will offer them  approach them to see if they would be interested - if they are already being supplied by someone else you will have to give them a good reason to change. This might be a wider product range, better quality plants, lower prices or a better service Sector trends

What has been happening in the garden products sector

Over the last 10 years or so there has generally been a steady increase in demand for garden products, for a number of reasons:

 there was a lengthy period during which the housing market was buoyant, with many new properties being built  gardening has become one of the most popular leisure activities and enjoys widespread coverage on TV and the radio, in magazines and newspapers  container grown plants and pre-planted pots make 'instant gardening' possible - people do not have much time to spend growing plants from seed  spending on garden items such as water features, garden furniture, barbecues, patio heaters and lights, paving, decking, boundary fencing, ornaments, planters and so on has grown significantly  growing demand for 'green' and 'eco-friendly' products like water butts and composters  the recent increase in interest in home-grown vegetables

This has benefited the garden centre sector but has also seen other retailers, such as DIY 'sheds', entering the market. Although the specialist garden centre sector still consists of many small independents, there has been an increase in the number of large outlets run by the big national garden centre chains.

In common with other retailing sectors, garden centres were affected by the economic downturn during the late 2000s - but demand for smaller, cheaper items such as plants and seeds held up reasonably well. Sales of vegetable seeds, plants and gardening tools increased considerably as people decided to save money by growing their own veg. However, sales of 'big ticket' items such as outdoor furniture are likely to have fallen.

In the longer term the market for garden products is likely to remain strong, but smaller independent garden centres may find it difficult to compete in what is now a very competitive industry.

One problem that the sector has faced in recent years is a shortage of good, well trained staff. Knowledgeable and friendly staff are particularly important to a successful garden centre, where many customers will have lots of questions about the plants on display and some will just want to chat.

Keeping up to date with developments

The Horticultural Trades Association (HTA) represents the interests of all types of businesses in the garden products industry including growers, landscapers, wholesalers and manufacturers as well as retailers. The Association offers members a range of services and can be contacted at Horticulture House, 19 High Street, Theale, Reading, Berkshire RG7 5AH.

The Garden Centre Association (GCA) also offers members a range of services including an annual Yearbook, regular newsletters and trading trends reports for members. Members are listed in the GCA online directory, with links to their own websites. More information is available on the GCA website.

Haymarket Media Group publishes trade journals for the horticultural sector, including Horticulture Week. You can contact them at 22 Bute Gardens, Hammersmith, London W6 7HN.

Trade Shows

You can get a lot of useful information at trade shows and exhibitions for the gardening sector. One of the main exhibitions is GLEE, held at the NEC every September. You can find out more about this event on the GLEE website. What to sell

The range of products and services that you decide to offer will depend on:

 how much space you have available  whether you are targetting a 'niche' (specialist) market  whether you are growing plants yourself

 whether you will invite other businesses to operate from your site on a concession basis

If you have a large site you'll probably have room to offer a wide range of plants, plant- related products and leisure items such as:

 plants (seeds, bulbs, houseplants, bedding plants, container grown stock and pre- planted containers)  Christmas trees  gardening tools and equipment  furniture, barbecues, ornamental items  hard landscape materials and decking for patios  boundary fencing, gates and trellises  pots and containers  miscellaneous garden products such as bamboos, artificial turf and so on  pet and aquatic products  buildings and greenhouses  garden chemicals such as fertilisers, pesticides, herbicides and so on (don't forget to include some organic ranges)  a range of composts, including peat-free products  'green' and 'eco-friendly' items like water butts, composters, domestic wind turbines and so on  gift vouchers  Christmas decorations, books, gifts and sundries  miscellaneous food items such as fresh fruit and vegetables, honey, jams, handmade biscuits and so on  craft items and cook shop ranges

Services that you might offer include:

 hanging basket supply and maintenance service  garden design  a café  swimming pool installation and maintenance  conservatory installation  solar panel installation

Some of these might be offered by concessions - separate businesses that 'rent' space at your premises.

When thinking about what to sell, be sure to tailor your stock to your customer base. If most of your potential customers have only small gardens it makes sense to have plenty of bedding plants and smaller shrubs and perennials. Don't forget to stock ancillary items like potting compost, tubs, planters, window boxes, hanging baskets, irrigation systems and so on.

Think too about current trends - for example during the economic downturn customers are keen to save money by growing their own vegetables. Even flat-dwellers with a small balcony can grow a few items in pots so it makes sense to encourage this by stocking a good range of different varieties of vegetables and planters.

Although it is important to have a big enough site to be able to stock a wide range of stock, one of the most essential things for any garden centre is the quality of your plants. They should be healthy, vigorous, weed free and well maintained so that they thrive when transplanted into the customer's garden.

Make sure also that plants have colourful and informative point-of-sale material and are displayed to the best advantage. You could tailor displays and promotions to different times of the year, or to coincide with the content of television gardening programs. Don't forget to stock a good range of herbs - the popularity of TV programs featuring celebrity chefs has boosted sales of culinary herbs considerably. Customer profile

Your market

You might have several different types of customer, depending on the nature of your business. For example:

 members of the public, either in person or via mail order or the internet  other garden centres, to whom you might supply plants you have grown yourself  gardening clubs  landscape gardeners and local builders  organisations such as local authorities, colleges and hospitals  local businesses such as petrol filling stations and convenience stores  businesses such as hotels and nursing homes or retailers with grounds that need to be maintained - for example those located on retail parks

Estimating the average spend

When estimating your income, think about the number of households who will buy from you and how much they are likely to spend each time they come in. Your market research may have helped you to estimate how many households are located within your 'catchment area' and to consider how many of these you might reasonably have as customers.

Estimating how much they will spend is more difficult because:

 they may spend significantly more in the spring or summer than at any other time of the year  each customer's requirements will be different, reflecting the different sizes of garden and the extent to which they grow from seed or buy plantlets. Remember

too that customers with young families may want a low maintenance garden, while older gardeners have more time to devote to gardening activities  you may have to offer discounts because the weather has deterred customers from buying your stock, or because local competition has increased

You might decide to base your estimate of the average spend on your own spending pattern and that of friends and relations. You could also observe closely in other garden centres the quantities in which customers buy and the price they pay.

Trade sales

If you are planning to sell to trade customers, try approaching some as part of your market research and establish:

 what range of products and services they would want  how frequently they would want them  whether they are happy with the prices you would charge

This will help you to estimate your trade customers' average spend.

Cash or cheque

Although some customers may pay you in cash, particularly if they are buying just a few items, many will prefer to pay by credit card or a debit card. Some may also pay by cheque, but this is becoming less commonplace. Your trade customers will probably pay by cheque, and if you supply local institutions and organisations on a regular basis they might pay you by electronic payment direct to your bank account.

You'll probably offer your trade customers discounted prices, for example 10% or 20% off the normal retail price, as well as credit terms of, say, 30 days.

Advertising your business

Whoever your customers are, it's essential that they know about your business. The garden centre itself is potentially one of your best advertisements - ideally it'll be very visible to passers-by and always have attractive and well-tended displays of seasonal plants. Many garden centres use colourful flags to attract attention.

There are a number of other things you can do to promote your business:

 set up your own website including images of your displays, details of any special offers and promotions and possibly an online ordering facility  have leaflets printed outlining the products you specialise in and, perhaps, including plant care tips  advertise in your local newspaper and any other local publications and directories

 set up a local gardening club and try to get some editorial on your local TV or radio station. You could offer club members a loyalty card scheme so they can build up points towards the cost of plants  have a regular stall in a local market, selling just a few of your seasonal ranges and displaying information about your main retailing outlet  make sure all your vehicles, packaging and other literature carries an eye-catching logo Quality standards

Whatever plant ranges you decide to stock it is essential that they are disease-free healthy specimens. You will need to make sure that the staff you employ are experienced and well trained with extensive plant knowledge. As well as keeping your stock in top condition, they'll be able to answer customers' queries.

The weather can have a very dramatic impact on demand. For example, a cold wet spring may mean that customers don't buy bedding plants as early as usual so that your stock becomes 'leggy' and unappealing. Very hot weather can mean that plants lose too much moisture and become limp and bedraggled. Although it seems hard to do, it is better to throw poor stock away before it damages your reputation. You might be able to discount the stock and sell it before it has deteriorated too far. Don't be tempted to use this sort of stock for your own displays - the plants won't thrive and the whole purpose of the display will be lost.

Make sure that your whole site projects a well cared for image. Keep pathways clear and weed free, stack non-plant products tidily and make displays as attractive as possible. Ideally you want your customers to spend a long time at your centre so it's essential to make sure all the different areas are pleasant and enjoyable to be in.