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| Starting Small Greenhouse Herb Business |
Answered by: Conrad Richter
Question from: No Name Given
Posted on: May 23, 1999
I need some good sound advice if you don`t mind, so please bear with me while I explain. My husband and I built a greenhouse last summer on the front of our house. I would like to start a business selling herbs and spices, but, we can only keep the temperature around 50 degrees Fahrenheit during the winter. About two weeks ago I started making my own paperpots and then digging up some things that I have an overflow of. I repotted them in the paperpots and am running a small ad that just states greenhouse overflow in hopes to get started selling the things I have to offer.
Providing this works for me this year, and I can make some money, I would like to know how to really get started in operating a small greenhouse, and try to grow. Am I going about this the right way? As of right now I have no money to spend on extra plants and need to rely on what I do have, I don`t know of any other way to get started.
The paperpots that I`m making are two inches, give or take a little and then I transplant the oregano vulgare, garlic or onion chives (in clumps of six) four chervil plants to each little pot, and am selling them for 75 cents. In this area (Battle Creek, Mich.), a four inch plastic pot of oregano vulgare, chervil and the chives are selling for $1.28, and since I`m not a known or guess you`d say a seasoned greenhouse operator, it`s the only way I can think of to attract sales to begin or to become known. There are two other greenhouses in this area way at the other end of town, but the people are not all that willing to give advice. Could you help and advise me please?
Always, the temptation for new business is to sell for less than the competition. This may work to attract attention, but at what cost? Will you make money selling less than everybody else? Have you tracked your costs? Are you sure that you will make enough money to make it worth your effort? If you don’t have spare cash to burn the only way to grow your business is to be profitable from the start.
Another way to look at this is to ask yourself, how much will you have to sell at 75 each to make some significant money? A thousand pots at 75 cents is only $750. How hard will you have to work to generate those $750 in sales? By the time the prime sales season is over you may find that your sales and your profits are not worth the effort.
Yet another way to look at this is to compare how much you have to sell to make the same profit. Let’s suppose your costs add up to 60 cents a pot. You are making 15 cents a pot. If you sell 5000 pots, you will make $750 in profit. Now, let’s say you were to sell for the same price as the competition, but now you only sell 3500 pots. Your profit is 68 cents a pot or $2380. You are selling fewer pots, doing less work, but making a lot more money!
The bottom line is that you do not make more money undercutting the competition. This has been borne out time and time again. We find that it is much better to look for other ways to distinguish your product from the competition. If you can find some marketing or production angle that gives you an advantage over the competition you may do much better in the long run.
For example, you are selling plants in paperpots. There is a segment of the population that appreciates companies that avoid using non-renewable resources such as plastics used to make pots. They are willing to pay a little more to get a product that they know does not damage the environment as much as the standard product.
The challenge is to communicate the fact that you are growing an environmentally-friendly product to the segment of the population that wants those products. You may find that the local media are interested in your unique product and they may be willing to write stories about you or give you a free plug on the radio. You can also print flyers cheaply that can be posted at places frequented by environmentally-aware people such as health-food stores. This effort to communicate your differences to your potential customers is often much more effective to grow a new business than simply lowering prices.
If all you rely on is cut prices, how can you be sure that your competition will not lower their prices too? They may be in a better position to weather a price war than you. It is easy for the competition to lower their prices, but much harder to reorient their business to compete with your environmentally-friendly product.