Current activities of the Water Issues Sub-Committee:

Establishment of Irrigation Assoc. Common Interest Group (CIG)

I’m pleased to report that our Water Committee has succeeded in spearheading the formation of a Common Interest Group (CIG) within the Irrigation Association dedicated to the nursery & floriculture industries. The IA Board approved the group just yesterday (see further information below.)

This is a big step for us in creating more visibility and attention to our industry within the Irrigation Association – in effect, putting us on their radar screen in a much more prominent way. CIGs are the springboards for initiating various programs and actions within the IA that are geared to a particular industry segment. A good example here is the educational program effort described below (B).

In our case, the CIG is also going to attract attention from other IA members whose area of focus is relevant to NAHSA interests, but who are not currently members of NAHSA. This serves our purpose of reaching out & forming relations with compatible organizations, etc as well as attracting positive attention for NAHSA within the Irrigation Assn ranks.

Demie Moore of Aquatrols (a member of NAHSA’s Water Committee) has agreed to Chair the new CIG, and Rick Bechtel will serve as Vice Chair. Andy Smith will serve as our staff liaison.

Development of an education track in the Irrigation Assn geared to greenhouse growers

Fred Harned has been leading our efforts to create an education track at the IA similar to those that now exist for the agricultural and landscape sectors, but geared to the greenhouse environment. Courses would include irrigation system design and installation.

In this effort, Fred has now made touch with the IA’s new head of education, Brent Meecham, who is quite enthusiastic about the idea and has asked us to put together a proper proposal. Fred, myself and others in our group will work on this, with assistance from Andy Smith of the IA. Our efforts here are going to be aided significantly by the formation of the CIG, because that signals the IA that there is a genuine constituency within its ranks that would find such programs relevant.

The first step will be to develop the content for the various courses, which will consist of adapting existing courses to suit the particular requirements of a greenhouse setting. Once the courses are developed, our next objective will be to get elements of them feathered into various key trade shows in the industry in the form of seminars, etc.

Formation of a “steering committee” with the USDA

Ron Eberly has been the lead on this effort, which serves our mandate to form productive ties with other organizations. Ron has been in touch with figures in the USDA who oversee their horticultural division, and generated real interest on their part in forming such a group. Members of the committee would come from ourselves, the ANLA and NGMA for starters. The current plan is to try to set up a meeting with the USDA in May, during a “fly-in” to Washington D.C. that the Irrigation Association is planning, which would enable Andy Smith to participate, as well as present a possible opportunity to meet some of the Water Caucus members while there.

Upcoming article in GPN

Greenhouse Product News (GPN) has asked us to provide a roughly 1,500 page article for their May issue, on how irrigation automation can help growers manage their water use more effectively and deal more successfully with water-related issues. Demi Moore is developing the content, and I will assist with editing.

More on the CIG…

The new Floriculture & Nursery Common Interest Group (CIG) in the Irrigation Association had its first teleconference today, and it went extremely well.  In all, close to 20 people participated and Andy Smith said the response he’s gotten makes it clear that this is something the IA should have done a long time ago.  It was our NAHSA Water Committee that was the catalyst for the formation of it, and we received lots of credit.  Demie Moore is the Chair and I am Vice Chair. 

Our most current activities, which correlate with NAHSA initiatives include:

Efforts to develop an educational curriculum geared to the greenhouse setting.
Development of a Best Practices Manual document geared to the greenhouse sector. 
Establishment of a connection between our CIG and the IA’s Government Affairs Committee. 

Andy Smith is setting up a “Google Group” for our CIG, which will make it easy to share and post information.  It will be very beneficial in tying the group together and keeping things moving.

Membership Committee Update
Ron-Riddle & Terri Higgins, Co-Chairs

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The Membership Committee would like to welcome NAHSA’s newest Manufacturer member, Quali-Pro! We would also like to welcome our newest Associate Members Dr. Charlie Hall and Branch-Smith Publishing! Our affiliation with these two Associate Members brings NAHSA a wealth of information from Dr. Hall as well as discounted advertising for NAHSA through Branch-Smith. Keep an eye out for all of our new members at the upcoming Annual Meeting!

If you know of any potential NAHSA members, please be sure to contact Headquarters! NAHSA can only continue to grow with support from members like you!

Program Committee Update
Jon Oliver, Chair

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The Program Committee is working with Headquarters on final arrangements for our June Meeting. We have an excellent line up this year in terms of education, and of course, you won’t want to miss the contact booth session (Headquarters promises no more curtains in the front of our booths!) If you are a new member to NAHSA or to a NAHSA member company and this will be your first year participating in the contact booth session, listen to our How to Maximize Your Time at the Contact Booth Session audio clip that will walk you through the do’s and don’ts from both a Manufacturer and Distributor perspective.

Of course, we want to send a special thank you to all of our Annual Sponsors this year!

Remember that next year’s meeting will take place June 7-10, 2009 in Hilton Head Island, South Carolina! Save the date!

Member News

Commerce Corporation

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Commerce Corporation was named LGMDA 2008 National Distributor of the Year! In addition, they received five of six first place awards including Outstanding Trade Show, Outstanding Sales Staff & Field Support, Outstanding Retail/Dealer Supplier, Outstanding Overall Vendor/Supplier Relationship and Outstanding Order Fulfillment and Customer Service. Congratulations, Commerce!

Branch-Smith Publishing

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Horticulture Gains New Web Resource

"Absolutely amazing! Wow! Congrats!"

"Great site and great info."

Advertisers are talking about the new Web site for Branch-Smith Publishing – www.GreenBeamPro.com –
launched March 1, 2008.

“The world continues to grow more electronic, and we're committed to providing the most attractive electronic venue for suppliers to meet their best prospects,” said Publisher Stephen Gent.

The site sets a new standard for commercial ornamental horticulture publishers, representing both new design and functionality. The “news portal” style provides at least one new story every day, while headlines for recent stories will continue to display. Daily news will feed off a brand-new blog. Live RSS feeds come from Branch-Smith’s Retailing and Sustainability blogs, as well.

The site is instantly searchable, stocked with more than a year's worth of past content in HTML and PDF formats. If that's not enough, the GreenBeam.com archives are still available. The Online Product Directory is more accessible than ever before.

Advertisers are already finding new opportunities on the site. Besides the rotating top-page banners available previously, three other ad sizes are available in a column that appears on every page. For the first time, Online Product Directory categories are also available for sponsorship, with more than half the categories already sold.

“GreenBeamPro.com is a huge leap from our well-known GreenBeam.com,” said President Mike Branch, “but it’s a natural progression as well. We wanted people to realize it was more than a facelift, but not lose the strong brand relationship we’ve built with the industry these past dozen years.”

Branch-Smith Publishing was the first publisher for commercial horticulture to post content on the Web. Visit here for or a special welcome message.

About Branch-Smith Publishing. A Fort Worth, Texas, company, Branch-Smith Publishing has been publishing trade journals for the horticulture industry since 1915. In addition to two publications for retailers -- Garden Center Magazine and Garden Center Products & Supplies (GCP&S) -- Branch-Smith also publishes Nursery Management & Production (NMPRO) and Greenhouse Management & Production

(GMPRO).
FOR MORE INFORMATION
Stephen Gent, Publisher
Branch-Smith Publishing
817-882-4120
sgent@branchsmith.com

Branch-Smith Publishing likes to inform its readers of special Branch-Smith business-related editorial surveys, shows, products and other offers that we believe they will find helpful in their business or career. To STOP receiving these non-subscription related e-mails please reply to this e-mail here.
 

 

Profit Improvement Report

The Sales to Payroll Delta: A Critical Planning Tool

Prepared for NAHSA | Vol. 17, No. 1 | March, 2008
By Dr. Albert D. Bates President, Profit Planning Group

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Payroll control is a critical issue for all NAHSA members. According to the latest PROFIT report, payroll and associated fringe benefits account for 59.5% of total expenses. In slightly different terms, payroll costs are 1.5 times as large as all other expenses combined.

One important challenge in controlling payroll is finding a practical procedure for planning what payroll costs should be. It is not enough to simply suggest that payroll should be a lower percentage of sales, as that does not suggest how much lower payroll costs should be or how fast a reduction can be made.

Firms also face the very real issue that reducing payroll too much may diminish the firm’s ability to service its customer set effectively. Indeed, payroll costs can be too low as well as too high.

This report examines an approach for planning payroll called the Sales to Payroll Delta. In doing so, the report will address two specific issues:

Targeting the Sales to Payroll Delta—An explanation of the concept of a Sales to Payroll Delta plus a suggestion of some specific goals for planning payroll in the future.

Making Specific Improvements—A review of the opportunities for improving payroll performance.

Targeting the Sales to Payroll Delta
The sales to payroll delta is the difference in the growth rates of sales and total payroll costs, including fringe benefits. As an example, if sales grew by 5.0% and payroll costs grew by 3.0%, then the sales to payroll delta would be 2.0 percentage points. Similarly, with 15.0% sales growth and 13.0% payroll growth, there would still be a 2.0% delta.

The most important point regarding the sales to payroll delta is that it focuses management on the fact that sales do not have to grow rapidly to generate substantially higher profits. In each of the examples above, the firm produced a 2.0% sales to payroll delta. The two plans are almost equally valuable.

This idea that actual sales growth may not be all that important is alien to traditional thinking, so it is useful to review Exhibit 1 which presents the latest financial results for the typical NAHSA member. As can be seen in the first column of numbers, this firm generates $15,000,000 in sales volume, operates on a gross margin of 22.5% and produces a bottom-line profit of 1.5%. In addition, payroll and fringe benefits are 12.5% of sales, the largest expense category.

In the final two columns of numbers, sales have been increased. In the middle column the sales increase is only 5.0%, while in the final column it is 10.0%. The key issue is that in both examples, there is a 2.0% sales to payroll delta. That means that when sales increased by 5.0%, payroll only increased by 3.0%. By the same logic, the 10.0% sales increase has been supported by an 8.0% payroll increase.

It is important to note that in both examples profit before taxes increased significantly. Of equal consequence, the 10.0% sales increase produced a profit improvement that was only modestly larger than the one generated by the 5.0% sales increase. This suggests that sales alone is not the driver of profitability. It is the ability of the firm to control payroll in relationship to sales that is key.

The results from Exhibit 1 may seem self-evident. Of course, profit is increased when sales grow faster than payroll. The reality, though, is that while the results are self-evident, a measurable sales to payroll delta has proven to be an elusive goal for most NAHSA members.

Over the long term, sales and payroll tend to rise together. In tough economic times, firms tend to get aggressive on payroll. In good times, they tend to grow lax. The net result is that over a five-year period, sales and payroll tend to rise at the exact same rate. It is this pattern of equal increases that needs to be broken.

Setting a specific goal for the sales to payroll delta must be done at the individual firm level. For firms that have always had strong control of payroll expenses, a delta of only 1.0% or so per year may be all that is possible. For firms where payroll is somewhat out of control, a 3.0% improvement should be attainable. For the typical NAHSA firm, somewhere around a 2.0% goal is realistic for each of the next three to five years.

The goals may also need to vary depending upon economic conditions. As was shown in Exhibit 1, with a 10.0% sales increase it is relatively “easy” to produce a 2.0% sales to payroll delta. Payroll can increase by 8.0% which allows for adequate increases in compensation for the existing work force and possibly even additional staffing.

In contrast, with only a 5.0% sales increase, the 3.0% increase in payroll requires a much more austere approach to payroll planning. Certainly for some employees there is no latitude to increase compensation at all.

In a period of no sales growth, the 2.0% delta would require a reduction in payroll of 2.0%. At the most extreme, in a recession where sales fall by say 5.0%, then achieving the goal of 2.0% would require a 7.0% reduction in payroll. Clearly, the slower the sales growth, the more difficult the 2.0% goal is to achieve. Even so, firms should target the 2.0% as a realistic goal over time. For the next five years, a cumulative goal of 10.0% is desirable.

Making Specific Improvements
It is a lot easier to talk about making payroll improvements than it is to actually make them. All the sales to payroll delta can do is suggest the magnitude of the improvements that are needed to reach higher levels of profitability. The goals need to be translated into specific actions.

As was noted earlier, generating a sales to payroll delta is much easier when sales are increasing. This means that the focus should be on creating an environment in which the firm generates modest sales growth continually. In essence, the firm must stop being captive to either market growth or prevailing economic conditions.

This conclusion leads back to a recurring theme in profit planning. NAHSA members must gain control over operating economics. This involves making significant improvements in three areas:

Sales per Order Line—If the average line value on an invoice can be increased, then for the same level of expense, the firm generates more profit.

Lines per Order—Working with customers to add one more line on every order creates more sales, but only a little more expense.

Fill Rate—When the firm is out of stock a lot of effort is expended for no sales. A higher fill rate is always beneficial from a sales viewpoint.

Payroll is likely to be an issue for NAHSA members in perpetuity. Employees will always desire improved wages, and health insurance seems destined to increase at a significant rate. Firms must gain control over the payroll side, even in periods of modest sales growth. The sales to payroll delta is the most beneficial concept in planning for payroll control.

About the Author:
Dr. Albert D. Bates is founder and president of Profit Planning Group, a distribution research firm headquartered in Boulder, Colorado.
©2008 Profit Planning Group. NAHSA has unlimited duplication rights for this manuscript. Further, members may duplicate this report for their internal use in any way desired. Duplication by any other organization in any manner is strictly prohibited.

Exhibit 1
The Impact of a 2% Sales to Payroll Delta At Different Levels of Sales Growth
	Current	5% Sales	10% Sales
Income Statement	Results	Increase	Increase
Dollars
Net Sales	$15,000,000	$15,750,000	$16,500,000
Cost of Goods Sold	11,625,00	12,206,250	12,787,500
Gross Margin	3,375,00	3,543,750	3,712,500
Expenses
Payroll & Fringe Benefits	1,875,000	1,931,250	2,025,000
All Other Expenses	1,275,000	1,338,750	1,402,500
Total Expenses	3,150,00	3,270,000	3,427,500
Profit Before Taxes	$225,000	$273,750	$285,000
Percent of Sales
Net Sales	100.00%	100.00%	100.00%
Cost of Goods Sold	77.5	77.5	77.5
Gross Margin	22.5	22.5	22.5
Expenses
Payroll & Fringe Benefits	12.5	12.3	12.3
All Other Expenses	8.5	8.5	8.5
Total Expenses	21.0	20.8	20.8
Profit Before Taxes	1.5%	1.7%	1.7%

 

A Managerial Sidebar:
Percent of Sales or Percent of Gross Margin?

Payroll costs can be evaluated either as a percent of sales or as a percent of gross margin. The second approach is known as the Personnel Productivity Ratio or PPR. The PPR for the typical NAHSA member is:

Most managers are more comfortable thinking of payroll as a percent of sales, simply because the approach has been used for so long. It also links payroll directly to sales generation.

The PPR is more encompassing in that it is impacted by changes not only in sales and payroll costs, but also gross margin. While ultimately a useful ratio, it can be difficult to pinpoint exactly why improvements are taking place.

NAW Group Health Insurance Program

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Enrolling in the NAW Group Health Insurance Program is Simple Convenient Process Simplifies Enrollments for Program Participant

Through our affiliation with the National Association of Wholesaler-Distributors (NAW), NAHSA members can easily enroll in the NAW Group Health Insurance Program. Trustmark Affinity Markets offers Express Connect—a quick, convenient and paperless telephone enrollment for NAW Insurance Program participants. Telephone enrollment is a proven and successful process that reduces administrative paperwork and safeguards employee confidentiality when collecting personal and medical information. Express Connect Benefits Live representatives assist employees throughout the process Accurate and confidential data collection Convenient process with no complicated forms to complete Faster turnaround times on premium rate estimates, and more! What You—the Member Company—Need to Provide Complete census, including names, date of birth, gender and coverage tier Preferred enrollment time frame Resources We Provide to You and Your Employees The Express Underwriting Guide for Employers, which outlines the information needed to begin and complete the enrollment process. Employer’s cover letter for employees Copies of the Telephone Enrollment Application Guide for each employee, which details information collected during the application process. The NAW Health Insurance Program is delivered by: National Association of Wholesaler-Distributors (NAW) is the Washington, DC-based trade association that represents the wholesale distribution industry. NAW is active in these areas: government relations and political action; research and education; and group purchasing. In addition to NAW, the association operates the Wholesaler-Distributor Political Action Committee, the NAW Institute for Distribution Excellence, and the NAW Service Corporation. NAW encompasses more than 80 national line-of-trade associations, representing virtually all products that move to market via wholesaler-distributors; approximately 30 regional, state, and local wholesale distribution associations; approximately 40,000 wholesale distribution companies, most of which belong to one or more of NAW’s national, regional, state, and local associations; and 85,000 wholesale distribution company personnel. Trustmark Affinity Markets administers the NAW Health Insurance Program plans which are underwritten and administered by Trustmark Insurance Company or Trustmark Life Insurance Company. Trustmark is headquartered in Lake Forest, Ill., has nearly 100 years of experience in the insurance industry and more than 50 years as a leader serving associations and other affiliated organizations. The NAW Health Insurance Program health plans are underwritten and administered by Trustmark Life Insurance Company or Trustmark Insurance Company. Flexible Benefit Service Corporation (Flex) is a General Agency and Third Party Administrator. Flex is headquartered in Rosemont, Illinois. Flex has 20 years of experience in the insurance industry and as a leader in leveraging tax-advantaged plans to create long-term savings for the American worker. The NAW Health Insurance Program is distributed and marketed through Flex, which also administers the tax-advantaged plans.

Completing the Enrollment Process Employers set aside up to three days for the application period and ask their employees to: Call the Call Center for the application process between 7 am to 6 pm EST Read and understand all Agreements and Notices, and give their acknowledgment during the call Call even if waiving coverage Once all employees have completed the phone application process, an underwritten premium rate, based on the information received during the application process, will be provided, usually within 48 hours.

To learn more about the NAW Health Insurance Program,
visit www.naw.flexiblebenefit.com.
You or your health insurance agent can also call Flex directly at 866-472-5397.