Example Business Plan

Example business plan for imaginary business, A&B Nursery.
Example Business Plan - Articles


A. & B. Nursery

February 2005

John A. Smith
724 Nursery Rd.
Anytown, PA 10000

Executive Summary

A. & B. Nursery will be a small part-time ornamental nursery producing four species of quality ornamental trees. The nursery's target market will be landscape contractors and garden centers. By producing trees for the wholesale market, the owner will be able to operate the business on a part-time basis, enabling him to remain at his current employment.

Currently, landscapers require quality ornamental trees to use for their businesses. The nursery will furnish these trees. The nursery is located in an area of high population growth in the Commonwealth of Pennsylvania. The nursery plans to offer services to area businesses that nurseries outside the area of Adams and Cumberland Counties cannot offer. Since the nursery will be geographically located in the northern portion of Adams County near the border with Cumberland County, the nursery has the advantage of being able to have trees to any portion of the two counties within two business days of an order.

A. & B. Nursery plans to produce only four species of trees to enable the owner to concentrate on producing quality trees. The owner has not previously produced ornamental trees, however; the owner was previously engaged in the commercial fruit business. The land used for the nursery was previously part of his fruit growing operation. Because of off-farm employment and depressed apple prices the owner only desires to operate the nursery as a part-time operation.

Since the nursery will be small, the owner does not anticipate the need to hire any additional labor. This will eliminate any employee taxes and benefits, as well as, any workmen's compensation insurance. This will reduce or eliminate expenses and overhead costs associated with employees.

In reviewing the business plan concerning the financial statements, the success of a business like A. & B. Nursery depends on offering trees of consistent quality and providing exceptional service. The success will also depend on developing close relationships with customers to determine future needs in regards to size, species, and production method. There are several small nurseries within a fifty-mile radius of the nursery's location, however; these nurseries do not supply the needs of all customers in the area. The owner believes there is a market for the trees he will produce. By catering to smaller businesses, the owner believes that he can market all of the trees he will produce.

A. & B. Nursery will face several challenges. These include: (1) the owner has no experience producing ornamental trees, (2) wholesale sales will not net as much profit as retail sales, (3) The owner will need to purchase some equipment, (4) weather conditions, such as drought, can affect the production of trees, (5) the nursery will be located in an area, currently under quarantine for Prunus tree species, (6) according to a survey conducted by the owner, businesses surveyed preferred to receive trees balled-and-burlapped.

Penn State Extension currently employs the owner who will have the resources of the University easily available. The owner also has a close friend who was previously involved in the nursery and landscape business. The owner can consult with this friend for advice concerning the business. To overcome the other challenges, A. & B. Nursery will need to borrow start-up capital for an irrigation system and needed equipment. The nursery may try to establish a retail market for a portion of the trees produced. Expanding the initial size of the operation will spread the investment in the irrigation system and equipment over a larger number of trees, reducing the overhead per tree sold. Because of the quarantine, the nursery will not be able to produce Prunus species of trees, which the research shows is one of the top four species of trees sold by landscapers and garden centers in the area. To overcome the challenge of customers preferring balled-and-burlapped trees, the owner will either need to purchase a tree spade or contract with a company to harvest the trees or educate the customers about the value of the pot-in-pot system.

The owner has doubts about borrowing money to begin the business at this time. However, this business plan shows that if the owner installs an irrigation system the return on the investment will take approximately four years. If the business does not install an irrigation system, the business plan shows the return on investment will be in five years, if the nursery can begin marketing trees at four years after business start-up. The break-even analysis performed on a five-year basis, supports this theory. The author uses a 6% interest rate for the cash-flow analysis of the business. The business should still be viable with moderate interest rates.

After completing this business plan, the owner determines that the business will be viable. The owner will undertake this business opportunity in some form.

Mission, Goals, and Objectives

General Description of the Business

A. & B. Nursery is a small nursery, which will specialize in producing deciduous ornamental trees. The business will be a sole proprietorship formed to provide additional income to the owner. The nursery will specialize in four species of trees including; Red Maple, Flowering Dogwoods, Japanese Maple, and Callery Pear trees.

This specialization will allow the owner to concentrate on producing quality trees to local landscape contractors and garden centers.

The business plans to produce trees in both the pot-in-pot and balled-and-burlapped method. Originally, by offering both methods of marketing, the business will offer customers the option of purchasing trees as they are accustomed and point them toward the newer method of pot-in-pot. Potential customers are now purchasing more trees produced by the balled-and-burlapped method. The pot-in-pot method is a newer, more efficient method of producing trees. The owner plans to offer a small percentage of the inventory of trees balled-and burlapped the first marketing year then only offer trees produced by the pot-in-pot method.

The nursery plans to sell all trees on the wholesale market to help alleviate the need for sales personnel and the requirement of having to be at the business during the weekends and evenings. The nursery plans to market trees within a two-county area in south central Pennsylvania. The business will offer customers the option of purchasing trees at the farm of the business will offer delivery for a fee within the local area.

Mission Statement

The mission of A. & B. Nursery is to produce and market quality deciduous ornamental trees at a competitive price for distribution within the local area.

Goals and Objectives

As a business in the development stages, A. & B. Nursery has several goals relating to quality, growth of the business, and survival of the business. These goals and objectives are as follows:

Goal 1: To produce quality trees for market within four years.

  • To plant two hundred trees each year over the life of the business.
  • To produce trees which meet the customer's specifications.
  • To have a survival rate above ninety percent for the years the trees are in the nursery.

Goal 2: To produce trees using the Integrated Pest Management (IPM) system.

  • By using the IPM system, the business will use fewer pesticides to reduce pollution.
  • The IPM system will help reduce the cost of production for the nursery.
  • The IPM system will produce healthier trees to help ensure long-term survival of trees.

Goal 3: To ensure repeat customers throughout the life of the business.

  • By constantly surveying customer needs and industry trends, the business will adapt to these needs and trends.
  • By offering a one-season warranty, customers will develop trust in the business.
  • By developing the customer's trust, the business will help ensure repeat business.

Goal 4: To expand the business after five years.

  • To establish customer loyalty and develop new customers after breaking into the market.
  • To expand the number of species produced to stay current with changing markets.
  • To expand the use of available land and use this land to its best economical use.

Goal 5: To produce trees at a profit for the business.

  • To produce quality trees at the lowest possible cost.
  • To produce species of trees that will command the highest possible price.
  • To produce species of trees which are what the customer desires.

Goal 6: To supplement the retirement of the owner.

  • To continue to expand the customer base to ensure the longevity of the business.
  • To continue to expand the business over the next fifteen years.
  • To continue to plant trees for sale for the next twenty years.

Background Information

Background Industry Information

Debra Holder, executive vice president of the Associated Landscape Contractors of America (ALCA), says,

"The overall health of the green industry is extremely strong. With gardening popularity growing and the strength of the economy, including the growth of housing starts and commercial development, the industry as a whole is doing great with a continued forecast of growth for the future" (State of the Industry, July, 2001. p.27)

She also states that education of the consumer as to the value of horticulture in the environment is critical to the continued growth of the industry. The value of exterior landscaping on the resale value of homes is an important factor. This factor, along with the environmental benefits of the air-cleaning quality of trees, needs to be stressed to the consumer (p.27).

Robert J. Dolibois, executive vice president of the American Nursery and Landscape Association (ANLA), agrees that the overall health of the industry is quite strong. He states, "Government and industry statistics tell us that lawn and garden sales doubled between 1989 and 1999" (p. 27). The growth in sales of lawn care and tree services is not quite as dramatic, but the trend is still positive. He also concludes, "Our industry is in a period of unparalleled market potential" (p.27). He is concerned that the industry is moving from a higher margin/lower volume structure to a lower margin/ higher volume structure.

Both of these experts agree that the industry is in a period of strong growth. With the industry in a period of growth, it is a good time to enter the industry. If the industry were in a downturn, it would not be as advantageous to consider entering this industry. Dolibois says that, "the green industry reliably rewards patience combined with innovation, integrity, and ingenuity" (The State of the Industry. July, 2001, p. 28). With this in mind, the researcher believes that the market potential is available to enter this industry.

According to the United States Census Bureau (March, 2002), from 1990 to 2000 the population of Adams County rose 16.6% with 639 housing units authorized by building permits in 2000. In 1990, there were 20,578 owner-occupied housing units in Adams County. In 2000, there were 35,831 owner-occupied housing units in Adams County. In Cumberland County, the population change was 9.4% from 1990 to 2000. There were 86,951 owner-occupied housing units in Cumberland County in 2000. This compares with 77,108 owner-occupied housing units in 1990.

These figures indicate that the housing industry in the two-county marketing area considered by the researcher is growing. With the growth in the housing industry comes growth in the landscaping industry. New houses, unless they are built in wooded areas, will need some type of landscaping to enhance the exterior aesthetics of the new housing. As stated previously, landscaping also increases the resale value of most homes. If this rate of growth continues throughout the next ten years, existing landscaping companies will need to expand their businesses. With this expansion comes an increased demand for the products they sell or use in their business.

Organizational Matters

Business Structure:

A. & B. Nursery will be a sole proprietorship at this stage of the planning. It requires only the expenses of doing business, such as office equipment, phone lines, internet connections, and marketing materials. These items are currently available to the business through the current business in which the owner is engaged. The owner will pursue the expenses associated with becoming a Limited Liability Company (LLC) to determine if this structure is an option for the business.

Management, Personnel, and Outside Services:

As the owner of the business, I represent the "management team." I have an Associate Degree in Agricultural Business from Penn State University, and a Bachelor's Degree in Organizational Management from Eastern University. I was previously a self-employed as a fruit grower for sixteen years and am currently employed by Penn State University. As a business person I posses a strong work ethic, excellent organizational skills, and good written and oral communication skills which will aid in the development of the business. The success of the business will depend on these factors.

Since the business is small and part-time, the business will not require additional labor beyond the first marketing year. The additional labor will be required to harvest the percentage of trees planted in the balled-and burlapped method.

Outside services will be needed to operate the business. A consultant or company representative will be needed to make pesticide recommendations. These services are readily available to the business. Extension personnel will also be required to make recommendations on several methods regarding production. Both of these outside services are currently used in the owner's existing business.

Risk Management Strategies:

The business will use the diversification of species as its main risk management tool. If irrigation is installed, this will be used as a risk management strategy. Irrigation will help lessen the effects of drought, which has plagued the area in three of the last five years. The owner has examined the possibility of crop insurance for the trees. Nursery crops are covered by crop insurance but slow or reduced growth of trees due to drought is not covered. The owner should participate in the crop insurance program under the Catastrophic Loss Program commonly called CAT. This program is free in Pennsylvania due to the Department of Agriculture paying the premium. This type of insurance will cover a portion of extreme losses that may occur. The CAT insurance program will pay an indemnity after a fifty percent loss, however; only fifty percent of the cost of the loss is covered.

Marketing Plan

This marketing plan will determine the marketing strategies of the small part-time deciduous ornamental nursery. The production plan for the nursery is to produce approximately two- hundred trees per year. The nursery plans to distribute quality products to local landscapers and garden centers. The nursery plans to locate in the Adams County area of Pennsylvania and sell the products in the Adams and Cumberland County areas.

Mission Statement:

The mission of A. & B. Nursery is to produce and sell quality deciduous ornamental trees at a competitive price for distribution in the local area.

Since this business is owned and operated by a single person, the party involved understands the mission statement. The business is started to supplement the income of the owner, and to provide funds for retirement and the education of the owner's children. The owner anticipates the business will take four years to produce trees for sale. This is due to the time anticipated to grow the trees to a marketable size. The owner plans to focus on producing three species of trees, determined by the clientele to be their most sold specie.


  • To provide quality trees at competitive prices.
  • To produce no more than four species of trees for sale.
  • To limit production to 200 trees per year.
  • To provide consistent quality throughout the life of the business.
  • To focus on producing marketable trees within four years.
  • To retain customer's respect.
  • To provide trees for customers that will meet their standards.
  • To provide trees to the customer that will meet their customer's expectations.
  • To provide additional income for the owner.
  • To supplement the retirement of the owner.

Situation Analysis:

Internal Strengths:

  • The owner has available land at this time.
  • The owner has most of the equipment needed to proceed with the business.
  • The owner has experience growing fruit trees.
  • The owner has a current pesticide license.
  • The business requires low input costs.
  • The owner has business experience.
  • The owner can do the required labor to produce the trees.
  • With selling wholesale, advertising costs will be low.
  • The owner has a truck that will be used for delivery.
  • The owner is currently employed by Penn State University and has the educational resources at his disposal.
  • Continued growth of the new housing industry in the target area.

Internal Weaknesses:

  • The owner has no experience producing ornamental trees.
  • Wholesale sales will not net as much income as retail sales.
  • The owner does not have a nursery license.
  • The owner will need to purchase some equipment.
  • With customers preferring balled-and-burlaped trees, the owner will need to purchase top soil to replace ground removed with the tree.
  • The business will require time away from family.

External Opportunities:

  • The owner has many connections to the nursery industry through his employment.
  • The owner has a colleague who has indicated interest in purchasing the trees.
  • The owner can join the Pennsylvania Landscape and Nursery Association for additional information.
  • The owner has a colleague and friend who was formerly a landscaper and nurseryman.
  • The business can sell to the retail market if it produces trees in the pot-in-pot growing system.
  • Newly built hoses usually require products for landscaping.

External Threats:

  • Of the last four growing seasons, there have been two years of drought.
  • The business may require irrigation to produce the trees, which will be an additional expense.
  • There are other suppliers in the area.
  • According to the survey, most landscapers and nurseries are satisfied with their current suppliers.
  • The business is currently located in a quarantine area for Prunus species of trees.
  • The market may become saturated with trees.
  • The changing desires of the customers may cause the business to have unmarketable trees.

Marketing Strategies:

The business plans to remain small because of existing employment commitments. The owner does not want to make the business into the sole income source of the family. Because of this, the business plans to specialize in a limited number of species and not sell to the retail market. The retail market will demand the owner to be accessible at all times.

The target market for the business is landscapers and garden centers in the Adams and Cumberland County area. Before deciding on species to plant, the owner plans to visit with several businesses in the target area to determine the species they are selling. This will help eliminate the possibility of producing species that will be unmarketable when the trees are to the required size. The owner plans to visit these businesses to market the trees. This practice will eliminate having to advertise in the traditional sense.

The population growth in Adams County has been continually growing. Adams County is the fourth fastest growing County in Pennsylvania. The population for the two counties is over 100,000 people and growing. Adams County is growing by over 16% over the last ten years and Cumberland County has grown over 9% in the same period. This sustained growth requires the construction of new houses.

New houses are traditionally being built on land that was previously devoted to agriculture. This land traditionally does not have shade trees existing on the properties. Due to this, most newly constructed houses will need some form of landscaping. The deciduous trees the business plans to produce will complement this need.

The target markets are seeking locally produced trees to lower shipping costs which will lower their input costs. The market is also seeking locally produced trees to ensure survivability of the trees. Trees produced in the area have a higher survivability rate than imported trees. The business will produce trees in the local area to assist in this demand.

The business is located within thirty miles of the target market. This will enable the target market to have better accessibility to trees when they are needed. They will be able to have trees delivered to the job site, or place of business or pick up at the business, within two days. This will enable the market to complete jobs quicker and satisfy the customer. With landscapers having to order trees for outside the area, they may have to wait several days or weeks to complete the job for their customer.

The business desires to work with other small businesses and help sustain their businesses. This will also help sustain the local economy. With the majority of all proceeds remaining in the local economy, this should help the other local businesses. The business plans to consistently market to small local businesses. This will help ensure repeat business from customers.

The business is not currently producing trees. The reputation of the business is not yet established. The reputation of the owner as a fair person has been established in the community. In talking with a potential customer, the customer stated that he would purchase as many trees from the owner as possible. This is contingent upon the business producing species of trees that this business is currently selling. This business has available land to produce their own trees but does not currently have the required time or labor to do so.

Because of the time required to produce the trees, the business cannot change products easily. This will make changing products difficult. This will also require the business to thoroughly research the species to be produced. The business must have the foresight to predict what species will be desired in four years. This will make it difficult for the business to expand or contract dramatically or quickly.

The government impacts to the business are; requirement of a pesticide license to control pests on the trees, a license to operate a nursery, and the quarantine currently placed on Prunus species in the owner's area. The Pennsylvania Department of Agriculture (PDA) places these restrictions on the business. The owner has contacts at PDA who will help him through the process of obtaining a nursery license.

Marketing Mix:

The business plans to establish a long-term customer base and develop a close relationship with these customers. This will help ensure the business keeps in tune with industry trends. If the customers see trends towards other species of trees, they can alert the business of these trends. Pricing trends will be determined by continuous research by the business and monitoring of input costs. The business plans to market trees at competitive prices as long as a profit can be established at these prices. If input costs rise, prices will need to rise accordingly.


The business plans to market; Red Maple, Flowering Dogwoods, Japanese Maple, and Callery Pear trees. According to the survey conducted for the Thesis project, these were the top four species sold by the respondents of the survey. The business plans to market two-inch diameter trees since these are the largest seller among the respondents. The business will offer smaller trees at a lower price if requested by a customer. The business plans to harvest trees when they are needed to ensure quality and freshness.

Public Relations:

Most nurseries guarantee the trees for one year; the business plans to follow this practice. This practice will need to be monitored to determine if additional warranty is needed. In addition, the plantings need to be monitored to determine if proper care for the tree was provided. Continuous monitoring of the customers will determine if quality is of acceptable standards and their customers are happy with the value of the trees. Customer service and care will be an important business policy.


The business will offer delivery of the trees to the customer or to the job-site if desired for landscapers. Garden centers will have the same options of delivery or pickup. The business will charge a modest delivery fee of thirty-five cents per mile under conditions that exist now. If fuel prices rise dramatically, this figure will be adjusted. The business assumes that most customers will pick up the trees at the place of business.


Promotion of the business will be by direct contact with potential customers. This contact will begin before trees are started in the nursery so the business knows the market desires before entering the business. This promotional tool will be the most effective and cost effective for the business.


According to the respondents of the Thesis questionnaire, the majority of the trees garden centers and landscapers are purchasing range from $65.00 and up. Production costs are predicted to be approximately $45.00 per tree over a five-year period. This figure does not include an irrigation system. If irrigation is installed, the production costs reduce to $42.00 per tree because of starting to market trees at year three over the same five-year period. This leaves at least $20.00 per tree profit for every marketable tree without irrigation and a profit margin of $23.00 per tree with irrigation. If the business produces 190 trees per year, the net profit for the five-year period should be $726.00 for the five year period without irrigation and approximately $2025.00 for the period with irrigation. For a small part-time business, this will be an acceptable level of income since the profit level will rise from year five on.

Implementation, Evaluation and Control:

When the business is established, if the customers require more trees each year, the business may expand slightly. When the business is more comfortable with the production methods, expansion will be easier. If the business expands beyond the initial customer base, more traditional advertising and promotion will be needed. The owner has not previously been engaged in this business and plans to start small until he becomes proficient in the business. The business plans to begin in the spring of 2004. The owner does not have the required time now to begin the business.

Evaluation of the business will be customer based. If the customers are not satisfied with the quality or service, the business will need to make adjustments to ensure continued customer loyalty. The business knows that it is easier to retain customers than to establish new customers. When a customer is not satisfied, the business needs to notice.

Financial Plan

Record Keeping Functions:

Because A. & B. Nursery is solely owned and operated by the author, the record keeping functions will be the responsibility of the owner. The owner will keep records of accounts payable, accounts receivable, cash flow, and other related financial records needed. For the first four years, if irrigation is not used, there will be no receipts, just expenses. Beginning the fourth year income will be recorded and financial analysis will be kept.

Other Operations Controls:

An accountant will be used to produce income tax reports as needed. The accountant will also perform analysis as a check for the owner to ensure accuracy of records. This procedure will develop a system of "checks and balances" needed by the operation.

A qualified crop consultant will periodically scout the nursery for pests. This consultant will then make any recommendations for pest treatment. The business will also consult with Penn State Extension regarding changes needed to improve the business.

Cash Flow Assumptions

  1. The owner will invest $3,000 per year of start-up capital
  2. No labor will be billed to the business except outside contracted labor.
  3. Tree expense is calculated on an average for the species planted and includes shipping.
  4. A 5% mortality rate is calculated when determining the amount of trees sold.
  5. There is no land fee associated with production costs since the land has no mortgage attached.
  6. The break-even analysis is performed for the five-year period instead of for one-year.
  7. The nursery will only require one acre of land at start-up.
  8. Insurance is not calculated since the current policy covering the existing dwelling is adequate for the nursery.
  9. Separate budgets are developed for non-irrigated and irrigated methods of production.
  10. The business will need to purchase an auger for $1,400.00 for planting trees.
  11. The business will need to purchase a small backpack sprayer for $107.00 for applying pesticides.
  12. The owner now owns a truck and trailer for delivering trees.
  13. The business will borrow $10,000.00 of start-up capital the first year.
  14. Interest is calculated a 6% and a 10 year repayment schedule.
Cash Flow Projection for five years without irrigation
ItemYear 1Year 2Year 3Year 4Year 5Totals
Land Preparation$600.00$600.00
Potting media$725.00$971.50$4,614.00
-Mouse Control$7.50$15.00$22.50$30.00$37.50$112.50
Principal and interest$1,358.70$1,358.70$1,358.70$1,358.70$1,358.70$6,793.50
Net income$722.60
Cash Flow Projection for five years with irrigation
ItemYear 1Year 2Year 3Year 4Year 5Totals
Land Preparation$600.00$600.00
Potting media$725.00$971.50$4,614.00
-Mouse Control$7.50$15.00$22.50$30.00$37.50$112.50
-Well and pump$5,000.00$5,000.00
-Sand filter$264.96$264.96
-Drip tape$16.00$16.00
-Main lines$900.00$900.00
-Misc. fittings$70.00$70.00
-Operation of system$890.00$890.00$890.00$890.00$890.00$4,450.00
Principal and interest$1,358.70$1,358.70$1,358.70$1,358.70$1,358.70$6,793.50
Net income$2,021.64

Breakeven Price Calculations

Breakeven Price
Total costs$23,973.90$66.59per tree
Breakeven Price
Total costs$35,024.86$61.45per tree