The Orchid Garden

Inquiry of profatability (So. Cal growers)

Question:

You know, for all the great information that has been presented in this thread, I am still amazed that one would use other peoples’ success – or lack thereof – as a basis for making business decisions.  Al spoke to that. So much research is needed before starting ANY business, large or small, and though certain market realities obviously need to be taken into serious consideration, one’s own business plan, based on good information, will have much to do with whether one succeeds. There are those who adhere to a basic rule of thumb:  A business should be showing a 20 – 25% profit AFTER paying the principals a competitive salary. But this applies to a business that is designed to be the sole, or at least major, support and occupation of the principals. OTOH, I know folks who buy flasks and compots, let them develop, keep the best plants for their own collections, and sell the rest, thus simply financing their hobbies.  And, as Al aptly put it, earning a tax write-off in the process.  Not so bad. Diana

Response:

My first response when I read your question was:  "Oh!  It’s suppose to be profitable.  How did I miss *that* point?"  But it was a serious question and I waited to see if it got any serious replies.  Where would you look to get the answer to this question?  Are there any Orchid Grower Associations in Southern California who might have these numbers or some idea of the answer?  How about the chamber of Commerce? One of the first things you must do before you start any business at all is to look at your own requirements.  How much do you need to make to support your life style?  Is it $10.00 an hour?  $20.00?  Since you will be spending all of your time at this business it must be able to pay all of its own expenses PLUS yours.  I think most people’s response here is "Well, Duh!" but this is where most people get lost in the calculation to determine the endeavor’s profitability, "I can grow these in my greenhouse and sell them and then I won’t have to go to work."  The idea to ’start small’…well, what does that mean?  Operating at a loss for X number of years?  Maybe it means springing for only a 3000 sq. foot greenhouse as opposed to a 300,000 sq. foot greenhouse?  The latter may be the worse way of thinking about it. The smaller operation may doom itself to failure.  And you are going to have to work just as hard. Do you know how to use a spread sheet?  :-) Do you know how to turn your projected expenses into an average cost per square foot number?  Weather you are making your own plants or buying them to resell, much comes down to the cost of  using the space in your greenhouse.  The longer the plants sit there, the more expenses they consume above their initial cost.  These expenses will vary from place to place, this much you already know.  Land values and local costs of living and labor are different from place to place.  The real question is not weather other people have done it.  This is only a barometer of the local scene.  You may determine you can make it work, just not in Southern California.  But, the true questions you have to ask are "Can *I" do it?" and, "How?" Do you know how to determine the true cost of making the plants if you choose to go this route rather than reselling?  The materials may seem inexpensive when you add it all up.  But, starting on a small scale, remember how much per hour your time is worth and try not to think about it when you are spending all of it in front of the laminar flow hood. A small business/hobby is not necessarily designed to make money.  "Only a tax write off" is not a bad thing. Good luck.  :-)

– Hide quoted text — Show quoted text – How profitable is the orchid growing business? I would especially enjoy hearing from Southern California growers who have been in the business for a few years; and who started out small scale.

Response:

How profitable is the orchid growing business? I would especially enjoy hearing from Southern California growers who have been in the business for a few years; and who started out small scale. Hi Robert, Interesting question- and not one where most enthusiasts want an answer.

Years ago, like 10 or 11, I (living in SoCal) thought about starting a small orchid business, so I contacted the big names in the business, and suprising to me, got personal replies (Robert Scully, Jr., Ned Nash, and others) and they all unanimously warned me that the business was changing rapidly and suggested I keep it a hobby and not a source of income. [snip] I say "with their own breeding programs" because that makes an enormous difference these days. As little as 20 years ago, the Hawaii scene was just starting and the Taiwan orchid scene was practically non-existent. But now these two regions dominate the orchid world. You can buy near blooming size dendrobiums for 60 cents each in bundles out of Taiwan. And in Hawaii, you can get blooming plants for as little as $3 wholesale.

And thus we see zillions of eBay ‘businesses’ offering these $3 plants for two to three times that.  And dozens of storefront orchid re-sellers, all seeming to have the same stock. Because they do! I’ve thought about how wasteful this all is.  Why not, if one is insistant on selling orchids, find an orchid niche (like your example of Bill Tippit) and develop that into something special? [snip] And speaking of pesticides- that makes California a tough place to grow many things these days. Not sure about orchids, but many winemakers are stewing over new laws that all but forbid many pesticide treatments for environmental concerns. That and the rising cost of land has chased many long time nurseries out of Southern California- Stewart’s being a prime example.

It is my impression that it was not just land costs, but that when Agristar wanted out, if the current owners didn’t step in the establishment would just have disappeared.  So they moved it to their homeland (Mississippi), also known as the anti-California. Not to mention power costs. The fake power crisis induced by panic and a few large trading companies (ie Enron) forced the govt. to enter into long term contracts for huge electricity prices with the public utilities which translates into very high greenhouse costs for consumers.

I think you are being too kind to our Gov. Davis.  He has screwed the state over!  And the biggest gougers were the PUBLIC utility in Los Angeles.   The Government-as-Savior folks (like Davis) *have* to have crises to excuse their expansion of goverment.  If no crisis is handy, they’ll create one! Southern California is, IMHO, the WORST place to start an orchid business right now.

You didn’t mention water problems.  But labor (illegal) is cheap! [snip] – Hide quoted text — Show quoted text – Hope this helps! My best advice is to do what many of us do. Start small. Do it on the side in addition to your real job. Breed plants. Save your best seedlings. Then someday when you retire or have enough money on your own, you will have the breeding stock to make it on your own and maybe even make some money. You are never going to beat Hawaii or Asia on price, so you have to beat them by having something unique that people want and that the commercial guys are not messing with. In Bill Tippit’s case- that would be multifloral Phalaenopsis. For places like Woodstream and Fox Hill it is Masdevallias. Find a niche and go with it.

Being we are talking about southern california, it seems to me that the original poster should look at the Mexican species.   These are pretty much ingnored by the asians and Hawaiins.  They will, most of them, grow well here.  The only person I know who does much breeding with them is Sandro Cusi (Rio Verde in Mexico).  I believe many of the Encyclias offer much, even for the pot plant market (e.g., long bloom time.)  Among the Laelias the only one used by mainline orchid growers is anceps; the others also offer possibilities (and most are just as easy, if not easier, to grow.) Barkerias (most) offer lots of flowers from small plants. Etc…. Anway, my point is niches do exist, and should be exploited.   I agree that offering a unique product is the only way to exist along side the mega-growers from Taiwan. Or, one must be a marketing wiz, and simply outsell the competitors. -dan

Response:

How profitable is the orchid growing business? I would especially enjoy hearing from Southern California growers who have been in the business for a few years; and who started out small scale.

Response:

Though I am not a commercial grower, I suspect that in order to answer your question one would need to factor in a sum for pain and suffering, and another for pure joy.  <S Diana

– Hide quoted text — Show quoted text – How profitable is the orchid growing business? I would especially enjoy hearing from Southern California growers who have been in the business for a few years; and who started out small scale.

Response:

How profitable is the orchid growing business? I would especially enjoy hearing from Southern California growers who have been in the business for a few years; and who started out small scale.

Hi Robert, Interesting question- and not one where most enthusiasts want an answer. To being, I started growing orchids when I was 9- almost 20 years ago- and while I have bought and sold a lot, it has never been my sole income. Yet I have done the show circuit, and have represented for Carmela a few times, so I do have some notion of how this works. There is an old joke in the orchid world- "How do you make a million dollars?" The answer- "Start with two million dollars and go into the orchid business." Now more than ever I think this adage holds true. Some points I think are worth noting, 1. Many, not all but many, of the great hybridizers and sellers of orchids in the US made their money elsewhere. Harry Freiburg of Creole Orchids was in mahogany. Alfred Proebstle (famed Cattleya man and Houston OS founding member) made his money in sulfur. John Martin started off as a cardiologist. Topper- one of the great Paph. species specialists- invented a bird seed mix that is still a favorite today. The Ehlerts- a venerable Houston group once known for excellent hybridizing- made their money in a machine shop. Bill Tippit (Olympia Orchids) and Bob Chauvin (ABC Orchids) were in the oil business (or as we in Texas call it- The Aaawl Bidniss.) These are just a few examples. As far as people who made a good living in orchids in the US with their own breeding programs- I think Alan Koch (Gold Country Orchids) and Bob Fuchs (R.F. Orchids) are the only two I know who have attained a secure and comfortable lifestyle out of it without having made significant money in another field first. I say "with their own breeding programs" because that makes an enormous difference these days. As little as 20 years ago, the Hawaii scene was just starting and the Taiwan orchid scene was practically non-existent. But now these two regions dominate the orchid world. You can buy near blooming size dendrobiums for 60 cents each in bundles out of Taiwan. And in Hawaii, you can get blooming plants for as little as $3 wholesale. So for many US growers, it is tough to be profitable with a breeding program. This is because you have a choice. You can pollinate, flask, compot- all at enormous expense over a 2-3 year period- OR you can spend 60 cents a plant and get them already near blooming size to flower and sell. But the difficulty then becomes one of competition- on two fronts. On the one hand- you could bring in the cheap plants from Asia. But at shows and on the net you will compete with scores of other growers who are doing that same thing. And that keeps profit margins low. Or you can do your own breeding and with the general US costs and the higher costs of maintaining plants here (in Hawaii you just need shadecloth and you are growing orchids) your prices will be very high thus keeping you from being competitive. Now many of the great breeders I mentioned at the start of my post who are still in business today can charge those higher prices- but they cater to a smaller market for the most part, and they could care less since they are financially secure in their own right outside of orchids. And then there are people like me I have no greenhouse. So when a big show is coming, I will represent for one of the big Asian or Hawaiian firms. They ship the plants the week of the show, I sell them, and keep a cut. Or I buy in bulk plants in spike and sell off the ones that I do not want to keep when they flower. Not my primary income source, but it subsidizes the hobby for me. It is an especially hard time to get into orchids as a sole income. Harder than before I think. This is because you just cannot possibly be more cost efficient than the Asian and Hawaiian growers who can grow plants for very little cost due to the natural environment in which they grow their plants (to say nothing of cheap labor.) A final consideration is plant condition and appearance. I went to the Galveston Show a few weeks ago and quite a few vendors were selling plants that, frankly, looked like garbage compared to the pristine fresh imports. So you not only have to grow the plants at a higher cost here, but you have to take steps to keep them "looking" nice in a way that many US grown plants do not compared to their Asian and Taiwanese competition. This also ties back to general environment (and also more lax rules about pesticides.) And speaking of pesticides- that makes California a tough place to grow many things these days. Not sure about orchids, but many winemakers are stewing over new laws that all but forbid many pesticide treatments for environmental concerns. That and the rising cost of land has chased many long time nurseries out of Southern California- Stewart’s being a prime example. Not to mention power costs. The fake power crisis induced by panic and a few large trading companies (ie Enron) forced the govt. to enter into long term contracts for huge electricity prices with the public utilities which translates into very high greenhouse costs for consumers. Southern California is, IMHO, the WORST place to start an orchid business right now. I love LA, but you have a lot of environmental folks to deal with there- many of whom have no idea what the real science is and instead prefer to advocate- with success I might add- some pretty severe restrictions. Hope this helps! My best advice is to do what many of us do. Start small. Do it on the side in addition to your real job. Breed plants. Save your best seedlings. Then someday when you retire or have enough money on your own, you will have the breeding stock to make it on your own and maybe even make some money. You are never going to beat Hawaii or Asia on price, so you have to beat them by having something unique that people want and that the commercial guys are not messing with. In Bill Tippit’s case- that would be multifloral Phalaenopsis. For places like Woodstream and Fox Hill it is Masdevallias. Find a niche and go with it. Tom.

Response:

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