stock pricing - rules of thumb

Graydon

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I have been following a thread on bonsaiTalk that was kind of interesting. Several members from BonsaiNut have voiced opinions on the thread. I considered the topic to be a good topic for discussion and thought I would bring it to the table here and see where we go with it.

In a nut shell there was a person contemplating purchase of an older trident maple, 8" caliper. He wanted to know if it was a good deal at $800 USD. Actually he wanted to know what it may be worth on the open market without listing a price. Some of the comments brought the discussion around to caliper inch pricing. $100 per inch seemed to be a good starting point.

Some responses were "the stock is worth what someone is willing to pay for it". Hogwash - and we all know that. There are standards in the wholesale landscape industry for plant prices based on caliper or pot size. I know the standards are a little loose but competition has to an extent leveled the playing field. In bonsai I see prices all over the place, and that means (to me) that the sellers have adopted the "it's worth what I can get for it" mentality. That could be dangerous or it could be profitable.

Let's discuss this concept - shall we?

For the sake of this discussion I would like to set some rough guidelines. I know they will be ignored but humor me on this, at least for a while. The stock I am referring to meets most if not all of the criteria below :

1. The stock is still in a nursery container or is still in the ground.

2. The stock may or may not have had structured pruning lending the final product to bonsai. If it has had some training please note why it should fetch more than an average price vs. same species without the training but same caliper.

3. The stock is not ready for a pot per se, perhaps a training pot but not a real pot. It still has work to be done.

4. Discuss any species but please note the species as that may or may not have an impact on the pricing.




I'll start out with an example :

There's a local wholesale nursery I visit periodically. I went the other day as they got in a shipment of Japanese black pines and called my friend with a nursery to let her know. My friend called me and I dropped what I was doing to make a run and take a look around. I picked up a couple as she needed one for a landscape job and the other was for me - yes, I need help. To some this may be no big deal - but JBP in Florida? Pretty rare if at all.

They were from north Florida or Georgia and were ball and burlap. They actually arrived in November and were placed in shallow holes for keeping. 24 total and all in the 3.5" to 5" range and about 6' tall. Nice trunks and still had those precious lower branches. The downside was a root ball in heavy clay. Several hours later I had carefully removed a good amount of clay exposing the future nebari and a nice little flare at the nebari line. I potted it up in a cut off 55 gallon barrel in a free draining soil mix. I'm contemplating where to cut to make a new leader. After that heals I will begin the process of grafting future primary branches if I do not get some bud pops.

Cost? Less than $100 wholesale. Future tree is 5 to 10 years in development before it ever sees a training pot. At that point if I sell it I would ask in the $400 range or perhaps more if the nebari develops nicely. Is that in a reasonable range? Too low or too high?

Anyhow - I am interested in hearing what others have to say about this type of stock and the pricing they see, set or would pay and why.
 
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Not too high, depending on how it looks. Can you show us a photo of said tree?
 

Graydon

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Not too high, depending on how it looks. Can you show us a photo of said tree?
I could - but I won't. It looks like a nursery tree Chris, one with a 4" +/- trunk with subtle movement, a nice taper at the base with good future nebari. How it looks now is irrelevant, only how it will look in the future is important.

This tree is not the point. The concept of general pricing based on a set of criteria is the point. You posted on the thread I mentioned, you know where it was headed. My question to you is can we pigeonhole rough stock to a price point like this or are we too set in out ways to do this? Must we poke and prod and scratch the surface looking for a gem - and hope to get the deal of a life time? Can't we accept it's 'x' dollars per inch and go from there? Of course it takes honest and experienced sellers to give us a comfort level but I digress as that's another thread.

When I purchase finished material I always want to see photos (and lots of them). When I purchase bonsai material in a rough form I never get to see photos. The seller selects for me - as they do for everyone. As an example - I get an 'x' tree from Brent. He spells out the overall parameters on his site - 2 year, 1 gallon etc. and lists a price. I email him and order one. He picks one and sends it to me - transaction complete.

Another example - I call 'xyz' wholesale tree farm and order 24 winged elm with a 6" caliper trunk for a landscape project. They pick 24 of them for me (I assume all in a row so it's easier to load) and deliver them to me. Even if I wanted to they will not allow me to crawl the rows at the farm - I get a typical tree of that size for the price listed.

My point is can we price things based on size alone assuming it will still need work on branches and nebari?
 
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No. There are huge variations in quality and possible value as pertains to bonsai that do not affect the price of nursery stock. If I ask for a sugar maple of a certain caliper, I can be certain that within a fairly narrow parameter, I will receive a tree nearly identical to every other tree of that size. It will behave in the landscape in the same way. But if I ask for a trident maple of a particular caliper, that has been trained for bonsai, there are going to be huge variations in quality and potential depending on the grower's expertise and care.

The care and expertise Brent provides would make me trust his selection for me. I would not have the same confidence in many other growers until I got to know them better. Without knowing the quality of the grower, how can I judge the value of the prebonsai stock? Inches do not equal value in this case.
 

darrellw

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Hi Graydon,

I'm not quite sure where you want to go with this. Are you hoping to come up with some kind of price guide? Anyway, a couple of regular nursery (NOT Home Depot/Lowes) examples here in the PNW:

-Collected Lodgepole pines in 15-20 gallon pots go for around $75. These are 1-2" caliper, 3-6' tall, some multi-trunk. Most are fairly twisted, some extremely so. In the right hands some of these could be near-instant bonsai.

-JBP and Scotch Pine, 15-25 gallon go for from $75-125. Generally 4-6" trunks in this range, some still with low branching, 4-8' tall. These would be similar to your "project" tree, needing a major chop and years of growing a new leader, but could be powerful trees in 10-15 years.

-Bald Cypress, 15-25 gallon go for $50-80. These have 4-5" bases, some reasonable taper. These are generally 10-15' tall. I'm planning on getting one of these to try a hollow-trunk with.

-Darrell
 

rlist

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Darrell- I need to get ahold of your nursery guy and spend some money - good prices up there in the People's Republic of Washington!
 

Jon Chown

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Hi Graydon, an interesting topic to be sure. I have been following it on BT but have not been prepared to discuss there.

I must first address your statement,

"the stock is worth what someone is willing to pay for it".
As a professional sales person (with experience in Life insurance, Automotive and Property Sales), I feel that I just have to say that by and large the statement is one hundred percent correct. Wether it be a Life, a Vehicle, a Home or a Bonsai stock plant, they are in fact worth different amounts to different people. The fact is that through life we wear two hats, One which reads ‘Seller’, when we wear this hat we want as much as we can achieve for what ever we are selling. The other hat reads ‘Buyer’ and when wearing this hat we want to pay the least we have to for what we are buying. That’s human nature.

As to your example,

Cost? Less than $100 wholesale. Future tree is 5 to 10 years in development before it ever sees a training pot. At that point if I sell it I would ask in the $400 range or perhaps more if the nebari develops nicely. Is that in a reasonable range? Too low or too high?
My answer is $400 is way to low. Here are my reasons why.

While your example covers 5 to 10 years let me discuss both options.

The investment is $100 . The term is 5 years and 10 years. Future Value $400.

Current interest rates are 7% and for those who understand the rule of 72 (if not google it), money halves in value every 10 years. Therefore for the buying power of our original $100 investment to remain equal it is worth $150 in 5 years and $200 in 10 years.

So to purchase a tree for $100 and subsequently trunk chop, create new leader, re-pot, water, feed, trim, feed, water, keep alive, for 5years for $250 ($400 minus $150) or $50 per year ($1 per week). Or all of the same for 10 years for $200.00 ($400-$200) or $20 per year. This does not appear to be a sound investment to me unless you are doing it with hundreds of trees at the same time and even then with fatalities taken into consideration, I feel that the selling value should be about double your example.

My 2 cents worth for consideration.

Jon
 

Tachigi

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Hi Graydon, I too have followed that thread on BT. I chose not to comment as for the most part it would have fallen on deaf ears. Brent's comments to that thread basically reflect my own. What amazes me is that people will spend top dollar on sporting equipment to raise there game. They will spend enormous amounts of money to on media equipment to listen to music or play computer games. Spend big bucks even on Masakuni tools. However when it comes to groomed stock they seize up like an engine devoid of oil.

The formula that is given for stock of $100 per caliper inch is one that I have adopted. With the exception of any yamadori that has unique and rare characteristics. Now while a lot of people have adopted this formula we need to be realistic and remember that pricing will always reflect what the market will bear. Essentially, "the stock is worth what someone is willing to pay for it". This concept is one of the ideas of what the capitalist system is based on. Now, don't get me wrong, this doesn't mean I like it or totally agree with it. It does mean that I need to be aware of the market. I know many people that have tried to buck this idea and found that there customer base dropped off severely or disappeared entirely forcing them out of business.

To comment on your criteria points as I have adopted them:
1. The stock is still in a nursery container or is still in the ground.
For the prices we are talking, the tree should have been harvested and containerized for at least a year. Ground collection will be something we offer in the future at a different pricing level. The collection will be done by the purchaser. The idea being that this may give a person new to collecting some guidance and hands on experience in how to collect. The liability (from a business point of view) for the trees survival has now been transferred to the purchaser which reflects a monetary value to me as a business owner. The last and most obvious point, a labor factor has been removed from the equation hence the benefit of a lower price.

The stock may or may not have had structured pruning lending the final product to bonsai. If it has had some training please note why it should fetch more than an average price vs. same species without the training but same caliper.
Because no one works for free! Whens the last time anyone went to work and decided that they would would give there employer a days work for nothing? Grooming a piece of material properly takes years of work. If planted in a field that stock may be lifted 3 or more times to have the roots worked. The price of fertilizer, irrigation systems, pots, and marketing isn't cheap. To give an example, think of what fertilizer alone costs you a year. Now in the growers case multiply that by a 500, 1000 or probably in Brent's case 1000's. The stock lifted from the ground will never have the same nebari as one that has been field cultivated for bonsai. If you are willing to save a few bucks and want to wait10 years before having your tree begin to have the qualities you desire, then by all means buy the garden center stock. With the relative impatience of our society, over that 10 years you will feel like your watching and waiting for water to boil. I would also venture that about after the fifth year you will wish that you had popped for the groomed stock and gotten on with it.

The stock is not ready for a pot per se, perhaps a training pot but not a real pot. It still has work to be done.
My opinion is that pricing for a groomed tree should be that the subject is in a pot be it plastic, mica, or inexpensive ceramic. This is need to establish that the tree has survived for a time (as I said above) out of the ground. The tree will always have work to be done, the idea is selling raw groomed stock. The grower should never put his mental impression on a tree to what it should look like. The grower should be trying to give a clean high quality canvass for the artist.

Discuss any species but please note the species as that may or may not have an impact on the pricing.
Pricing differences (exceptions) for species would have a direct correlation to how difficult the material is to originally obtain. Also the difficulty in developing it. In my case Larch would be a difficult species. I sit on the southern most region of its hardiness zone. So I risk losing my investment if environmental influences change. My example would be possibly global warming. If it progressively gets warmer as the trend is going. Then I risk losing my investment or part of it. So this tree I might price differently if I lose a lot of my original crop.

Your example: Cost? Less than $100 wholesale. Future tree is 5 to 10 years in development before it ever sees a training pot. At that point if I sell it I would ask in the $400 range or perhaps more if the nebari develops nicely. Is that in a reasonable range? Too low or too high?

This is almost an impossible question to answer Graydon with out seeing what the tree would be in 5, 10, 15 years down the road. What you did to it to warrant that price. People also need to remember that not every tree groomed for bonsai makes it to the sellers table. Some trees no matter what you do just won't stack up. If the grower is sincere about the quality of material he puts forth. Then a percentage of his/her trees will be excluded and will be sold off in another venue like garden centers for landscape stock.

Here is the issue with material vs. cost as I see it. Most enthusiasts see bonsai as a hobby, something pleasurable to do. They don't see the bonsai entrepreneur as a business man trying to make a living, but as a fellow enthusiast trying to make a few bucks. This is perpetuated to some degree by the grower when they visit bonsai forums and interact with the enthusiasts. Being lovers of this art and craft it is a temptation hard to resist. What the general community fails to realize is that the grower because of this love has taken a vow of poverty to pursue this passion. Contrary to popular belief there isn't a whole lot of money to be made at this point in tree cultivation for bonsai use. In my case I shed for the most part my previous business that provided me a good six figure income. Asked my wife and kids to take this vow of poverty with me so that I could chase my passion. For me there is no greater reward than seeing a person's face light up when they see a good if not great piece of material. It is a rare and beautiful thing when you see a person visualizing the possibilities and an even greater thing when you had a part in it. So the next time your in shopping for material and looking at the price tag do a few things before you pass judgement on the price. Is the tree been worked well? Is the business your standing in a palatial palace or a common man's place? Is the seller someone that shares your same passion (You'll be able to tell by the look on their face and the way they talk about thier material)? Then and only then pass your judgement.
 

Graydon

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Interesting answers and discussion on my convoluted question. I do not believe there are any right or wrong answers on this subject - this one is pure opinion.

Chris - I can understand your point but over the years I have noticed something on the cost vs. size as I first posted. The $100 per inch just seems to work even if the seller was not selling it that way! For example I got in a few nishiki black pines, grafted. Three total for $150. The size of the plants were roughly 1/2" to 5/8". No preparations or any work - just low grafted pines with good grafts and many branches. They worked out at $50 for 1/2" stock. Same grower a few years ago sold me a grafted yatsubusa black pine for $250 with some initial styling but still for the most part rough. It was a little over 2 1/2" above the root flare.

Darrel - I'm not going anywhere with this - just wanted to throw it out and see where it goes. As I purchase more stock that has some size I keep this in mind.

Jon - I appreciate your input on the pine. I like your structured formula but I am afraid buyers here in the States are for the most part clueless as to equations like that. They proudly wear the buyer hat wanting the best deal out there even if it means a) cheaper = better = many more years in development and b) they truly are not getting as good a deal as they can if they used a formula like you provided and applied it to the cheap little stock they find. My other concern (that goes against your buyer and seller hat idea) is that unless buyers pony up and spend real money on stock we (as a community of bonsai people) run the risk losing sellers that can't make enough to earn a living, let alone invest in future material or nursery improvements. There is no value in that - no matter who you are.

Tom - Nice points and good stuff to discuss. You get 2 gold stars, one happy face and a well deserved "atta-boy".

This discussion draws a nice parallel to my scenery business. I compete with many other shops around Florida. We all have a niche and regular clients that come to us based on prior performance and comfort levels. Every once and a while I lose a job to the competition based on price alone. It's always a result of the other shop lowering the margin to get the job and keep people busy. Most of the time it backfires on them and the client suffers due to the unprofessionalism of the shop. The cut corners and substitutions that were meant to save money actually cost more money and the product either looks like crap or is about to fall apart. Sometimes I get the call to come in and mop up - try to make things better for more money than my first bid (the other shops price + my additions). Where is the value in that?
 

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An interesting subject. Economists have tried to define markets for years and have pretty unversally failed (at least, name the last billionaire economist you knew). There is a rather broad assumption in this thread that all markets are logical at the micro level, when I truly believe the reverse. Take the same tree, and it will earn different money depending where and when you sell it - eBay, Home Depot, a bonsai nursery, or a bonsai show. If the theory of bonsai "value" that we are trying to define here held, than the bonsai should sell for the same price at all times and locations. Instead, the largest driver of price is the buyer and how much that person wants the item :) The buyer may be an educated buyer who understands the years of work that went into a tree, and can therefore rationalize paying a high price, OR the buyer may be a wealthy beginner who just likes what they see in an eBay listing. In either case the tree may end up fetching a higher price than you might expect based on rationale inputs.

As an educated seller, you want to offer to the largest marketplace possible, with limited information and tight time constraints, and allow competitive bidding (eBay or perhaps bonsai show with lots of buyers).

As an educated buyer, you want to buy in the smallest marketplace possible, with no other buying competition, unlimited information and no time constraint (when a bonsai buyer goes "bargain hunting" in old nurseries, etc).

In the first case you will spend a lot for your bonsai. In the second, you won't (all other things created equal).
 

Tachigi

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You get 2 gold stars, one happy face and a well deserved "atta-boy
What is the market values of the stars and happy face, can I cash them in :) I had my eye on a nice trident.
 

Graydon

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What is the market values of the stars and happy face, can I cash them in :) I had my eye on a nice trident.
Well, I would have to see them to tell you - but I have heard a rule of thumb is $100 per inch caliper on both the stars and the happy face. Perhaps more if the nebari is good.
 
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Well, I would have to see them to tell you - but I have heard a rule of thumb is $100 per inch caliper on both the stars and the happy face. Perhaps more if the Nebari is good.
Not a good rule of thumb, I'm afraid. I have to agree with Jon and others, stock (or anything else) is worth exactly what the market will pay for it. Sure there are some people that will pay overinflated prices, but many won't.

It's simply supply and demand, something the smart grower will take advantage of and what many growers have to deal with...think about it, what should a grower like Brent plant now in order to be able to take full advantage of the market five years from now? If there will be an overabundance of JBP's on the market then, the prices will no doubt be lower because the supply outweighs the demand. On the other hand, maybe no body is growing Malus now and the grower who has advanced stock five years from now, when few others do, will be in a great spot, high demand, low supply, he could practically name his own price.

Japanese growers have been known to burn inferior trees so as not to flood the market with cheaper trees, driving the overall price down.

All this being said, there are two ways to make a million dollars selling ink pens, sell one for a million dollars or sell a million for a dollar each. I don't think I need to say which way is most likely to succeed. If growers over price their trees, they may sell a few here and there, but the grower who keeps the fair prices, will sell many more.

So what is fair? That depends on the supply and the demand, nothing more and nothing less.


Will
 

Graydon

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Japanese growers have been known to burn inferior trees so as not to flood the market with cheaper trees, driving the overall price down.
Not a bad idea. Who is going to take the time to let most of the eBay sellers know this?
 

Jon Chown

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I honestly believe that there is another side to the ‘Value’ equation that we do not seem to be taking into account when we discuss investing big dollars in a stock tree. In a nut shell it is the difference in thought process between the Bonsai Hobbyist and the Bonsai Artist.

I think that the 80 – 20 rule perhaps applies to this business as it does to most others. The equation probably looks like this:-

100 bonsai hobbyists + Lots of time/frustration/learning = realization and 20 bonsai artists.

That is to say that 80%of exceptional Bonsai is owned by 20% of the Artists – the other 20%of exceptional bonsai are most likely bought by the other 80% of the artists.

One doesn’t have to visit bonsai sites for long to realize that this equation is alive and well here also. We all know that the Hobbyist somehow believes that the stick in a pot that they invested virtually nothing in and have been nurturing for several years is miraculously going to turn into a prize winning bonsai. When the realization that it won’t dawns on them, they will have taken their first steps towards becoming an Artist

The frustration for a grower of advanced pre bonsai stock is that he only has 20% of the market that will perhaps see the value in the advanced stock. What he has to do in conjunction with growing the stock is to nurture the other 80 hobbyists and hopefully encourage them to take the next step to Artist. That is, he has to provide his own supply and demand curve.

Jon
 
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Jon, excellent points, the 80/20 rule is always on the spot, it would seem.


Here's a question, pretend you are growers and you needed to decide which species to plant now to sell on the market five years from now, what would you plant?




Will
 

Graydon

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Good question Will.

I think I would pretend to sell everything off now and get out of the pretend business while I still have some pretend money in the bank.

Considering all of the imports from China, Japan and Korea who could afford to plant and grow anything? Combine that with the eBay junk and the mallsai growers that are actually making money... well you get the point.
 

darrellw

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Q: How do you make a small fortune rasing bonsai stock?

A: Start with a large fortune!

That said, I would think you would approach this best with a diversified approach. Some portion of your stock should stick with "classic", tried and true species. Japanese Black, White and Red pines (name cultivars, especially), Japanese Maples, Trident Maples, Shimpaku and a few more to round out the "top ten".

I would put perhaps as much as half of my stock in this area. Then I would put up to 25% in some promising species, ones that you see reasonably often, but are not seen "everywhere".

I would allocate the last 25% or so to "undiscovered" species, ones that have some promise, and that you see good examples of occasionally, but are hard to find in developed stock. Of course, all of this would be adjusted by your climate.

Anyway, that's what I think I would do, with no experience in the nursery business!

-Darrell
 

Vance Wood

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Not meaning to depart from the original intent of this post but seeing that cultivation has risen its ugly head I think it is as important, if not more so, how stock is grown as much as it is the kind of stock. If a grower knows how to develop a good quality stock for the bonsai trade he/she is more likely to sell his stock at higher prices than one who just shoves things in the ground and hopes for the best in trusting to nature. It does after all come back to the value being determined by the market: A thing is only worth what someone is willing to pay for it.
 

darrellw

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Not meaning to depart from the original intent of this post but seeing that cultivation has risen its ugly head I think it is as important, if not more so, how stock is grown as much as it is the kind of stock. If a grower knows how to develop a good quality stock for the bonsai trade he/she is more likely to sell his stock at higher prices than one who just shoves things in the ground and hopes for the best in trusting to nature. It does after all come back to the value being determined by the market: A thing is only worth what someone is willing to pay for it.
Certainly. I could get 100 JBP seedlings, plant them in a field and let them grow for 10 years, and they would only be worth their value as firewood. On the otherhand, if I take care of them the way someone like Brent would, they could be worth several hundered dollars each. I don't know enough about the economics of firewood or nurseries to know which would be the better investment, though!

-Darrell
 

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