The Story of Nelson Plant Food
It all started when...
In the fall of 1982, Dean Nelson and his wife, Julie, left Texas A&M where Dean had been working on his masters degree in Agribusiness. With their first child, Angela, not yet one years old, they soon learned that living off of a student grant as a new family of three just wasn't going to cut it. So Dean made the tough decision to put the masters degree on a definite hold, thus resulting in the following adventure:
After leaving A&M, "I was employed at Cox-Nelson Seed Company in Katy, Texas. To my surprise after 11 months on the job, Mr. Cox called me into his office and fired me. He told me that he could not afford to pay me anymore.
I walked the half mile to dad’s office and told him that I just got fired with a new plan to go into rice farming.
Dad and I talked for about three hours about my prospects of farming. The final conclusions were: I did not have any land, I did not have any equipment, and I did not have any money. Dad said that I could farm somehow, but that my family would live in poverty for many, many years.
So on to plan B.
About five months earlier, a friend of Dad’s, named Forest Garlough, came to me at Cox-Nelson and asked me to take over his business. He had a custom blending fertilizer business that was located in downtown Houston. He also sold turf chemicals, turf paint, etc. I initially told him I wasn't interested; I had other plans. Mr. Garlough then closed his business. But after my talk with Dad on the day I got fired, Mr. Garlough’s business looked appealing.
I called Mr. Garlough. He took me to see his closed business. The manufacturing plant was amazing. The whole thing was once big pile of junk. There was no way that I was going to try to reopen that plant. However, he had already found an abandoned agriculture fertilizer building in Waller, Texas. It had a couple of truckloads of abandoned fertilizer in the bins. The blending equipment and electrical equipment was all rusted and total junk. The roof had holes in it.
Teddy agreed to let me buy it for $34,000. I could pay half immediately and half in one year.
So, I decided to open a fertilizer company that custom blended products and sold them into the horticultural industry.
How did I decide this?
Prayer. God told me to start the business.
That afternoon, I walked into our house and told Julie “Well, we’re going to start a business." She asked “what kind?” and I said, “a fertilizer business."
She said “OK.” She was six months pregnant at that time with our second child, Hunter, and had one and a half year old Angela to tend to.
The next challenge was to find some money to build the plant and open the business. I also needed to find some money to live on since we no longer were employed by Cox-Nelson.
I went to Katy National Bank and talked to Chuck. I explained what had happened to me over the past week and that I needed $10,000 to live on until I could get my business started. I filled out the application and went back a couple of days later and got the line of credit. I had no collateral, but Chuck had known me all through Katy High School and through college. I called this a “character loan."
Then I went to my uncle Bob in Houston. He was a brilliant technology person who knew a lot about the newfangled contraption called a personal computer. I borrowed one of the first Apple desktop computers that could actually let me type in a document and then print it out.
I spend a week developing a great business plan for Nelson Plant Food, which I still have. In this plan, I explained my sales and marketing plan, my plan of operations, my cash flow, income projections, etc. Since I had just come from two years of graduate school, I could still use big, impressive words to get my point across.
After polishing off the ideas, I had several copies made and bound them into booklets for bankers.
Then, I went to five banks in Katy, Bellville, Rosenberg and Houston. One in Houston was a bank that I found out made Small Business Association loans. I just walked into the bank and asked to talk to the bank president. He talked to me for about two hours about my plan. I was asking for $100,000 to build the plant and a $60,000 line of credit to finance inventory and receivables.
All the bankers would talk to me, take my booklet, and ask me to come back in a week. I thought “man, this is easy." I went back to each banker and answered more questions and was asked to come back later. I came back later and answered more questions. I was asked to come back later.
All the while, the $10,000 line of credit was being used up. After three months of financial troubles, I finally went to my dad and explained the situation in-depth. He then made a few calls to banks and co-signed my line of credit notes.
I was floored. It was that easy. I also could not believe that he had let me go through three months of financial acrobatics before he helped me out.
I asked Dad “why didn’t you do that a long time ago?”
His answer was “Cause then you wouldn’t have learned anything."
It’s hard to argue that point.
Well, now it was time to get serious.
At our new plant in Waller, there were several bulk storage bins that had fertilizer in them. We could not get the fertilizer out. We tried a backhoe, jackhammer, picks and shovels. The problem was that it had all gotten wet and turned into one giant brick. It was about forty feet long by ten feet wide by fifteen feet high. I called Mike Shively, who was a county agent in Houston who was the local expert with dynamite. He came out one day with Dad and Mr. Garlough. We drilled holes down into the fertilizer, put a stick of dynamite and a blasting cap into the hole, covered it with more fertilizer, and pushed the handle. Just like on TV. The explosion broke up the block into 1000 pound blocks, which could then be moved with a front end loader.
That was the first fertilizer I ever sold.
One thing I had to learn quickly was how to make fertilizer. I had no clue.
In about one minute with a pencil, a calculator and a napkin, Mr. Garlough showed me the mathematics needed to make 15-5-10. Then he showed me how to make 13-13-13. He also showed me how to figure out the cost of ingredients and how to calculate the desired sales price for each bag.
Now it was time to actually sell some fertilizer.
Julie and I also spent many hours addressing envelopes to the whole Texas Turfgrass Association. We would type up letters, make copies, and mail them out. The first letter just introduced ourselves, said that we can make any fertilizer they might need at a fair price. We asked them to give us a call.
After about six weeks of actually trying to sell fertilizer, the first month of production, February 1984, we sold $90,000 of product.
I knew then that the Hand of God was in this enterprise.
It is amazing to think back to how much I did NOT know. I did not know what a bill of lading was. A customer wanted me to send a “bill of lading” along with the delivery. I had to ask him what that was. When we started the building process, I did not know how to make fertilizer. I did not know any customers. I did not know what slow release nitrogen was. I did not know how to set up a set of accounting books (we did not have computers back then). I had never seen a commercial nursery operation and did not know anything about preplant or topdress fertilizer. I remember the first time I went to a golf course. I was astounded that they mowed the greens and tees every day. They even mowed the fairways more often than once a week.
For the first few years, we just sold to everyone who called. A feed store in Marble Falls called and needed fifty tons of fertilizer for a golf course. I had no clue who this guy was, but we sent the product to him the next week. He mailed us a check..
Those first two years were wonderful. We had three employees and myself. I did all the blending, selling, and delivering. Our total company expenses were about $15,000 a month. We only had to sell about $50,000 a month to break even.
The delivery truck was a used one ton flatbed that pulled a gooseneck trailer. The trailer was borrowed from my uncle David. I took it and put heavier axles and tires on it so we could haul seven tons at a time. I made all the deliveries when we did not use an outside trucking company.
I remember telling one of my friends that “business is good”. We are making a profit of $10,000 a month all during the year except December and January."
Then, in April of 1986 something happened. I faithfully had been tracking every penny that we spent each month and had a really good handle on how much fertilizer we would sell each month. The second week of April I knew that something bad was about to happen. I was looking over my sales forecast and the numbers were not adding up. Our sales dropped to nothing in about two weeks when this should have been one of our busiest weeks. Somehow, I know that Nelson Plant Food was in serious trouble.
I fired our part time office help, cancel all my advertising, cancelled any plant repairs, cancelled my long distance phone access. In short, I cancelled every single source of spending money that I could find.
Over the next couple of months, it became clear that the Texas economy was in a severe downturn. The price of oil had collapsed as well as the Texas real estate market. My customers were going out of business right and left. Somehow, I only had two customers who owed me money that went bankrupt. Many were very, very slow in paying me for the fertilizer that they had bought.
The next five years would be hell for Julie and me. The guy that loaned us money to build the plant recalled the note. The bank that gave us the operating line of credit would not budge on increasing the line.We had to resort to selling a lot of product for cash just so we could keep our labor and pay out light bill. One of those December's, we were down to one employee and me. I told Julie that I wanted to have a company baseball tournament.
The meter reader came by once a month to cut off our electricity because we did not pay our bill. Sometimes…not very often…we had the money to pay him. Most of the time we talked him into coming back in a couple of days or taking our check and not turning it in for a couple of days. We usually had him a bunch of cookies or a cake to take with him to show our appreciation. He always helped and we will always be appreciative of that fact.
I had to find several suppliers for each ingredient so that when one supplier refused to send more raw material because we had not paid for the last load, I could call up the next supplier. Then, when we had some money to pay the oldest invoice, we would send money so he would sell us product and we would let the second one wait on his money.
I tried to keep several credit cards in my wallet because every time I bought gas, I had to find one that would not be declined. It was humiliating to stand in line at a gas station with people all around you and have the attendant say “I’m sorry, but that card has been declined." Happened a lot.
It was during this time that I invented ColorStar.
A customer of ours, Mike Hugg, worked for Metro National in Houston. He called me up one summer and said “I want you to make a fertilizer for me that will feed my pansies.”
I went to his office to talk about it and the guidelines he gave me were “it needs to be a 19-13-6 and it needs to have Nitroform in it.” I went back to my office and played around with the formula for a while and then made up two tons of 19-13-6 and took it to Mike. I had no idea of what this would become.
After about a month, I went by Mike’s and saw that his pansies looked great.
Then I began to get phone calls from all my other customers in Houston and they all said “I want the same fertilizer that Mike Hugg is using on his pansies.”
One of the memories from that period in our life that still gets to me happened like this:
It was in March of 1987 (I think).
I had been telling our operating note loan officer at the bank that I would be running out of money in the next couple of weeks and that I needed to increase my line of credit. I had good receivables and a good inventory to more than cover the additional amount of money I was asking for. The loan officer, over about a month, kept putting me off with excuses.
So, one morning Julie, the kids and I were all up at our house getting the kids ready for school. Julie came into the bedroom and asked me if I had any money. I pretended not to know (I knew I was broke) and made a big deal of finding my wallet and looking into it. “No” I told her, “I don’t have any money."
Then she said this: “Well, we have a problem. You don’t have any money and I don’t have any money. We don’t have any food in this house for the kids to eat at lunch for school. We don’t have any money for them to buy lunch either."
I went to our neighbors next door and knocked on their sliding glass door. “Can I borrow some peanut butter and bread?” I asked. I got the peanut butter and bread and took it to Julie for sandwiches. We could survive another day.
Then I went to work until ten o’clock and then drove back to the bank when it opened. I marched right into that loan officer’s office and practically yelled at him. I told him that it was time give me the money. I told him what had happened that morning. Here was a 28 year old boy who had been in business for three years yelling at a senior loan officer.
I stomped out of the office and went back to the fertilizer plant to make fertilizer. He called me that afternoon and told me that he had $30,000 of additional money to put in my checking account.
That $30,000 allowed me to survive one more month. That one month turned into another month and then another month. It was not until about 1991 that we could go home at night and not wonder if we would be open the next day. It was that tough.
In all those years, though, we never did pay our employees late. Many times we would write checks on Fridays with absolutely no money in the bank, but by Monday somehow, we always got in enough to at least cover those payroll checks. Prayer had to be the reason.
The years between 1990 and 1995 turned out to be pretty good. We were able, somehow, to climb out of our financial hole, continue to build our customer base, and get the company ready for the next financial storm.
This was when we started selling our products for the retail market.
I knew that we had good products with ColorStar, NutriStar for tree and shrub, and the NutriStar for Azaleas.
Since our fertilize looked so good, I wanted to put it all in a clear jar, which nobody in the industry did. I also wanted something that could be resealed, would stack on a shelf, and be reusable. I looked for four years for something like this.
I went into every Wal-Mart, Target, H.E.B. and all kinds of other stores, going from row to row, shelf to shelf looking for just the right container. I would find something that might work, copy the information from the package, and call the manufacturer to find out how to get bulk quantities.
Finally, I was in Dallas for the Nursery Expo on year and saw a store called The Container Store. I went in there and saw the square, clear plastic jars that we now use. I tried to buy them bulk through the Container Store but that was way too expensive. I finally found a wholesale company that stocked them and started buying in truckload quantities. Now we buy directly from the manufacturer.
So, if you go into a nursery and see other fertilizers sold in clear, square, clear plastic jars, you now know that Nelson Plant Food did it first!!
Actually, the next financial storm was self inflicted in a way. Our plant was located on one acre of land that belonged to Southern Pacific railroad. I had used the rail siding some to unload boxcars of fertilizer. Shipping by rail was cheaper than using trucks, but my bins were not large enough to hold more than one rail car, usually 90 tons. We did not have the cash, anyway, to store that much inventory. I remember reading about how the Japanese started using “just in time” inventory management in the 1980’s as a way to increase the profit margins on automobiles. It dawned on me that we had always used “just in time” inventory management. We turned our inventory over on about three weeks….and still do. It’s like conducting an orchestra around here in the busy spring season.
Back to the story….Southern Pacific kept increasing our rent each year for the one acre. It was up to $400 a month. They wanted $80,000 for the one acre of land (I owned the building), which was ridiculous. We needed more bulk storage bins since we only had ten. Our warehouse was built out to the edge of the property. We had to move.
Since we lived in Bellville, which was thirty miles from Waller, we decided to find a location in Bellville. Again, available financial resources was a problem.
You see, a year or two before we decided to move, our relationship with our bank was no longer there. This is a long story, but I think that it is one of the most amazing things that happened to us.
Backtrack a few years to the early 90’s. The economy in Texas, as far as I could tell, was still suffering from the savings and loan debacle of the 80’s. The institution that had our long term building loan kept pressuring me to move the loan. One day they would tell me that they could only loan on assets of the company and that profitability did not matter…nor did cash flow. So, I went back to my records and developed documentation to show them that my assets were worth much more than the long term loan that they had on their books. When I thought that my problems were over concerning this matter, they then changed their tune and told me that assets did not matter but that they were only loaning on profitability. I was buying equipment at that time and was doing this through a leasing company so that the purchases could be written off directly against income (instead of using depreciation). This skewed my income statements a lot. So, when I went back and proved to them what I was doing, my profitability (and tax payments) changed dramatically.
They were still not wanting to carry my loan. I needed to pay them off and go somewhere else.
Back then, we lived in the actual town of Bellville. After work and the family meal each night, I would take one of the kids and put them behind me on the bicycle and ride around town. This helped Julie to have a break and it helped my stress level immensely. One night, one of my friends by the name of Mark Skelton was outside his house looking at his yard. He asked me how things were going with work. I told him that things were really bad because my bank was going to cancel my loan and that I did not know what I was going to do. Mark worked at a bank in Houston and told me to bring him all my financials to see what he could do. It took a couple of days to gather the documents and I took them over to his house one night. A week later, Mark called me and said “You need to come to the bank tomorrow and sign the loan papers.”
I showed up at the bank the next day and Mark had a loan of $150,000 for long term payout of equipment and $100,000 line of credit.
Did you get that?
I showed up at the bank the next day and Mark had a loan of $150,000 for long term payout of equipment and $100,000 line of credit.
Sitting here in 2014 and remembering back to that time in my life, I still can’t believe what Mark did for us. It was definitely a God thing. One night I was talking to Mark and had no clue as to how Nelson Plant Food was going to survive…one week later a whole new world opened up.
Words cannot describe how grateful I was…and still am…that Mark Skelton stepped up and helped Julie and me like he did. God bless him and his family!!
So, the early 90’s worked out OK and we started to thinking about building a new plant in Bellville.
Then, something really weird happened.
I had been talking to Mark at the bank about increasing our line of credit because we were growing our sales and need more cash to finance receivables. Each spring, it was a struggle to keep the bills paid because we shipped out so much fertilizer and expected payment in 30 days. This did not always happen. Sometimes it was 45 or 60 days. The problem was that our suppliers in the fertilizer industry expected to receive their check from us on the 15th day or 30th day after they shipped. Quite a few wanted us to send a check to them the day we received the product. Some would only ship if we wired them the money before shipping. Nelson Plant Food was making a decent profit at the time, just not enough to cash flow all the inventory and receivables.
Each spring, Mark and I talked about increasing the line of credit and he assured me that we would, so I did not worry about it. We even sent out checks knowing that we would be overdrawn for a few days from time to time. Julie was really great about this. She seemed to always know how long it would take each vendor to get our payment, deposit it into their bank, and then when the check would hit our account. She totally used all the float that was out there.
One Friday in April, we desperately needed to increase our line of credit for the spring. We had used up all the $100,000 and had about $50,000 out floating around. I called the bank where Mark worked and he was not there. I remember thinking that this was very odd. Mark was always at work. I asked the lady on the phone if Mark would be back that day, and she said “no.” I asked if Mark was going to be back in the office on Monday, and she said “I don’t know”.
Alarms started going off in my head. I knew that something terrible had happened.
The next Monday, I tried to find out what was going on and nobody would talk to me. Something had happened at the bank. My account was frozen. My loans were frozen. (That bank eventually failed.)
And….I had $50,000 in bad checks out floating around.
Some background on the fertilizer industry. These are all big companies that we buy from. Large, multinational institutions who operate on a very thin margin for each ton that they process. This is a commodity industry. These people, back then, were extremely wary of all of us small customers because so many had gone bankrupt over the years and left them high and dry. These companies would not ship product to us if we were more than a couple days’ late on payments. What would they do if they received a bad check from us? Basically, no more selling to us on credit, which would be the end of NPF.
So, we got a list of every check that might possibly be out there floating around. I personally called each company and explained what was going on. I asked them to look for the bounced check and keep it when it came back to them in the mail. Since we have always operated NPF with as much honesty and integrity that we could muster, every single supplier understood the problem and agreed to work with us on this issue.
They trusted us because we were trustworthy. Always were. Always will be.
Then, I got on the phone and called every one of our customers who we had shipped product to and still owed us money. Even the ones that we were shipping that day. I explained the problem and asked if there was any way that they could go ahead and pay us now instead of waiting the usual 30 days.
Guess what? We collected more than enough money in two days to get out of trouble. Over $50,000. Now those are customers who you want to have. You can see why we at NPF try so hard to make both of our suppliers and customers to think “Nelson Plant Food is the best company that I have ever worked with."
After the initial storm was gone that week, what next? NPF had no banking relationship of any kind. We were going to go it alone, working out of the cash that we had, which was NONE.
Somehow we did it the next two years. No other bank would touch us. They would of course be happy to set up the company checking account, but no loans to pay off the previous bank loans, which disappeared into bank regulators’ no man’s land.
It was during this time that we decided to move NPF to Bellville and build another plant. Are you not totally amazed at my awesome ability to plan ahead, both financially and strategically? No bank. No land. No idea.
Actually, I did manage to save up $60,000 in the early 90’s. So, we found three acres of land in Bellville that was supposed to be part of a future 36 acre industrial park. We bought it for $7000 an acre and the owners financed it over five years. We bought this land because it already had water and sewer, so we would save some money on that. It had a gravel road coming off Highway 36 just south of Bellville.
Our plan was to disconnect electricity at the Waller plant the day before Thanksgiving and begin tearing down the whole plant and moving it. I did not have the money or bank loan or any other way to pay for building materials, so we had to take down the old plant in Waller and move it to Bellville. We tore it down nail by nail.
In August of 1995, our slower season, we had electricity run to the new site. I would shut down our plant in Waller whenever we could and go to Bellville and build the two concrete pads that we wanted to pour concrete into. My dad, Wesley Nelson, helped a lot during this time. Our kids were also out there after school and weekend tying rebar. They were 13,11 and 9 years old at the time. It took a month or so to finish forms for the two buildings. The dirt at the new location is black, expansive clay that gets as hard as a rock when it drys out. It took forever to dig the trenches.
Along about October of that year, we poured the concrete. The two buildings are parallel and are 30 feet apart. Between them is where the blending equipment would be. We also poured a pad for the blending equipment.
We tore down half of our 40 by 80 foot finished goods warehouse in Waller in October. We kept the other half in operation until Thanksgiving. We called all of our customers and told them that we would be out of operation from Thanksgiving until Feb 1 of the next year. We made up some extra turf fertilizer to sell and also made up enough preplant fertilizer for our nursery growers to keep them running through the downtime.
With all hands on deck (five of us), we started putting up the wood framework for the two warehouses. We bought a new blender, so this would have to be installed. We used the old elevator that we had bought when the other one fell down (and missed my pickup by three feet in 1991). We bought a used Rotex screener to put on top of the stainless steel bagging hopper (which my father in law made in 1983 and we still use to this day).
And that leads me to another story that I hope you find interesting. One day in the late 80’s, we were in our office inside the fertilizer plant when we heard this explosion right outside the office. We looked outside and the bucket elevator that Mr. Garlough had given me had fallen down. It was about 70 feet high with all the downspouts, safety cages, etc. It missed my pickup truck by about three feet. This was in the early fall of the year, which is a busy season for us. Basically, NPF was closed until we could find another elevator.
I got on the phone (before the internet, mind you) and began trying to find an elevator, and fast. After a couple of days, I found a company in North Carolina called Agricraft that had exactly what I needed and could afford. Julie and I had a Ford van that had a folding down rear seat. I borrowed Dad’s horse trailer, went to the bank and got $1000 cash and told Ubaldo and his two co workers to drive the trailer to Agricraft, load the elevator in the horse trailer and come back home. Non stop. They could trade out driving and sleeping. I figured that it would take a day and a half to get there, a day to load and a day and a half to get back. They left on Friday afternoon. A week and a half went by and I did not hear from them. I called the plant and was told that they had picked up the elevator, but where were they? Finally, after four or five days of wondering what had happened to them, they showed up. What was the problem?
The trailer was big enough to hold the elevator…just barely. However, they had to load it in such a way that too much weight was in the front of the trailer. Whenever they got over 30 miles an hour, the trailer would fishtail. Also, they had to stop a lot for gasoline.
But, at least they were back and we could get back in business. It took a week to get the new elevator installed.
Back to the new plant construction in Bellville.
We used the old bin walls for the new bulk storage building, but had to buy more since the new building was twice as large…we now had 20 bulk storage bins. We used all the old trusses for the other storage warehouse that actually had a CONCRETE floor…a first for NPF. We used all the old wiring and electric boxes that we could. We rented a cherry picker with a driver to help install all the material handling equipment. I was the one who hung 70 feet in the air to install the bucket elevator and the bulk storage bin. I figured that I was the one that needed to do all the more dangerous work and not our employees.
It is not THAT complicated to build a fertilizer blending and bagging facility. The hard part is making money with it.
Finally, on or about February 15, 1995, we were able to make and ship fertilizer from our new plant in Bellville, Texas.
Unfortunately, it started raining in mid January and did not seem to stop. This was not a problem for making fertilizer, but it WAS a huge problem to get trucks loaded. All we had between the gravel road and the plant was deep, black mud. We could not drive forklifts or trucks into the mud and expect to get out. So, we borrowed a tractor and pulled the trucks up to a concrete walkway that we made, and loaded two pallets, pulled the truck up, loaded two more, pulled the truck up…etc. Sometimes we had to tie the tractor onto a forklift and drag it out to the gravel road and load the truck from there. It took three hours to load the same truck we load now in twenty minutes.
What was the solution? When it did finally dry up to pour some concrete for loading trucks, we knew that now was the time to fix the problem….but there was another problem.
You see, in my awesome ability to plan ahead, I spent the aforementioned $60,000 that we had saved up about one month into the plant construction. I then drained all of my cash flow from the fall fertilizer business. I then began to run up bills with no idea of how to pay for them. We basically built a $250,000 plant with $60,000 of cash and $190,000 of hope and prayer.
But, we still needed to be able to load trucks on concrete. I was talking to one of our good friends here in Bellville at church one Sunday and telling him of our dilemma. Glenn Huebner and his family own Huebner Concrete. I was not asking for help, just talking about our life. Out of the blue, he calls me the next day and asks me how much concrete I needed. I told him “about $10,000”. He asked me when I needed it, and I told him as soon as we could get the forms up. But, I remember telling him that I could not pay him for the concrete. His comment: “Don’t worry about that….pay me when you can.”
True to his word, as soon as the forms were finished, concrete trucks started showing up and did not stop until all the pads were finished. God bless Huebner concrete.
So, here we were in 1995…twelve years in business, a new plant, no money, still no bank…this somehow looks familiar. What to do?
Get to work and sell more fertilizer and work our way out of it. It took four years of that bad feeling in the bottom of your stomach every time you thought about it. Praying for peace is what got me through. My wife was also always there, always believing in me and what we were doing.
At one point, another friend who is a banker was looking over my financials and told me that my company was basically bankrupt. He asked “how are you still in business?” Julie and I talked about selling our house that we had built in 1990. However, when we sat down to talk to the kids…16, 14 and 12 years old by now, we could not say much because our whole family was crying our eyes out. So, we did not sell the house.
Finally, after four years of not having a bank to work with, an interim loan was obtained from a bank in Houston. That took a lot of pressure off of cash flow. A year later, a local bank took the risk and funded the plant and gave us a small line of credit to work with.
The rest, as they say, is history.