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Beneath The Surface Suspicious not all areas of your company are bringing in a profit? Break it down with activity-based costing.

By Mark Henricks

Opinions expressed by Entrepreneur contributors are their own.

Among the 1,500 plant varieties Bluemount Nurseries Inc.stocked, Nick Pindale suspected that some yielded profits and someonly losses. Unfortunately, Pindale, the CFO and grandson-in-law ofthe founder of Monkton, Maryland-based Bluemount wasn't surewhich was which.

Pindale sought answers from an accounting technique calledactivity-based costing, or ABC. Dividing nursery tasks intocategories such as potting and planting, he assigned costs to each.Then he determined which ones Bluemount performed cost-effectivelyand which would be better outsourced, trimmed or omitted. Theinformation identified the most profitable plants and even helpedprovide documentation for a bank loan needed to boost production ofmoneymaking lines.

Bluemount bloomed with ABC. "Five years later, not one ofour original greenhouses is still standing," says Pindale ofthe 65-person nursery. "We've added state-of-the-artmachinery in our potting line. And we've doubled insize."

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