Outlines the eight biggest challenges facing landscape and irrigation contractors today. Kenney Outdoor hired an independent research company to take a look at these challenges and trends. This briefing represents over $250,000 worth of white papers, studies, articles, government documents and data gleaned from over 39 different sources.
8 Challenges Facing Landscape and Irrigation Contractors
1. The 8 most dangerous challenges facing
landscape and irrigation contractors
Can your business weather the storm?
2. The 8 most difficult challenges facing landscape
& irrigation contractors
• Current economic situation as it affects
landscape and irrigation contractors
• Labor issues
• Rising cost of goods & price fluctuations
• Competition
• Maintaining customer relationships
• Regulations & compliance
• Lead generation problems
• Management failures & lack of financial analysis
& understanding (including job costing & bidding
errors)
3. Why this study?
• Kenney Outdoor Solutions understands that the Green
Industry is experiencing some very unprecedented and
extraordinary times.
• Kenney hired an independent research company to take a look
at these challenges and trends, to see if there was a way to
bring greater value to our customers.
• This briefing represents over $250,000 worth of white papers,
studies, articles, government documents and data gleaned
from over 39 different sources.
• This resulting report is a fascinating study which demonstrates
a real need to sharpen your focus to a razor’s edge. We would
like to share this report with you.
5. The Current Economic Situation is STILL a
Nightmare
• 13.5 million persons continue to remain
unemployed (March 2011). 8.8%
unemployment.
• February 2010 personal saving continued
to decrease by almost $35 billion (down
to $340 billion nationally).
• The amount of money Americans are
saving as a percentage of their
disposable income is just 3.1
percent, down from 3.4 percent in
January 2010.
Source: US Bureau of labor statistics – April 1, 2011, 2010; Employment Siituation
Summary April 2010 and Bureau of Economic Analysis, National Economic Accounts,
April 2010 5
6. What about the Green Industry?
• PRO Magazine, a national trade magazine
serving landscape contractors across the
North America, recently concluded an
extensive readership study and found sales
for installation and irrigation for 2009 was
down by 20%.
• ―Markets throughout the US are down and
more competitive than ever. Many
contractors submit bids that are below their
break-even point (BEP); and in some cases
below their direct costs. This is reflective of
the hyper-competitive market: where there
are a lot of contractors chasing a limited
amount of work. However, once contractors
are driven to pricing work at their break-
even point, it takes years for a given
market to recover.‖ - Jim Huston
• Jim Huston, Labor Numbers and Loss Leaders, Lawn & Landscape
Magazine, May 2010
6
7. Design/build - revenue still dropping
• At the end of 2009, the average landscape
company sales growth was down 8%
compared to 2008.
• In addition to diminished growth,
revenue per employee figures
decreased (from $46,378 on average to
$41,193.)
• Certain services performed worse than
others. Those down included
construction/design-build at negative
6.5 % for 2009.
Source: Lawn &
Landscape, http://www.lawnandlandscape.com/LLSOI_1009_taking_
control.aspx 7
8. Despite some optimism, the truth is that the
U.S. Recession is far from over
• The economy may have added 290,000 jobs in
April 2010, marking a four-year high in monthly
job creation, but the number of mass layoffs
- those totaling 50 or more at a single
company - rose during the month, and was
led by the manufacturing sector.
• Without a flourishing manufacturing base, the
American economy will be a shell of its former
self. We will remain highly susceptible to
chronic boom-and-bust cycles like the current
one.
• Facing the worst economy since the Great
Depression, millions of Americans are still
struggling to find work, pushing the long-
term unemployment rate to record highs
and putting economic recovery in jeopardy.
Source: www.economyincrisis.org
8
9. Challenge # 2
How will you handle the
downpour of a labor issues?
10. Labor problems
Finding & Retaining quality people in the GREEN INDUSTRY is hard.
• Maybe it’s because of comparatively
lower wages and a slow winter
season.
• Or maybe it’s because, when you
get right down to it, it is hard
manual labor.
• Baby Boomers are aging, and in the
wake of the digital revolution the
GREEN INDUSTRY does not attract
young professionals.
10
11. Looking for workers
• Over the last eight years, Leahy
Landscaping has advertised for a total of
140 seasonal positions
• Ten people have applied, all 10 were
hired, but none of them showed up for
work
• ―We spend in excess of $10,000 a year
advertising in newspapers and on
Monster.com and we get little to no
feedback,‖ President Matt Leahy says
• Despite his Lynn, Mass.-based company’s
$12- to $20-per-hour wages and
excellent benefits package, American
workers don’t want seasonal jobs
11
12. Turning to H-2B
• Many employers turn to the H-2B program, which supplies
immigrant workers to US companies for nonagricultural
short-term labor.
• H-2B allows guest workers to temporarily work in the U.S.
• H-2B requires a lot of pre-planning, as you must forecast
your need months in advance. (TIME & MONEY)
• Then, applying for H-2B requires extensive documentation
and paperwork to show that your need is temporary and
that you have tried to hire all available American workers.
(TIME & MONEY)
• But even if you do meet all of the conditions, there’s
NO GUARNTEE that you’ll be approved.
Source: Richter, Amanda, Coming Up Short: The Search for Labor,
Irrigation & Green Industry, April 21, 2008
12
14. Escalating costs are shrinking profits
• List of rising items is endless… fuel, fertilizer, copper
fittings, pipe, wire, backflow and other items are impacting your
profits.
• Nurseries and suppliers delivering products and plant stock have
increased prices 30% or more due to higher distribution charges
• In a five-month period in 2008, fertilizer went from $150 to $162
per acre.
• In 2008, copper ranged from $2.80/lb to over $4.00/lb, hiking
prices dramatically.
• Fuel prices rank at the top of contractors’ list of concerns
• Fuel costs typically made up 2% to 3% of a typical contractor’s
total sales, but now can exceed 12%
Source: Cost of Goods Soaring, Landscape Management, 2/15/09;
www.theoildrum.com , 20009
14
15. Surcharges – customers hate them!
• While 37.5% of contractors conserved
fuel use and 27% raised prices, others
added or increased fuel surcharges
(8.5% to 6.2%).
• But these solutions, while necessary,
leave us wondering…
“How much can the consumer
take?”
• Where do you draw the line?
• Do you add a health insurance
surcharge, a fertilizer surcharge, a
vehicle surcharge, a wage surcharge,
etc.
15
16. Looking at new ways to generate revenue
• But there’s only so much you can cut
back on – you can only play so much
defense and so much offense
• Contractors are going to need to look
at new ways to generate revenue
• The next frontier is in labor
reduction costs…
…it all comes down to speed and ease
of installation.
16
18. Few barriers to entry means more competition
• Initial costs are low, it is easy to start up in the
Green Industry
• Newcomers, without a track record feel that in order
to get the job they have to bid low.
• Until they understand their overhead and learn what
their true costs are, bidding on projects will be a hit-
or-miss … and so will profit and loss.
• Generally, 50% of the new startups fail within the
first 3 years.
• Many fail, not because they lack the field skills but
because they lack the business skills and knowledge
of overhead, insurance, taxes and the labor burden
of business.
• Many recently unemployed will also try their hand in
our business
18
19. Finding your USP
(Unique Selling Proposition)
• To beat the competition you must find
your unique margin of difference and
stand out!
• Your USP could be maintenance, new
technologies, service of conservation—
but you must spend time and money on
marketing it.
• Spending marketing resources selling
the brands you sell and service, at the
expense of investing in your own
company’s brand and USP, should be
unthinkable.
19
21. Successful customer relationships = profit
• Ask your existing customers if they would
recommend your company. Sign of strength.
• Customer relationships = a company’s most
valuable assets, but often one of the most
undervalued assets too.
• In the constant battle to gain new
customers, it is easy to overlook the
value of existing customers.
• All corporate profits are ultimately earned
from conducting successful relationships with
customers
21
22. Maintaining customer relations
• Your customer base is gold—don’t let
them leave
• Why Customers leave:
- Move or die 4%
- Other company friendship 5%
- Competition 9%
- Product dissatisfaction 15%
- No customer contact strategy 67%
• If your customers begin to feel ignored
or neglected, they will take their
business elsewhere
22
23. Challenge # 6
A blizzard of governmental
compliance and regulation
24. Dealing with Federal, State
and Local Regulations
• Compounding slow industry growth are
the restrictions and regulations that are
proving to be both costly & time-
consuming.
• US Environment Protection Agency has
enacted a program that aims to reduce
water usage by creating a clause that strictly
limits the amount of turf grass that
participating builders plant.
• Some cities give financial incentives to
replace certain types of turf grass with plants
deemed more water-efficient (i.e. Las Vegas)
Source: Gwendolyn Bounds, The Wall Street Journal Article, “Turf
battle heats up over limits on water-guzzling landscapes”
24
25. Local water use restrictions
• Locally, water management districts and
municipalities have been enacting water use
restrictions for decades
• 48% of contractors have seen an increase in
landscape watering restrictions over the last
two years, according to a recent Lawn & Landscape
study
• It would be irresponsible to ignore our duty as
stakeholders in the future of the water supply
• That duty comes not only in complying with water
use restrictions, but also in providing input for the
development of these types of ordinances and
seeking continuing education.
25
26. Challenge # 7
The stormy road to lead generation: no
leads = no sales
27. How are you managing your leads?
• Only 10% of organizations are
undertaking strategic investments
focused on new-customer acquisition
(Profitable Channels)
• Most organizations recognize they do
a bad job at managing the ―front
end‖ of the sales process.
• 87% of sales and marketing leaders
rate themselves average or below
average at generating demand
(Sirius Decisions)
• Leads are not managed very well—
over 75% of leads are not followed
up on properly (Sirius Decisions)
27
28. 4 strategies
for revitalizing lead generation
#1 Make more time for leads.
• Good sales professionals
prospect 2.5 hours a day. Great
sales professionals prospect 4
hours per day.
• An analysis of your sales and
marketing performance will
likely show that an incremental
investment in ―up front‖ lead
generation efforts will likely get
bigger returns than spending
more money managing the sales
pipeline or the lead-to-close
ratio.
Source: Revitalizing Lead Creation: Six Strategies That Work (Part 1)
by Stephen Diorio, MarketingProfs, June 1, 2004 & The Ultimate Sales Machine by Chet Holmes
28
29. Timing is everything
#2 Use timing to improve targeting.
• Timing is the new frontier in targeting new
leads and customers.
• 3% of the total market is buying your
product/services RIGHT NOW. Figure out
WHEN your customers actually make the
decision to buy and target them then
• Marketers often find they can get far more
revenue from a dollar invested in getting the
timing right than they can on a dollar invested
in targeting the right person. Marketers
who understand that “timing is
targeting” are improving performance 2
to 10 fold by improving the timing of
their marketing programs.
29
30. Give your customers more information
#3 Use more white papers (INFO) to
grab attention.
• 70% of U.S. information technology
professionals rely on white papers to make
purchasing decisions. (ITtoolbox, July
19, 2006)
• Informative white papers are sought after
by prospects early in the sales cycle and
can generate quality leads.
• Studies show white papers were more
valued by those at an early stage in
the sales cycle—more so than free
trials, analyst reports and webinars.
(KnowledgeStorm and Sirius Decisions -
July 6, 2006)
30
31. Strategic partnerships can be your
greatest asset
#4 Use strategic partners.
• Find strategic partners to work with to
help develop leads and improve your
management practices.
• The ideal solution would be a vendor or
company that either sells products or
services to you (who would have leads
for those products) and/or a business
consultant that can work with you on
various sales and marketing
techniques.
• Does such a company exist in your
industry?
31
32. Challenge # 8
Does your management know how to
strike while the iron is hot?
33. Management failures
• Management failures typically involve: the failure to
plan, the failure to understand finances & cash flow
and other economic issues
• Financial & marketing ignorance prevent contractors
from being able to grow their business.
• Financial & marketing ignorance prevent contractors
from being successful and prevent a profitable sale
of the business upon retirement.
Is this you??
33
34. Thinking outside the box
• Contractors need more than just
technical skills to be successful.
• Today, more than ever, you need to find
a way to stay strong in a weak economy.
• Some suggestions are:
1. Focusing on labor efficiency
2. Keeping a firm grasp on the numbers
(including bidding)
3. Identifying emerging markets, and
4. Building strong relationships
Source: Lexau, Elizabeth, Staying Strong in a Weak Economy, Irrigation &
Green Industry, July 15, 2008
34
35. Trends in landscaping & irrigation
In order to help you develop
strategies for success, consider
the following landscaping &
irrigation contracting trends:
1. ―Green‖ landscaping
2. Certification
3. Using state-of-the-art
technology
4. Developing strategic
alliances
35
36. TREND #1:
Green building and LEED
• Green building is expected to continue to grow over the next 5 years
(despite negative market conditions) into a $96 - $140 billion market.
• The Leadership in Energy and Environmental Design (LEED) Green Building
Rating System is a point rating system devised by the United States Green
Building Council (USGBC) designed to encourage market transformation
towards sustainable building design
• Using highly efficient irrigation products can increase the number of points
awarded to a project trying to obtain LEED certification
• Reductions can be attributed to any combination of the following items:
– Plant species factor
– Irrigation efficiency
– Use of captured rainwater
– Use of recycled wastewater
– Use of water treated and conveyed by a public agency specifically for
non-potable uses
36
37. TREND #2:
Irrigation Association Certification
• The Irrigation Association’s (IA) certification
program began in 1983 as a means for
contractors to demonstrate a level of
professionalism and skill
• The goal of these certifications, in addition to
bettering your business and the industry, is to
―set your business apart from the competition‖
(Think USP)
• Customers increasingly recognize and look for
certification as a confirmation of your
professionalism and capability.
• Because there’s a continuing education
component to certification, contractors who
become certified are proving they are on the
cutting edge of the latest irrigation technology all
the time.
Source: BETTERING YOUR BUSINESS: The State of Landscape Irrigation
Certification, Lawn & Landscape, 11/11/08
37
38. TREND #3:
Technology
• In the last decade, tremendous strides have been
made by irrigation manufacturers to reduce the
amount of labor involved in installing a system
• Pre-assembled pipe, valve boxes w/ valves
installed, press fit wire & pipe
connections, wireless sensors, etc.
• Industrially and culturally — technology is
moving more and more in the direction of
efficiency
• This in turn will allow your company to complete
a project more quickly, leaving you more time to
take on new clients
38
39. TREND #4:
Strategic Alliances
• Manufacturers and distributors are
forging relationships with suppliers
that help streamline their supply
chains.
• Results = faster service and lower
prices
• But these partnerships aren’t
limited to just high-volume
industries
• Irrigation contractors can also
realize the benefits of partnering
with their distributors.
Source: Katz, Jonathan, WORKING WITH IRRIGATION DEALERS: The
Partnership Pipeline, Lawn & Landscape, 2/17/05
39
40. Selling landscaping & irrigation systems – what
are the real benefits?
• Are you selling these benefits
and positioning yourself as the
expert… or are you just
presenting PRICE?
• A landscape is a good
investment. One dollar invested
yields greater than one dollar in
return in home value.
• Landscaping represents an
excellent way to combat falling
home prices.
• A good landscape adds
anywhere from 6% to 15% to
the base value of a home.
40
41. Healthy lawn = healthy air
• Gallup survey: only 23% of Americans
recognize turf’s environmental benefits.
Educate the other 77%!
• A 50-foot by 50-foot lawn produces
enough oxygen for a family of four
• Lawns cool the atmosphere
• Eight healthy front lawns have the
cooling effect of 70 tons of air
conditioning, which is enough for 16
average homes
• Grass converts carbon dioxide to
oxygen, a process that helps clear the
air
41
42. A solution to water scarcity lies with you
• Landscape needs account for 20% to 50% of the 95,000
gallons of water consumed by the average U.S.
household.
• Conserving water used on landscape is an important
part of the overall solution to the water scarcity
problem.
• The goal of an irrigation system is to give the plants
sufficient amount of water without waste.
• Major advantages for sprinkler irrigation is efficiency
and proper coverage without waste.
Source: United States Environmental Protection Agency, Office of Water,
Water Efficient Landscaping: Preventing Pollution and Using Resources
Wisely, September 2008 42
43. What have we discovered?
• The economic crisis is having a profound effect
on the Green Industry.
• A long list of challenges makes running a
business difficult and requires plans and
strategic partners for survival and defense.
• Running a successful contracting business
requires excellent technical skills, adaptation of
the latest technologies, and a keen focus on
consumer trends.
• Running a successful landscape and/or
irrigation business also requires exceptional
business abilities that include: the ability to
understand your company’s financial
position, use the data to manage the business
more effectively, develop leads, have efficient
systems, deal with customers/employees, etc.
43
44. How can Kenney help?
Introducing the Prosperity
Challenge for Kenney Outdoor
Solutions
• Learn how to overcome your
biggest challenges with The
Obstacle Course worksheet
• Benefit from our Strategic Stocking
Model and get back control of cash
flow
• Gain lead generation strategies
that can impact your business
today
44
45. Get started today
Kenney Outdoor Solutions designed the Prosperity
Challenge to help your business stay strong during
these challenging times.
Start strengthening your business today
Visit The Prosperity Challenge to find out more
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