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2012 Lawn & Landscape State of the Industry Report

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2012 Lawn & Landscape State of the Industry Report

  1. 1. REPORT 2012 STATEof the Sponsored By INDUSTRY
  2. 2. STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S3 J ohn Deere is celebrating a milestone not reached by many companies – our 175th year in business! Our business, like yours, began with an idea. John Deere was certain that he could build a better plow, and he did. I am sure that you were certain that you could create a successful business, and you did. Things have changed a lot since John Deere built a better plow, and no doubt, things have changed a lot since you first started your business. While our business has changed over the past 175 years, we haven’t lost the innovative spirit of our founder. It’s been a part of our culture and products from that very first plow to the exciting new line-up of commercial mowing products and solutions that you’ll see in 2013. In addition, integrity and commitment – two of our founder’s value – are still part of our guiding core values today. Throughout our 175 years, we’ve worked to make our products safer for you, our customer, we’ve done business ethically, and we have often noted that the results we achieve are less important than how we go about achieving them. These values, along with countless hours of hard work from dedicated employees have taken us from a small, Midwestern U.S. plow company to a global business committed to the success of our customers. Reaching our 175th anniversary is a remarkable achievement, one that generations of proud John Deere employees and customers have made possible. Because of you, the green industry continues to survive and thrive even in uncertain times. As we look towards the future, we are optimistic about our business, and given the growth that you predict in the 2012 Lawn & Landscape State of the Industry Survey, you are optimistic about yours. At John Deere, we realize that our success is dependent upon your success. Just as you are committed to your business, we are committed to you, and the hard work you do every day to enhance the environment. Together, we can strive to achieve the next big milestone in our business, and in yours. Ken Taylor, CLP General Sales Manager – Commercial Business Development GROWING TOGETHER
  3. 3. REPORT STATEof the INDUSTRY 2012 S4 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE I t can be difficult to take the pulse of an industry with hundreds of thousands of owners, employees and suppliers spread across not only a vast geography but also dozens of service segments. But to sum up the state of the landscape industry in 2012, we have to say it’s getting better. Generally, sales and profits are up, companies are hiring and consumers are spending again. While the economy isn’t thriving the way it was a few years ago, top contractors have found ways to gain market share and continue to grow regionally. This year, with help from independent research firm ABR Research, we surveyed more than 600 landscape contractors from across the country and from diverse service segments. We combined those data with interviews with dozens of other key contractors to put together this year’s State of the Industry Report. Inside, we’ve combined our research and reporting to highlight the key issues and challenges facing core services in the green industry. Contractors across the country continue to report similar challenges, regardless of market, service breakdown or size: downward pricing pressure, trouble finding good employees and difficulty in growing their market share. The bottom line is that most regions of the country are still take- away markets for landscapers. A majority of the industry – 66 percent – still inks less than $500,000 in annual revenue and nearly half post net profit margins of less than 10 percent. But, more companies predict higher margins and higher gross sales for 2013. One of the main challenges this year was the weather. Starting with the winter of 2011, which pinched the cash flow of anyone who relied on pushing snow, and ending with one of the worst summers on record, the weather in 2012 was not kind to contractors. But such a damaging drought has opened up opportunities for contractors offering resodding, turf renovation and planting services. 2012:It’sgettingbetter A look back at a year of weird weather, sporadic growth and tight prices, and what they mean for contractors next year. BY CHUCK BOWEN Combine a year’s worth of bad weather with a presidential election that focuses mostly on a still-foundering economy, and you get a lot of worried small business owners. Among the top concerns in the minds of landscapers this year are fuel prices, the rising cost of health insurance and consumer confidence. On the positive side, two factors are coming together to indicate the potential for more mergers and acquisitions in the coming years. The average age of owners continues to increase, as does the interest of private equity firms in the green industry. That means more investment capital and more owners thinking about how they’re going to exit their businesses. But with all the challenges, tough weather and uncertainty in political climate, contractors remain optimistic. Eighty-nine percent of our survey respondents say they are confident that the landscape industry will grow next year. And while an optimistic industry is good, it also helps to have some money in the bank. And our research shows that these good feelings are based on real growth: Average revenue per company is up by almost $100,000 compared to last year. In 2012, the average landscape contractor will net $896,446 – about $95,000 more than they reported in 2011. Overall, net profit was 11 percent, and contractors report it will remain about the same next year, rising to a predicted 12 percent in 2013. So read on to find out in detail what’s happening in your industry, and what you can expect next year. Good luck. SOI
  4. 4. STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S5 How many years have you been in business? Company breakdown Based on our research, here’s how the industry looks. 13% 18% 36% 33% Less than five 5-9 10-19 20 or more How old are you? 18-25 26-35 36-45 3% 14% 28% 22% 33% 46-55 55 or older What percentage of your annual sales comes from the following services: 44% 19% 12% 7% 5% 6% 6% Lawn mowing/maintenance Construction/design/build Lawn care Irrigation Tree and ornamental care Snow and ice removal Other What percentage of your sales comes from the following property types? Single-family residential 63% Multi-family structures 7% Commercial/ industrial 25% Government/ institutional 4% Other 1%
  5. 5. S6 REPORT STATEof the INDUSTRY 2012 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S7 A s companies start looking ahead to 2013, they’re already gearing up for their new equipment purchases. Each company approaches equipment purchasing a little differently but most have similar expectations: They prefer buying their equipment as opposed to leasing it, are more conscious of spending since the recession and are looking for a strong relationship with their dealer. These core components come into play across the country when contractors create an equipment purchase plan. Most owners say they primarily buy their equipment as opposed to leasing or renting it, unless there is something special needed for a specific job. “For instance, if the irrigators were going out and installing irrigation on a huge property and we needed a Ditch Witch trencher, that’d be something we would rent to get the job done rather than purchase a $20,000 unit,” says Scott Tintera, shop foreman for Clean Scapes in Austin and San Antonio, Texas. “But if we do rent something continually, and feel it would be an asset to own one, we will go ahead and purchase it.” “Whether we rent or buy depends how often we use it,” adds Luke McClure, co-owner, LKM Mowing & Landscaping in Normal, Ill. “If it’s something we end up Today’s landscape companies are still holding onto equipment and expect it to last. renting more than six times a year, or if it becomes a big hassle to rent it because we could use it more, than we will try to put something in the budget to purchase it for the following year.” Patrick Donovan, owner of Classic Landscaping in Edison, N.J., says he looks at renting versus buying not only from a cost perspective, but also from an efficiency perspective. If it’s something he would use once in a blue moon, he’ll just rent it. But he says there’s a lot of hassle involved in renting. “I might need a piece of equipment for just three hours but it will take six hours because I have to go to the place to get it, sign papers, then return it at a certain time and possibly jump through more hoops,” Donovan says. “I may have just been better off buying the equipment because it would save me time. It has to be something I use very infrequently to rent it.” Donovan has also found that his equipment list has been a great sales feature. “I love to show my potential clients my equipment list because it shows them that I invest money in my business,” he says. “I don’t have to go get an unreliable piece of equipment to rent because I have everything I already need for the job.” BUYING PLANS. Since the recession, companies are a little more wary about spending and maybe even holding on to equipment longer than before. Brent Gurney, equipment manager of Pleasant Grove, Utah-based Elite Grounds, says that the company has not only held off on equipment purchases but also reduced the amount of crews while having to increase workload to still meet their demands. “With the way the economy has been here, we’ve held on to our mid-sized and larger mowers as long as possible so next year we’ll be looking to mostly just purchase trimmers, edgers, blowers and some smaller push A HIGH BAR BY LINDSEY GETZ Longer than usual Replace as often Replace more frequently How long do you hold onto equipment today compared to two years ago? 2% 66% 32% mowers for growth,” Gurney says. Donovan says that he’s always tried to get as much use out of his equipment as possible and feels that his business model allows for that. “I’m an owner/operator so I get much more longevity out of my equipment,” Donovan says. “I still have a 1989 truck that’s operating just fine because I’m the only one that drives it. I’m a family operation. It’s myself and my three sons so we all have a vested interested in taking care of the machines.” Donovan says that each employee has his own machine, and is on that same machine every day. “You end up having a relationship with the machine,” he says. “If you hear a click or a buzz, it’s your machine and you know if something isn’t right. Because we take such good care of the equipment we don’t have to rotate it very often. The average business may rotate pieces every three years but for us, it’s at least every seven.” Tintera says that Clean Scapes will run equipment until it’s no longer cost-effective to do so. “If the parts to repair an older weed eater are going to be $225 and we could buy a new one for $300, we’re obviously going to buy a new one at that point,” Tintera says. “But we’ll then use all of the reusable parts that we can on the old equipment. We’ll keep those to repair other pieces that go down.” Sometimes planning for equipment purchases can be a challenge. As a newer company (founded in 2007), FieldStone Landscape Services in Clearwater, Fla., has seen fairly rapid growth and that’s meant growing their equipment base rapidly as well. Michael Thackery, co-owner, says that he often feels like they’re scrambling when it comes time to purchase. That’s why they’ve started playing closer attention to projected growth now that the company has several years under its belt. “Our plan is to budget in the fall and then come January we’ll start calling the local dealers for prices,” Thackery says. “Our goal is always a one-time buy but it never happens that way. But we definitely focus on buying into our growth so that we don’t have to scramble come busy season.” THE DEALER RELATIONSHIP. When it comes to working with a dealer, most companies are looking for loyalty these days. Donovan says that even if he had to pay a little more, he’d still go to the same person every time he buys. But because of his loyalty, he feels he gets the most competitive price. “He doesn’t want me to shop around so I feel he gives me the best price the first time,” Donovan says. “But what it comes down to is service and that means having a relationship with my dealer. If I break down on a Sunday, I can text him on his personal phone and he’ll open up shop and loan me a machine if he has to. You can’t put a dollar value on that.” “I feel like it does make a difference in the relationship when you work with someone consistently,” adds McClure. “Even just for efficiency’s sake – they know you and what to expect and you don’t have to create a new plan with a new dealer all the time.” Thackery says finding a dealer that you can have a strong relationship with might mean going an extra mile – literally. “We do have a mower shop that’s right down the street from us, but for our most recent purchase we actually went over the bridge to a different dealer because we felt we got better service and built a better relationship,” he says. In Utah, Green Line Equipment has set the bar high for Elite Grounds, Gurney says. “They have changed what we now expect from a dealer,” he adds. “If a machine goes down and is still under warranty, they bring us an identical mower, take the other mower back to their shop and repair it. Then they swap it out. It ensures we have no down time and we’ve now come to expect that higher level of service.” Tintera says Clean Scapes has partnered with a parts and equipment dealer to get on a fleet pricing program. He says that the fleet discount on their equipment has been a nice incentive, and he’s also built a great working relationship with the dealer. “They’re really great at ordering parts and they can get things overnighted so we get it quickly and keep our downtime at a minimum.” In the end, no matter what the buying plan is, everyone is looking to operate as efficiently and cost-effectively as possible these days. Tintera says that the best way to do that is to take good care of the equipment. His crews are set up on a weekly maintenance schedule to ensure that equipment is regularly serviced and also kept clean and presentable. “As long as you keep equipment on a strict maintenance interval, the machines can go a long way,” Tintera says. “Keep them on that strict interval and you’ll get the longest life possible out of your machines.” SOI How did your equipment budget change in 2012 compared to last year? 19% 39% 25% 7% 10% 12% 57% 20% 7% 4% Significantly increased Increased slightly Did not change Decreased slightly Significantly decreased How will your equipment budget change in 2013? “You end up having a relationship with the machine. You know if something isn’t right.” – PATRICK DONOVAN, CLASSIC LANDSCAPING
  6. 6. STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPES8 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S9 REPORT STATEof the INDUSTRY 2012 A building year The design/build sector is growing thanks to some consumers’ increased confidence, but economic and weather barriers hampered serious growth at most firms. by Kristen Hampshire C lients are loosening their wallets a bit and more willing this year to spend on design/build projects, placing a priority on enhancing their outdoor spaces. There are fewer for-sale signs propped in yards, and families are reconsidering those big vacations. So some have coin in the bank for that patio space. “We are seeing more restoration design/build work where clients have decided it doesn’t make sense to move – they’ll lose too much and take a financial hit on their home if they sell it – so they decide to stay and remodel or redo the landscape,” says Tracy Bertog, president of Bertog Landscaping, Wheeling, Ill. But those remodeling decisions haven’t included entry-level, small potatoes projects for Bertog Landscaping. Those $2,000-$4,000 jobs have kind of disappeared. “The people who used to spend a couple thousand are too afraid to spend that now or are spending it on other things that are more important to them,” he says. “Clients in that range aren’t spending money.” On the other hand, the larger-cap jobs are beginning to sell for Bertog. And clients are even willing to pay over budget a bit if they see the value. Bertog has come in $5,000-$10,000 over budget on some estimates. “And if they love it, they find the extra,” he says. This generally happens on projects that are $40,000-$100,000-plus. “We are up about 14 percent this year to date, but we are not close to where we were three or four years ago,” Bertog says of the company’s overall performance in 2012. “We do see that customers are starting to spend again.” Kurt Bland, president of Bland Landscaping, Apex, N.C., says his business has a backlog several months deep, though this isn’t a reflection of the market. “This will be our best year in 36 years of business, and it’s not because of the economy,” he says. “It’s the things we’ve been doing to actively manage our destiny – focusing on growing and selling and producing quality work.” It has been the best year for Bland, and the most difficult in his career. “Our employees have worked harder than I can remember, and I’ve had to solve more problems and deal with more challenges this year, but it’s paying off,” he says. All told, the company will grow about 30 percent in 2012. A large part of that is because of maintenance, as landscape installation (including design/build) makes up 20 percent of the company’s total revenues. But this number is up. At the lowest point of the recession, the installation division was down to 15 percent of the company’s total revenues. The ratio now is just where Bland wants it to be. “Consumers who have the money to spend are like customers in any other business sector – they are being more discerning and looking at who they are spending their money with,” Bland says of the design/build sector in 2012. “As a company with 36 years of history under our belt, we have a substantial workforce and resources, so we are fortunate to have that on our side. The people we want to work with and who are negotiating work with us respect that.” A STOP-AND-GO YEAR. Maintenance crews weren’t the only ones laid up during this summer’s drought conditions. Landscape installation teams also felt the burn. At Bertog Landscaping, some clients benched projects at the last minute. “They said, ‘I’m afraid to move forward with these plants going into the ground – even if we water them, it will be too difficult,’” Bertog says. That hurt Bertog for a couple of months. “Fortunately, we had some rain and things greened up so the phones started ringing again,” he says. “A couple of those projects we put on hold we are moving forward with now.” Weather was a factor at Snow Creek Landscaping in Arden, N.C., but it didn’t really affect the performance of design/build. Tim Boone, president, says the company is down about 12 percent this year, mostly because of the lack of snow business. “But the size jobs that we are doing are steadily decreasing in size,” he says, adding that average What services does your design/build firm offer? Design only8% Install only24% Waterscapes/ fountain24% Retaining walls46% Tree transplanting27%Design/build58%
  7. 7. STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPES10 REPORT STATEof the INDUSTRY 2012 sales are dipping steadily, too. “So, we have to do more volume.” Boone says the average project size at his company is $7,000 – his new “sweet spot” is much smaller than it once was. And, there’s no large, new construction in his area like Bland is seeing in the Research Triangle, where some contractors are back on the new-build bandwagon (but not Bland). Boone says that with fewer high-end residential clients spending, the company is tapping its existing client base for projects. So some of those former “big project” clients are adding on to their outdoor environments, but incrementally. “We are doing more landscape lighting than in years past,” Boone says. “And more hardscapes including patios and little fire pits.” Meanwhile, his company has provided bids to customers who don’t plan to spend for a year or more. “We are seeing people shop for price and get estimates, then just sitting back and looking to budget the money in the future,” Boone says. Meanwhile, Bland says clients who have been sitting on the sidelines with projects in mind are coming forward with budgets to get them started. “Those who have done well and spent the past few years being frugal are not feeling confident enough to start taking on some of the projects they have deferred,” he says. “We started noticing that about 12 months ago.” IN SPITE OF BUREACRACY. Running a business has become more stressful than ever, and with potential tax increases on the horizon, the uncertainty of health care and a hotly contested election in November, no one feels settled. “My biggest competitor is the government,” Bland says. “If they would get out of the “My biggest competitor is the government. If they would get out of the way and let us do business….” — KURT BLAND, PRESIDENT, BLAND LANDSCAPING, APEX, N.C., way and let us do business….” The majority of his uncertainty is focused on tax policy. So this year, the company will make investments in equipment and trucks to take advantage of accelerated depreciation. Who knows what 2013 will bring in terms of tax law? “Because we are having such a good year, we need to invest in our infrastructure,” Bland says. Meanwhile, as the Bland brothers work through the final stages of buying out their father’s remaining shares of the business, their succession plan has a greater sense of urgency. “What happens if capital gains taxes change?” Bland asks, noting they are at historical lows. “That is a major catalyst for us to finish the transaction this year.” At the same time, Bland Landscaping adopted E-Verify, an Internet-based system that allows employers to determine potential employees eligibility to work in the United States. North Carolina passed legislation in June 2012 requiring all employers with more than 24 workers to implement the system. “It has dramatically changed the nature of our workforce,” Bland says, adding that labor is the company’s No. 1 challenge and hindrance to growth. “The impact this law will have on the industry in our state is, in my opinion, the single largest challenge we face.” The economy continues to test businesses, and only the fittest survive. Bertog points out that many of the weaker firms that came out of the recession battered and worn down are up for sale. He’s taking advantage of this opportunity. “We have done a couple of acquisitions in the past two years and we are looking at a couple more now,” he says. While some spending has loosened up, and business owners face the unknown going into 2013, a focus on growth continues. Snow Creek Landscaping will ramp up its marketing efforts and continue to run lean, Boone says. And all of the contractors we talked to emphasized nurturing customer relationships as a key to success. “When the economy starts picking up, we’ll have a tremendous platform to grow,” Boone says. His company has ramped up volume because jobs have been smaller, and he considers the bright side to this. “We’ll have more referrals to pull from.” SOI
  8. 8. STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S13 Average annual revenue per company in the industry is up almost $100,000 this year compared to 2011. Here’s how companies across the country are doing, and where they expect they’ll end up in 2013. Sales stat shot In what range will your company’s gross sales be for 2012? 18% 13% 15% 20% 15% 17% Less than $50,000 $50,000 to $99,999 $100,000 to $199,999 $200,000 to $499,999 $500,000 to $999,999 $1 million or more Average annual revenue in 2012: $804,208 What will your net profit be in 2012? 16% 13% 18% 25% 14% 14% Less than 4% 4-5% 6-9% 10-15% 16-20% More than 20% Industry average net profit: 11% In what range will your company’s gross sales be for 2013? 12% 14% 17% 22% 15% 20% Less than $50,000 $50,000 to $99,999 $100,000 to $199,999 $200,000 to $499,999 $500,000 to $999,999 $1 million or more Average annual revenue in 2013: $896,446 What will your net profit be in 2013? 7% 17% 16% 28% 16% 16% Less than 4% 4-5% 6-9% 10-15% 16-20% More than 20% 2013 industry estimated average net profit: 12%
  9. 9. STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S15 REPORT STATEof the INDUSTRY 2012 S14 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE M ike Stewart has about 40 tons of salt sitting in the warehouse at Stewcare in Columbus. The company’s consumption was one-third of the usual, thanks to a spring-like winter and just a handful of snow events. With snow compromising 25 percent of the firm’s total revenues, and generally providing a financial launchpad to cover the summer startup costs, Stewcare was feeling the burn long before his region experienced a double drought. Already beat down by a horrible winter (“Horrible meaning we didn’t do any work,” Stewart says), a 45-day period of no mowing in June and July spoiled hope for a rebound. “There is no complete recovery from having a drought two months out of the year,” says Stewart, who had to lay off some seasonal employees as customers were going three to five weeks in between mowings. “We had two droughts, one in winter and one in summer, and that’s a tough season for anyone to handle.” Maintenance companies across the country report that disappointing weather and sluggish customer spending put a damper on what could have been a better year after roughing the downturn. Most are saying that we’re not out of the doldrums yet – and in an election year, there’s a wait-and-see feeling that seems to be stopping any big moves in terms of discretionary spending. Serpico Landscaping in Hayward, Calif., planned for a better year in 2012. “We thought things would improve faster than they have … and the year has been quite a disappointment,” says Sharon Hanson, president. Overall the business grew, but they didn’t hit projected numbers. The firm’s homeowners association clientele cringed at the slightest price increase. “We just really A mild winter followed by harsh drought conditions gave maintenance companies a run for their money. by Kristen Hampshire “There is no complete recovery from having a drought two months out of the year.” – MIKE STEWART, STEWCARE “We’re looking for ways to diversify so we aren’t so affected by the weather.” – ADAM LINNEMAN, LINNEMANN LAWN CARE & LANDSCAPING Weathering 2012 expected things to be better, and the fact that it’s an election year has people in a tizzy,” Hanson says. “They don’t know what is going to happen and they are not really willing to move forward with things.” BURNED BY DROUGHT. The “double drought” that Stewart described afflicted many maintenance businesses that rely on snow business as profitable revenue bringer in non-mowing months. Adam Linnemann, president of Linnemann Lawn Care & Landscaping, Columbia, Ill., says sales were down the entire fiscal year because of the lack of snow in 2012. The company’s overall sales decreased by 15-20 percent. But the mild winter did give Linnemann a jump on spring services. “We didn’t get the freezing weather, so we were able to get out there and cut grass,” he says. “That did help a little bit.” But then the drought came, and in his area it was the worst since the early 1930s. “Most of our maintenance in terms of lawn care halted for up to six weeks,” Linnemann says. So he kept crews busy in the shop, focused on training and improving systems to become more efficient and profitable. Employee hours were cut back, but everyone stayed on board. Of course, that drove up labor costs and resulted in a net profit that was about 10 percent lower than normal. “The busywork increased payroll but not profitability out in the field,” he says. This year was the first in 14 where Linnemann did not grow his business. “That’s disappointing, but it was weather- controlled, and there’s not much we can do about that,” he says. Weather also meant early mowing for Sebert Landscaping in Bartlett, Ill. “We were out the first week of April and we couldn’t even start our spring cleanups,” he says, adding that crews came back later to make up that work. SHAKY CONSUMER CONFIDENCE. Customers are still minding their budgets, and Sebert says he sees pricing in the maintenance industry continue to erode. “Competition is fierce,” he says. “Quality of work has also eroded from what I have seen, and I’m talking about being on the street and seeing the type of services other companies are providing.” Mainly, Sebert is referring to contractors who jumped into the business several years ago, figuring it an easy entry in a depressed job market. “It makes it tough when you’re Mowing Sodding Hydroseeding Edging/trimming trying to sell new business and your competing against a lower price, and while the concern of the client may be quality and price, it always seems like the pricing is the overwhelming decision-maker.” Hanson experienced the same attitudes in California. And this surprised her somewhat. “In general, people still want the absolute lowest price they can get – they’ve got an attitude of, ‘We are suffering so you guys have to suffer, too,’” she says. Still, Hanson noticed that some customers who left her service for lower- priced providers are now coming back. “I think they got a taste of what it means when you get what you pay for,” she says. Meanwhile, the cost of doing business continues to increase: gasoline, insurance, taxes. Hanson succeeded in raising prices ever so slightly. The scant increase barely covers costs, she says. Sebert is worried that the cost of doing business will become a burden that is unmanageable in the next year given the political climate. He figures regardless of the presidential winner, we’ll experience another downturn. But Brad Johnson, president of Lawn America in Tulsa, Okla., is optimistic. “Overall it was a good year,” he says of 2012, noting that the company will have beat its budget by 4 to 6 percent by the time the fiscal year closes. He attributes the increase, in spite of drought, to an early spring that ignited sales. The company as three weeks ahead of schedule and busy in January, February and March, he says. “I think the economy seemed to be turning earlier on, but hit a bump in the summer,” Johnson observes, adding that the spending he saw in the first months of 2012 didn’t continue past April. First quarter sales were stronger than ever. But the spending spree stopped. “We didn’t add a lot of new customers in summer, and we just didn’t do as we should have in summertime,” he says. A slower summer didn’t put a damper on the entire year’s performance at Lawn America. And Johnson says this is due in part to rigorous communication with customers. He blogs twice weekly and sends out a monthly e-newsletter. “The bulk of our writing was on how to water properly and deal with the drought,” he says. Customer education has been critical to keeping contracts intact. Meanwhile, at Serpico Landscaping, an emphasis on business development will continue through 2013. “We see that as a critical part of our business in the new economy,” Hanson says of driving new sales. Sebert agrees. “We had a bit of growth this year, and we really focused on our sales and procedures, in general,” he says. The company fine-tuned its sales presentation and uses iPads to show customers what quality is all about. “And we’re not just showing pretty pictures, we explain who we are and what separates us from our competition,” he adds. It’s difficult to say what next year holds, but expanding services is one way to deal with this downer year and continue to protect a business. Johnson says the fall looks optimistic with lots of calls for fescue seeding, aeration and lawn renovation. Linnemann acquired a service from a local florist and is now offering “porch primers” that include large, decorated flower pots changed out each season. “We’re looking for ways to diversify so we aren’t so affected by the weather,” Linnemann says. SOI 78% 63% 17% 76% Which of the following does your company offer? “We thought things would improve faster than they have … and the year has been quite a disappointment.” – SHARON HANSON, SERPICO LANDSCAPING
  10. 10. REPORT STATEof the INDUSTRY 2012 S17STATE OF THE INDUSTRY OCTOBER 2012 LAWN&LANDSCAPES16 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE W hile most irrigation contractors report an upturn in business, they do admit the economy is still having an impact. Consumers have a tighter rein on their purse strings and most companies have accepted that business may never boom the way it once did. But as contractors begin to adjust to the new normal, they still remain hopeful that business will continue to improve as they move forward. RECESSION REMNANTS. Across the board, L&L is hearing from irrigation contractors that things are improving, but those that survived the economic downturn are wary of getting overzealous just yet. Any optimism has been approached relatively cautiously. “There’s no question the industry took a heck of a beating with the economy and although it’s coming back, it’s coming back slowly,” says veteran industry consultant James Dowd, chair of the Irrigation Association’s Ambassador Group. “You see some bright spots but for the most part, people aren’t ready to jump up and down for fear of jinxing it.” Irrigation contractors face increasing water restrictions and licensing requirements, but look to 2013 with hope. CAUTIOUS OPTIMISM In many parts of the country, the impact of the recession lingers. “The economy is definitely still impacting what we’re doing with irrigation here in Florida,” says Judith Benson, president of Clearwater PSI in Winter Springs. “However, there are pockets in Florida that are starting to get some new home construction and some activity on smaller commercial properties so we’re hopeful things are starting to push forward.” In the Northeast, the economy has left its mark as well. “We’re still dealing with the remnants of the recession,” says Bill Gallagher, president of Summer Rain Sprinkler Systems, in Greenwich, Conn. “Quite frankly I still wouldn’t call these ‘good times.’ There are still markets that are really struggling here. In the end, it all comes down to jobs and our government isn’t creating jobs. If people can’t find work, they certainly aren’t going to invest money into an irrigation system.” Although most of the country still feels those lingering effects, in Texas, where the economy never really tanked, business appears strong. “Here in Houston, we certainly outpaced the nation this year,” says Wade Martinez, president of CBS Services. “Our economy has stayed pretty strong over the last few years and we were never really impacted by the downturn that the rest of the industry felt.” “We’re seeing a slight uptick in residential builds and even commercial builds,” says Dowd, who’s based in Dallas. “But even though Texas didn’t get hit as hard as the rest of the country, we did still get hit so everyone is cautiously optimistic. We’re hoping for the best but from a money standpoint, most are still holding back. If they need to hire more people, maybe they’re hiring two instead of 10. Or maybe they’re investing in training instead of hiring at all.” John Newlin, owner of Quality Sprinkling Systems in North Ridgeville, Ohio, says that his business had an exceptionally good year. “Unlike some of the negative talk I’ve heard, I feel the economy has improved dramatically,” he says. “I think part of it is that people are just tired of being tired and they’re starting to spend again. I definitely see people spending money in areas where they weren’t two years ago.” Newlin says he’s seen growth across “We’re seeing a slight uptick in residential builds and even commercial builds.” – JAMES DOWD, IA AMBASSADOR BY LINDSEY GETZ
  11. 11. REPORT STATEof the INDUSTRY 2012 S18 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE the board. Even his low-voltage lighting installations have gone up three times as much as last year. To him, that means people are willing to invest in their homes. Over in Haddonfield, N.J., Marty DeNinno, president of Pinnacle Irrigation & Nightlighting agrees that homeowners are finally investing again. “If I had to pick any one trend for this year, I’d say it’s the fact that homeowners are taking care of their properties again,” DeNinno says. “We have customers putting in pools and adding night lighting, so of course they’re willing to invest in irrigation. Irrigation is one of the least expensive things a homeowner can do to get bang for their buck and have a nice, green property.” RESTRICTIONS AND REGULATIONS. Though there seems to be an upswing from the recession, there are still many challenges that the industry faces. Water restrictions top the list for many. “Government intervention in our industry is getting more and more invasive,” Martinez says. “You’re seeing a lot more guidelines and restrictions as the government gets involved.” Martinez also says stricter immigration laws may impact the industry, as will changes to healthcare. “An overhaul of the healthcare system will certainly affect the bigger companies but is probably not an immediate change in 2013 – no matter what happens with the election.” Benson says licensing is a hot topic in her region. “The Florida Irrigation Society is a proponent of licensing and I am, too, but I also recognize it can carry a double edge,” she says. “My hesitancy is that I don’t see it making any real impact on a residential level and that’s significant in Florida since we have so much residential acreage.” “State licensing is definitely a trend,” adds Kurt K. Thompson, of K. Thompson & Associates, a landscape water use consulting and training firm headquartered in Pensacola, Fla. “This seems to be a loved and hated thing. It definitely doesn’t prevent bad systems from going in or bad work from being done, but it is a more formal way of keeping track of everyone. I think it produces more responsibility.” ALSO TRENDING. Water conservation continues to be the hot topic for 2012 and will carry into 2013 and beyond. As the cost of water rises – or threatens to rise – consumers are paying closer attention to water usage. “The public is more aware of water waste because they have to pay for that extra water in most instances,” Gallagher says. “Here in Connecticut, its state law that every system has a rain sensor but there are still some very old systems that don’t have it. If homeowners see that their irrigation system is on during the rain, they’ll call us to check the rain sensors. That’s new, as in the past they would just ignore it. In fact, some homeowners are even calling to tell on their neighbors. There’s definitely a greater recognition of waste. People are more aware that water is a limited resource and want to protect that.” Newlin agrees. “Water conservation continues to be the big trend,” he says. “Here, what’s pushed it is the drought. We can actually gauge our phone traffic by water bills. When the water bills start hitting the street, that’s when our phone starts ringing. But that’s also making people more receptive to embracing the new technology out there.” In terms of new technology, Martinez says evolving ET technology as the hottest trend. “Getting things like the Solar Sync down to a lower cost is going to be very valuable to the consumer,” he says. “They’ll still want to keep prices competitive on installation, too. I see a lot of potential ahead. I don’t think it will be long until we see more homeowners monitoring their sprinkler systems from their smart phones. That’s the next big thing.” Diversification is also a trend, which was first initiated by the downturn. “Businesses that played it smart and survived were those that diversified,” Dowd says. “Over the last few years we’ve seen everything from irrigation contractors who plow snow in the northeast winters to contractors who are adding more services. If they used to only do new installs, now they also do repairs.”Thompson also sees a greater emphasis on education as a rising trend. “In the past, irrigation contractors have put more of their focus on their trade – and they’re great craftsmen and very good at what they do,” Thompson says. “But now there’s more of a need to get educated on the best business practices. That can be hard for the guy that spends his day toiling in the trenches to also know how to sit down with a company CFO and talk financials and business. But fortunately there are more opportunities than ever before to get educated.” LOOKING AHEAD. Even irrigation contractors who have still felt the squeeze from the recession say they have hope. “People have a lot of fears about our future,” Gallagher says. “When they look at our national debt, they start worrying about their own debt. But in the end it will come down to jobs. If our government takes the uncertainty and regulations off of small businesses, I think we can see things turn around.” SOI “The economy is definitely still impacting what we’re doing with irrigation here in Florida.” – JUDITH BENSON, CLEARWATER PSI “We’re still dealing with the remnants of the recession. Quite frankly I still wouldn’t call these ‘good times.’” – BILL GALLAGHER, SUMMER RAIN SPRINKLER SYSTEMS Which of the following do you offer? Installation 34% Maintenance 48%
  12. 12. STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S19 Service breakdown Overall, contractors reported growth in 2012. But things weren’t rosy everywhere. Here, we dig into specific services to see how the booms and busts fared. On average, the contractors who saw a boost in these services, saw this percentage of an increase. On average, the contractors who saw a decline in these services, saw this percentage of a decrease. Design/build Mowing/maintenance Lawn care Irrigation Trees and ornamental Snow removal Landscape lighting 20%19% 36%37% 17%16% 7%8% 5%5% 3%2% 3%2% What were your fastest-growing services in 2012 and 2013? 2013 2012 Lawn maintenance 17% 16% Design/build 18% 19% Lawn care 19% 11% Irrigation service 13% 17% Tree care 5% 4% By what percentage have your total gross sales revenue changed from 2011 to 2012 for the following services? By what percentage do you expect your total gross sales revenue to change from 2012 to 2013 for the following services? 19% 8% 17% 8% 3% 19% 16% 9% 9% 2% Lawn maintenance Design/build Lawn care Irrigation service Tree care 2011 2012 2012 2013
  13. 13. S20 S21 REPORT STATEof the INDUSTRY 2012 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPE S21 F or those focused on the lawn care segment, the road has surely been rocky at times. For a long while, many customers were only opting for the bare bone services and perhaps forgoing some of the upsells that were once big revenue drivers for this market. While things appear to be turning around, most lawn care businesses report that they still have some concerns and aren’t ready to say they’re in the clear just yet. Many customers still aren’t spending what they used to, though business does seem to be taking a better turn. capable as well — it’s not just the one-man-and-a-truck type of competition.” Kevin Igoe, co-owner of Your Green Team, a lawn and landscape company in Plant City, Fla., that specializes in fertilization, plant and tree care, and pest control, says that the Florida market has been saturated by competition as well—but in his area it’s a lot of low-ballers. “There are so many companies going out and doing work so cheap that nobody can make money,” he says. “We’re losing good customers over pricing. And then when they invest in bad service and get poor work done, it hurts the industry’s reputation. That’s one of our biggest challenges right now.” The company focuses almost entirely on the residential market in this post-recession period. Igoe says that the downturn in the economy really hurt their commercial segment. While he previously worked with a lot of Homeowner’s Associations, Igoe has found the HOAs are now saving money by not investing in fertilization plans and just mowing whatever grass still grows. He says the company is focusing on holding its own with its residential customer base as a result. “We’re trying to get more aggressive,” he says. “We’re targeting specific areas as opposed to blanketing the whole area like we used to. We’re really getting strategic about our game plan and trying to figure out who to put our time into selling to—and who not to worry about.” In upstate New York, Laurie Broccolo, owner of Broccolo Tree and Lawn Care in Rochester, offering lawn care and maintenance, design/build, integrated pest management, and environmental consulting services, says that the economy has been relatively stable the last few years. “It has not affected lawn care fertilizing programs,” she says. “It did affect landscape design/ build projects but those are starting to come back. What has suffered is our tree care segment. People are not making that a top priority and are a little more willing to wait and see how things go.” While some areas have seen a better turn, many report that their regions are still struggling. Customers are anxious about spending and companies have to work harder than ever to maintain and build a customer base. “I don’t see any meaningful improvement in the economy,” admits Jon Parry, general manager for Bemus Landscape in San Clemente, Calif. “Our sales have picked up, but that’s more from our stronger sales efforts and not any major improvement in the economy. While home sales have picked up a bit here in Southern California, that’s only a short-term positive sign. Until we see some sustained increased, we will remain only cautiously optimistic.” TARGETING THE CUSTOMER. In New Jersey, Mike Haskell, owner of Plant Solutions Tree & Lawn Care Specialists based in Warren and Short Hills, says they’ve been targeting the high-end residential consumer who is still willing to invest. Haskell says that in the market where he’s located, customers are willing to spend the money if they see the value. “We try not to get caught up with the guys that are low-balling and we aren’t willing to get involved in any price wars,” Haskell says. “”Honestly, that’s what sells our industry short. We are aiming for the customers who are spending money the right way, A LIGHT IN THE DISTANCE LCOs report an improving – but not yet thriving – market. BY LINDSEY GETZ “It’s finally starting to pick up more,” says Mark Utendorf, owner of Emerald Lawn Care, in Arlington Heights, located in the northwest suburbs of Chicago. “Business had been flat for a while.” Emerald Lawn Care focuses on fertilization, weed control, pest control, aeration and tree and shrub care. Utendorf says that because they’re a small business, focused almost entirely (95 percent) on residential customers, they’ve still been able to grow during the recession. But even so, it’s been slow growth. Utendorf says it’s largely the steep competition. “The Chicago lawn care market is extremely competitive and it seems like companies just keep coming,” he says. “We’re pretty saturated with competition and that’s definitely a big challenge. Most of our competition is quite for a superior service, because they’ve learned what happens when you spend it the wrong way. Instead of paying twice; they pay once and get it done the right way.” Tim Jenkerson, co-owner of St. Louis Lawn Care in St. Louis, says that he’s also held steady on price. He recognizes that there will always be businesses that go out there and undercut his charges, but most customers are willing to pay for customer service, professionalism, and knowledge. “Some people just want their yard cut for a cheap price and that’s fine — there’s always someone that will do that,” he says. “But we don’t let that affect us. That’s not the customer we’re going for anyhow. We just try to be as reliable as possible and put a major emphasis on customer service and we’ve found there’s always going to be a customer base that appreciates those efforts.” In Southern California, Parry says that Bemus is raising its prices for the first time in five years. “We’re raising it just slightly and that’s due to rising costs,” he says. “Despite the economic situation, I think that customers are being receptive. The raises are very limited and also targeted increases. Customers do understand that five years without any increase is very generous and that we still have to run a business.” Parry says the company will target their customers with more emphasis on their tree care division. While new installation work is down and the company has turned away from putting a lot of effort into those sales, they see potential growth in tree care. The economic situation has certainly caused many to re- evaluate their offerings. In the Chicago area, Utendorf says that a big change for him will be getting out of snow. “It’s just too hard on the equipment and it doesn’t generate enough money to justify the wear and tear on the trucks and the people,” he says. “I’ve looked at other services but just feel they’re a distraction from our target. We’re going to stay laser- focused on providing the best quality turf care we can.” LOOKING AHEAD. With a new year around the corner and many possible changes on the horizon, it seems most in the lawn care segment are remaining cautiously optimistic. Many hope that some of the green industry’s challenges will be faced, but recognize there are still obstacles to overcome. Looking toward the future, Haskell has some concerns about the lack of education. He feels it hurts the industry’s reputation. “A lot of technicians we’re seeing have a serious lack of training,” he says. “There also isn’t a lot of education given to the client and we’re huge on that. We love to educate the client so that they can understand why things cost what they do. Once they understand why soil biology is so important, they understand the value behind our knowledge and experience—and they’re more willing to pay for that quality service.” In Illinois, Utendorf says that his biggest concerns for the future center on finding quality workers. “Finding good people that you can rely on is always a challenge in this industry,” he says. “We need good technicians that are really focused on quality and customer service. With the saturation of competition that makes it even more challenging.” But Utendorf says he has some hope for the future. “On the positive side, I am excited about the economy potentially turning around even further,” he says. “It definitely seems like there’s a chance we may finally turn a corner.” SOI Fertilization Weed control Disease control Insect control Which of the following services does your company offer? 72% 71% 47% 51% 22% 65% 72% Organic lawn care Aeration Seeding
  14. 14. How confident are you the landscape industry will grow next year? Very confident 37% Not at all confident 12% Somewhat confident 51% REPORT STATEof the INDUSTRY 2012 STATE OF THE INDUSTRY OCTOBER 2012 LAWN & LANDSCAPES22 Business associate referrals 66% Company website/email marketing 56% Yard signs 30% Yellow Page ads 24% Direct mail 23% Internet search/SEO 22% Internet referral service 20% Door hangers 18% Newspaper ads 18% Public relations 17% Cold calls/canvassing 16% Door-to-door sales 12% Home and garden shows 11% Telemarketing 4% Company retail store 3% 2. Consumer confidence 3 (t). Stress 3 (t). Health insurance costs 5. Low-ball competitors 6. Weather 7. Generating quality leads 8. Workers’ compensation costs 9. Delinquent payments 10. Customers cancelling services TOP MARKETING METHODS USED Customer referrals 98% TOP CONCERNS 1. Fuel prices