AB-Money Can Grow On Trees: Adding Tree Services - FOCUS: Tree Care

"We had to individualize each tree to price the service and it was such a lengthy process that no one did it," explained Ken Wentland, production superintendent, Lied’s landscape maintenance division, Sussex, Wis., pointing out that, at this time, the company offered limited tree work and the division only drew in $50,000 to $100,000 annually.

Today, Lied’s tree care division offers spraying, fertilization, micro and macro tree injections, cabling, bracing and full-range arborist work from pruning to removal, and generates $250,000 in spray work and $400,000 in arborist work each year.

To become a profitable tree care service provider, Lied’s streamlined its estimating and selling process and made substantial investments in specialized equipment and people.

But contractors interested in following Lied’s footsteps should proceed with caution – adding tree care services can be a gamble. Contractors need to consider startup costs, possible threats and market potential before hurling themselves at this wall of enterprise and risking a violent rebound, advised Wayne Richards, president, Cagwin & Dorward, Novato, Calif., who added tree pruning and removal two years ago. "This is not a business to be taken lightly," he said.

AT ANY COST. Many landscape contractors add tree care to their service assortment because it can be fairly profitable. In fact, many contractors boast near 33 percent profits, pointed out Dick Bare, president, Arbor-Nomics, Norcross, Ga., though he hasn’t experienced these earnings yet from his 4-year-old tree division.

However, large initial investments needed to pursue the tree business make reaching this profit level challenging. A company’s primary investment varies, depending on the tree service being added.

For instance, Atwood Lawn Care added tree and shrub fertilization, disease, insect and preventive weed control to its lawn care business because "it was a natural extension of the services we were offering," said Tim Doppel, president of the Sterling Heights, Mich.-based business. The pick-up truck and 200-gallon spray tank that comprised this division’s start-up required a minimal investment, he said, adding that the division has experienced double-digit growth every year since its inception in 1992. "The revenue/cost ratio is much better than lawn care," Doppel said. "The trick was to manage labor costs as we grew the division."

But the costs and risks intensify for contractors adding other tree care services, such as arborist work. While tree work was a good complement to Cagwin & Dorward’s landscape maintenance services, the initial equipment expense was high. The cost to set up one crew with a truck, chipper, hand tools and stump grinder can be $100,000 or more, not including personnel costs, marketing materials and training programs, Richards pointed out. Wentland agreed, stating that an arborist truck can cost approximately $25,000; a chipper can cost between $10,000 and $15,000; and climbing ropes, light chainsaws and other small tools can run between $3,000 and $5,000.

Contractors who add tree services also must address insurance costs. This is due to the higher risk associated with climbing trees and using more advanced equipment with blades like chainsaws and chipper/shredders, Bare said, adding that 25 percent of his tree division’s total labor costs go to workers’ compensation insurance vs. the his lawn care group’s 5 to 7 percent total labor burden.

As for marketing costs, Bare is constantly searching for new tree clients because "once you cut down a client’s 25 pine trees, additional work for that client is bare," he said, pointing out that his Yellow Pages budget for tree care is $40,000 vs. zero dollars for lawn care because clients on that side of the business renew their contracts annually.

Like Bare, many contractors find adding tree services is a big risk, albeit one worth taking. Though Bare borrowed $290,000 from his lawn care business to incorporate his tree division, he’s getting closer to those sought-after profits. Last year, he realized his smallest loss-to-date of between $10,000 and $15,000. "This year we should make a profit," Bare said. "I stuck with it because I like the tree care business and I had always planned to get into it. If you’re a smaller lawn care company with $500,000 to $3 million in revenue and can’t do the tree work yourself, I would recommend not getting into it until you have a good couple million on the turf side of the business and have a healthy cash flow and a bank account with capital."

Bare said he has learned a great deal these past four years about how to properly add and grow a tree division. For example, he said putting down half of the total equipment costs and paying them off in two years was a mistake. "This is too fast for any business," he said. "It hurts profits. Instead, I’d put down 20 or 25 percent and then have a five-year balance for the rest. This will free up more cash."

Despite the initial investment involved, Richards said his tree division was profitable one year after its inception. His already large landscape maintenance client base brought a backlog of tree work in a short period of time.

Wentland also boasted high tree sales, particularly during the past couple of years due to a gypsy moth problem in Wisconsin. His sales skyrocketed once he streamlined his selling process by figuring out specific time intervals and costs for each type of tree task. A typical tree care crew can generate $1,800 per day, added Bare, who learned from consultants that tree division production numbers should be 25 to 28 percent of labor costs vs. lawn care’s 15 to 18 percent.

PEOPLE POINTERS. Finding the right person to run a tree division proves the most daunting task for many contractors, particularly since they tend to be lawn care, lawn maintenance or design/build experts instead of tree care specialists. This is true for Doppel, who calls himself a "strict turfee," who doesn’t know much about ornamentals. "So finding someone who knew the plants and related pests was important," he said.

At first, Doppel hired a college graduate who had a lawn care degree and prior background in ornamental maintenance. Eventually, he hired an arborist with a forestry degree to manage the division. "Having this resource available to train new hires is invaluable," he pointed out. "The person or people doing this work can make it or break it. The division requires specific expertise to be run professionally."

But while contractors search for tree care professionals, Bare warned that breaking into this "cliquey club" can be tough. "Tree maintenance experts, particularly climbers, are like pilots and roofers – risktakers, who can be unreliable," he explained.

To succeed at finding dependable, qualified tree care managers, Bare suggested contractors "network like crazy," attending the important tree trade shows and meeting as many people as possible to spread the word about their companies and learn who may be in search of new opportunities.

Because contractors tend to rely heavily on tree care division managers during initial start-up, finding someone trustworthy is important. "It was not until we found the right leader and champion to head this operation that we decided to offer full tree services," Richards pointed out.

But finding the right person isn’t easy. Bare, who has gone through two poor tree care managers, cautioned that the tree manager hiring pool is shark-infested. "They took advantage of me because I was unknowledgeable about the business and depended on them to get me through the establishment phases," Bare related. "People realize immediately that you’re vulnerable. The initiation is unavoidable."

When looking for a tree manager, Bare said the person’s business vision should mesh with the contractor’s goals to ensure success. "I initially bought another guy’s tree care company when I got into the business because the manager, his employees and clients were a part of the deal," he said. "The problem was that his clientele wasn’t used to our higher quality services for higher prices, so it dried up."

Today, Bare has someone he trusts in the position and said he has discovered what type of person – regardless of tree experience level – can develop a tree division and train and manage its employees.

"What I learned is that the type of person who’s good at a start-up isn’t necessarily a good manager," he explained. "He gets bored quickly and wants to start something new again. I also couldn’t rely on good salesmen to be managers because a born salesman typically won’t make a good manager – he spends too much time selling and too little time managing. The perfect person should be a good manager that likes to sell in addition to managing people. He’s an accomplisher and gets things done."

Richards agreed, stating that contractors need to find a leader. "Hiring an arborist is no more difficult than hiring maintenance personnel or others," he said. "Just look for someone with leadership abilities, proper management skills and the knowledge to run a business and hire, recruit and build top-notch people."

Once contractors find a good manager to run their tree divisions, these people tend to bring in other, experienced employees, according to Wentland and Richards, who both experienced positive division growth as a result of their current employees’ network of fellow arborists and tree care workers. "And the people they recommend are good because our guys won’t bring in someone who’s not going to do the work," Wentland enthused.

In addition to preliminary costs, contractors who offer tree services may have to make continual investments to ensure success and retain key employees once they find them. For instance, a skilled arborist or high-end foreman will earn between 10 and 20 percent more than an average landscape foreman, Wentland said. Keeping tree employees educated and challenged also can add up. A certification test can cost $100 per person, and national conference registration can cost $350 per person before considering travel costs.

Without the right manager, training also is a discouraging task. "Training lawn care personnel to look off the lawn for ornamental problems and properly identify them is an ongoing challenge," Doppel related.

Cagwin & Dorward’s training program focuses on safety and customer relations. "Compared to other landscape operations, tree care is more dangerous, so safe practices are critical," Richards said. "If you don’t have a passion for tree care or don’t have someone in the organization who does and who you can trust, then you are a lot better off subcontracting this work."