BUSINESS OPPORTUNITIES: Turning Over Fresh Profits

Steve Woods, vice president of operations for Five Seasons Landscape Management is the first to admit mulch cultivation – turning over or freshening mulch – is not the most exciting service his Columbus-based company offers. The service may not generate “oohs” and “ahhs,” but it can generate profit when done correctly, with Woods estimating annual gross profit margins of 50 percent or better. 

With an annual revenue of $50,000, the service represents only 2 percent of the company’s $2.6 million in annual maintenance revenue. But that number is deceiving. “A revenue of $50,000 may not sound like a big number relatively speaking, but it is when you realize that half of it is going to the bottom line,” he says.

Woods started offering mulch cultivation about four years ago, after another contractor told him about it at an industry event. It sounded like a simple way to add some profit, so Woods decided to try it. It’s a decision he hasn’t regretted. “The real money in this business is made on enhancement services, such as mulch and flowers,” Woods says. “Mulch cultivation is just another piece of the puzzle.”
 
EASY TO EQUIP. At first, Woods’ crews used only potato forks to turn the mulch. But then an employee suggested trying the tillers the crews already used to prepare flowerbeds for annual colors. The tillers, which cost $300, weigh less than 20 pounds, making them easy to handle.
Although potato forks still work best for small areas of mulch, the tillers have proved to be a major time-saver on larger areas. “They let us do a lot more in a short time, which helps keep our pricing in a range where the clients are willing to buy it,” he says.

Saving time is critical for Woods because it’s the one thing his busy crews lack. In fact, one of his biggest challenges to starting the new service was figuring out when it could be done. The service doesn’t generate enough revenue to support a separate truck and crew, which means the task is left to his enhancement crews who handle mulching, seasonal color and shrub pruning. Adding another service to their already full plates was difficult. “We had to find time during the season to get everything done,” he says.

To ease scheduling problems, Woods says he relies on new ideas for equipment, such as using the tiller. Using the same crews on properties also improves efficiency. Once a crew is familiar with the property, they know how to get it done as quickly as possible. Experience has also been a great teacher. Even though they’ve been performing mulch cultivation for four years, Woods says they’re still learning. “But now we can look at properties we’ve been doing for three or four years, and use what we’ve learned to help us move forward.”

CULTIVATING SALES. Woods admits his mulch cultivation service is still not exactly where he’d like it to be. Selling the service can be difficult, mainly because customers don’t understand it. “Mulch cultivation – what’s that?” is a question he hears often.  Woods answers this by educating his clients about the three benefits of mulch cultivation. The first is that it improves a property’s appearance. Mulch has a short shelf-life – within two to three months after it’s first laid, it starts to compact and fades. Cultivating it gets rid of the gray, giving it a fresh look.

Ninety-eight percent of Woods’ customers are commercial property owners, mainly condominium associations, Home Owners Associations and upscale office and retail properties. “Mulch cultivation is a fairly inexpensive way for them to boost curb appeal,” he says.

But mulch cultivation isn’t solely about looks. Plant health is also an issue. While new mulch helps keep in moisture, old mulch can keep out the nutrients plants need. “When mulch compacts, oxygen can’t get to the roots of the plant,” Woods says. “In addition, compacted mulch can keep water from getting to the roots. Cultivating it breaks the barrier so that plants can get the oxygen and water they need.”

Lastly, mulch cultivation helps break down clay in the soil, which is common in Woods’ Columbus location. “The last thing you want to do is establish a 4- to 6-inch thickness of mulch on your client’s properties,” he says. “It’s too thick, and it hurts the plants.” Ninety-five percent of the mulch he uses is hardwood because it helps break down the clay. Cultivating it helps the hardwood decompose and makes the soil more workable.

When customers learn the benefits, most are willing to try the service at least once, says Woods. After that, the service usually sells itself. Around 65 percent of his customers have their mulch cultivated at least once a year, and customer retention is 100 percent.

The hard part is increasing the number of times per year a customer receives the service. Most only want the service once a year. His typical client receives two shrub prunes and one cultivation, and he usually performs the cultivation service between the first and second pruning. “But we really want to do cultivation three to four times a year,” he says. 

Right now, only 10 percent of his clients receive more than one cultivation. To increase that number, Woods pushes the service with pruning. If a customer hires him to prune three times a year, he offers to cultivate the mulch while he’s there. It’s great for Woods from a scheduling standpoint because it cuts the cost for a second trip.

Woods estimates annual growth in the service at 10 percent. “But I think we can grow that number significantly just by having our current clients do it twice per year instead of once,” he says.

Selling the service also gets easier as it grows in popularity. Woods notices more of his competitors offering the service lately, which he says is good. “Our clients are becoming educated, even by our competitors, which helps us, too,” he says.

COST CALCULATIONS. Woods prices mulch cultivation separately from other maintenance work. The key is to keep the price low enough for clients to be willing to buy it. To determine how much to charge, Woods estimates the number of hours it takes to do a job and tries to achieve his standard labor rate of $40 per hour. “There is hardly any equipment in this service,” he says. 

To reach his labor rate, Woods starts by calculating how long it takes to cultivate one bag. Even though they do a lot of mulching, Five Seasons Landscape Management uses bag mulch. Woods takes the number of bags and multiplies it by 50 cents per bag. “Say you have 1,000 bags of mulch,” he says. “When we apply the 50 cents per bag rate, we get $500, which is how much we would charge to cultivate.”

Woods stresses this 50 cents per bag is simply a starting point. The rate changes depending on the layout of the property. His average property is 3.5 acres, which typically takes a three-man crew 6½ hours to cultivate. But by experience, Woods has learned that some properties take longer and need to be bid differently. If the mulch is spread out over 10 to 15 acres or if there are more tree rings to maneuver around, he raises the rate 5 to 10 cents per bag. On the other hand, if most of the mulch is spread out in a huge bed that his crews can cultivate with a tiller in 30 minutes, then he lowers the rate. “I take that 50 cents per bag and tweak it one way or the other after I look at the layout of the property,” he says.

With any maintenance business, Woods says the goal is to make at least 10 percent before taxes. “Anytime you can add a service that is going to help you achieve that goal, you should do it, even if it’s as small as this,” he says. “If we can grow it to 3 or 4 percent of the business, that is really going to help.”