DESIGN/BUILD: Turn on the Profits

Contractors left in the dark about how to increase income need only turn on the light – literally. Lighting installations can be a great way to add profit to design/build jobs or make money on existing landscapes.

“A whole new dimension is added when a landscape can be enjoyed in the evening, as well as the day,” says Noel Goldman, president of manufacturer Frog Lights, Park Ridge, N.J. He points to his company’s 62 percent increase in sales as proof that lighting is growing in popularity.

Increased demand may involve lighting’s profitability. Some contractors estimate gross profit margins of 50 percent or more per job. Not bad considering the investment is fairly low, with most of it in training and marketing. The equipment investment is minimal because most contractors already have the necessary tools. One tool contractors might not have is a voltage-ampere meter to measure voltage and current, which costs between $150 and $200, says Steve Parrott, media and marketing director for CAST Lighting, Hawthorne, N.J.

Lee Buffington knows how well lighting can pay off. The president of Turf Tamer in Fort Payne, Ala., says he enjoys an annual net profit margin between 24 and 32 percent. “Lighting is one of the least labor-intensive services with one of the highest profit margins,” he says. He hasn’t found it difficult to make money with lighting, especially when he offers it as an option on design/build projects. “When you look at the total cost of a construction project, it’s a relatively inexpensive upsell at $2,000 to $4,000,” Buffington says. “Spending $3,000 more on a $40,000 to $50,000 project is fairly easy.”

While electricity is involved, landscape lighting installation shouldn’t intimidate contractors. “This is a low-tech business,” says Goldman. “Essentially, the transformers plug in and the proper wiring is connected in a specific manner minding simple specifications. With little instruction and some trial and error, lamp placement is a breeze.”

EN-LIGHTEN YOURSELF. Lighting systems may be relatively easy to install, but contractors still need to know what they’re doing. A number of distributors and manufacturers offer training on installing, designing and marketing lighting systems. For instance, one manufacturer offers a free seminar that runs about five hours in length. Another provides two days of hands-on training – where contractors actually install a system – for only $300. If there is a fee, oftentimes contractors will receive a coupon for money off of their first product purchase.

“Lighting doesn’t mean simply stringing a few lights together,” says Mark McClure, residential sales manager, Beary Landscaping, Lockport, Ill. There are calculations to learn. “Our mistakes when we started out were inaccurate calculations of voltage drop, undersizing transformers and placing fixtures where landscape lighting will overgrow certain fixtures,” he says. He recommends taking seminars to learn the basics before jumping into lighting installation.

In some parts of the country, training isn’t an option. Some states require low-voltage lighting contractors to hold a license. In those cases, contractors can either invest the necessary resources to get a license or subcontract the licensed work out.

For instance, in Washington, contractors must have a licensed low-wattage administrator, as well as licensed installers. A journeyman needs a minimum of 4,000 hours of experience, and crewmembers working under him must hold training cards until they earn up to 4,000 hours of time. Licensing requires taking classes and a test, offered through local municipalities. But it doesn’t end there. “Then, once you’re licensed, you have to do eight hours a year of continuing education,” explains Josh Bruner, division sales manager for The Highridge Corp., Issaquah, Wash.

Mike Southard, national sales manager, Kichler Landscape Lighting, Cleveland, recommends contractors learn about licensing requirements through the Low Voltage Lighting Institute of the Americas or LVLIA, an organization of contractors, manufacturers, lighting designers and landscape architects. The organization’s Web site, found at www.lvlia.com, tries to keep an updated list of licensing requirements by state. The LVLIA also holds an annual conference and offers its own certification program for low voltage installers, Southard says.
 
PRICING POINTERS. When bidding lighting jobs as part of a landscape installation, contractors need to be careful to not underprice the installation. “One of the biggest mistakes contractors make is to underprice lighting,” says Southard. “They figure the homeowner has already spent a lot of money on the landscaping, and lighting always seems to come at the end. Contractors have a tendency to just kind of throw it in at a much lower profit margin than they need to.”

Bob Shields, technical specialist, Vista Professional Outdoor Lighting, Simi Valley, Calif., says the key to pricing lighting jobs correctly is to remember that every individual job is going to be different. “There are some contractors who just take the material costs and multiply it by two or three and use that as the installation price,” he says. “But that kind of pricing doesn’t take into account the variables of each installation. A 25-fixture system for one house isn’t going to be the same as a 25-fixture system on a house next door. The transformer may have to be placed farther away or wire may need to be run through turf, which is more time-consuming that running wire through flowerbeds.”

Consequently, unit pricing can be a dangerous prospect, says Bruner. When he prices jobs, he notes the number and type of fixtures, which dictates how much wattage is needed and determines wire and transformer size. He then looks at the ground conditions and the trenching that will be needed. All of these factors change from job to job, so costs are never exactly the same.

Jeff Korhan, president, Treemendous Landscape Co., Plainfield, Ill., also keeps away from unit pricing. “We think it diminishes our product,” he says. “Pricing it by fixture almost immediately makes it a commodity. Not to mention, it results in the customers comparing jobs on price alone, without factoring in quality.”

Goldman says that it’s not difficult to obtain an annual gross profit of more than 60 percent with lighting. “A light fixture that costs the contractor $50 could be sold for $100 installed,” he says. He is quick to add that the installation doesn’t require more than a one-man crew and can be completed within a few hours on average.

Buffington tries to keep his profit margins in the 40 to 65 percent range. He marks up fixtures an average of 50 percent, including components such as the wire, transformer and hardware. As far as labor, after 10 years in the business, he knows how long it will take to install a fixture and a foot of wire. His average job is around 20 fixtures, which takes a day to a day and a half to install. “There is going to be a learning curve,” he says. “You need to know how many man-hours it will take to install a foot of wire or a fixture. And the only way to find that out is to actually go out and do it.”

Parrott recommends contractors charge $200 to $300 per fixture. This includes the cost of the fixtures, transformers, wire and labor. Fixtures range in price from about $30 to $130, says Parrott. Transformers can cost anywhere from $200 to $700, depending on wattage and features. Wire requirements vary with property size and transformer location, with typical 10-gauge wire costing about 36 cents per foot.

As an example, if a contractor charges $200 per fixture, he would price a 20-fixture job at $4,000. Say the fixture costs a contractor $50, 20 fixtures would cost him $1,000. A system of this size would require a 1,200-Watt transformer costing about $500, as well as roughly 250 feet of wire for around $90. Parrott notes this type of job can be completed in one day with a two-man crew. “So say labor is another $200, the contractor is still only spending $1,790, which means he’s making a 55 percent profit on the job.”
 
SERVICE SELLS. While installation allows contractors to generate additional sales with lighting, maintenance can create recurring revenue whether it is via a maintenance agreement or on an as-needed basis.

Parrott suggests contractors propose a maintenance agreement with every lighting job. He recommends replacing all the lamps every 18 months, whether they’re burned out or not, so that the need to replace any of them mid-year is unlikely. He suggests contractors charge at least $350 per year for a service agreement. This price covers onsite service twice a year for lamp replacement, fixture cleaning and adjustment, trimming and pruning plant material around fixtures and voltage checking. “These visits are also important times for contractors to reconnect with the homeowner and, when appropriate, propose system expansion or other landscaping add-ons,” he says.

Ricky Dyer, owner, Total Landscape Management, Knoxville, Tenn., offers a maintenance agreement in which he goes out once a year and changes all of the bulbs. “Changing them all at the same time saves you from having one or two bulbs burn out throughout the year,” he says. Korhan also offers an annual service program, which he says has been working particularly well with his high-end clients. “Sure it might result in taking lamps out that are still good, but the bottom line is that it ensures that everything is working all of the time and clients don’t become disappointed,” he says.

On the other hand, Buffington has heard the benefits of service agreements and changing bulbs twice a year touted in lighting seminars. “It isn’t a bad idea, but sometimes a bulb needs to be changed more or less often,” he says. So instead he performs service on an as-needed basis. He charges $20 to $25 for the service call plus the cost of the bulb.

When done correctly, landscape lighting installation and maintenance are a great add-on service. Plus, offering them makes good business sense. “When contractors are already on the property doing maintenance or design/build work, lighting is a natural add-on,” says Southard. “Customers spend a lot of money on landscaping, so why not show it off at night?”