Editor's Focus: Oct. 1998

The year started off simply enough with contractors riding the wave of success that has propelled the industry to new heights in the last few years.

Then came February and two announcements in one weekend – the formation of LandCare USA and TruGreen-ChemLawn’s new foray into landscape maintenance. Soon after, the industry learned that The Brickman Group also had aggressive expansion plans, and contractors suddenly found themselves at the industry’s first mergers and acquisitions institute.

In the spring and early summer, many of the contractors we talked to professed a concern for their futures in this new world with national companies and wondered how they would compete. Many companies still have this concern now as the year winds down, but many others have come to realize they know exactly how they will compete – and they plan on continuing to succeed as well.

The answer for these companies is knowing who they are as a company and doing what they do best. The fact that some other organization acquires two dozen companies to offer more services to different markets doesn’t mean other companies have to. In fact, the best strategy may be to go the opposite route – pare down the services you offer and focus on the work that you do best, the work that is most profitable for your company.

As of press time, the three aforementioned companies had acquired approximately $345 million in landscape revenues. But what many contractors have come to appreciate this year is the very important distinction between sales and profits.

Now that’s not to say these consolidating companies will or won’t be profitable – that remains to be seen. What’s important for the rest of the industry to remember, though, is that there are companies selling $500,000 in business a year that end the year with more profit than some companies selling $5 million in business a year.

How can they do this? Simple: let go of contracts that are too time consuming, require too much driving to get to and just aren’t as profitable as other jobs. Some companies can let enough of these jobs go that the labor shortage is no longer a problem either, and financing new equipment purchases isn’t as difficult. Sounds pretty good, doesn’t it?