Hanging on

Jim Huston

During a late fall trip to Utah, Idaho and Montana, I met with seven landscape companies from various segments of the landscape industry. Two contractors focused on commercial bid-build work, four were primarily residential design/build installation and maintenance contractors and one was a commercial maintenance business doing some installation work. Geographically, three companies were in Utah, two were in Idaho and two were in Montana. I've been tracking these companies for a number of years – one for almost 25 years. Apart from being run off of I-15 near Blackfoot, Idaho – an accident that totaled my 2007 2500 HD GMC Sierra truck – it was a very productive and insightful trip.
 

Company observations. All seven of these companies were very hard hit by the recession of the last three years. Fortunately, they have adjusted, made necessary marketing, operational and production changes and are in recovery mode. Four hover around $1 million in annual sales, one is near $500,000 and two are in the $2.5-$3.5 million range. Here are some insights into what I saw.

Sales: Two of these companies have seen their annual sales numbers increase in the 5 percent range over the last two years and expect this trend to continue. Two others are seeing significant sales increases in the 15-20 percent range. Sales for the other three companies are holding steady.

Net profit margins (NPM): After all of the bills are paid and owners take a reasonable salary, three companies are operating right around break-even, two have NPMs of 2-6 percent and two have NPMs in excess of 15 percent.

Areas of growth: Almost all of these companies have gone back to their existing client base and offered add-on or new services to them. They've been "grooming" their client list. Three of these companies have made serious efforts and have seen significant increases in their snow and ice management divisions. Fine gardening or estate maintenance (this is not mow, blow and go) has also been a bright spot for the residential contractors.
 

Key issues: The two key issues confronting most of these companies are: (1) finding experienced crew leaders, and (2) maintaining quality control in the field.
 

Market observations.
Commercial installation: While one of the three commercial installers is growing in this area, the other two are trying to maintain their previous sales levels.

Residential installation: Two of the four residential install contractors are experiencing 10-15 percent growth, while the other two are holding steady or seeing modest growth.

Commercial maintenance: The one commercial maintenance contractor is growing at a 10–15 percent rate the last couple of years.

Residential maintenance: The one contractor in this market is experiencing modest growth but is limited due to lacking experienced crew leaders.

Snow and Ice management: Three companies are experiencing significant increases in sales in this area primarily due to their marketing efforts. They've rethought their approach to snow and ice management and it is paying big dividends.
 

2012 expectations. Virtually all of these seven contractors are expecting an improvement in their bottom line in 2012. All see sales improving slightly or, at a minimum, remaining at 2011 levels. This being the case, the bottom line improvements will be primarily due to improved marketing – mainly to existing clients – slightly increased sales, better production methods, better pricing and more efficient office operations.
 

Conclusion. These seven landscape contractors are fairly representative of ones I work with and see throughout the U.S.

Their challenges are not that different than those facing companies in all of the 50 states. While they remain reasonably optimistic about 2012 and beyond, most would agree that they are not having "fun" in the current economy.

The thrill has gone, if you will. I keep reminding them that I fully expect a turnaround starting at the end of 2012. Now is the time to prepare – implement accounting, estimating, production and administrative systems – that will make you more profitable when the economy begins its recovery in 2013. So get ready and be prepared.