Power Players

Last fall in Louisville, Lawn & Landscape invited the owners and executives from top companies across the country to sit down and talk. Regional to international. Two million a year to $600 million. They do tree care, commercial maintenance, high-end residential design/build, snow removal, lawn care.

The idea was to bring together strong, intelligent voices and take a pulse of what the industry’s best minds think about 2012 and beyond. Over the course of three hours, we talked sales, pricing, closing contracts, labor and regulations.

All year, Lawn & Landscape will be running excerpts of the conversation. In the first installment, we discuss the crumbling H-2B program, $19-an-hour production rates and what to do when your own church cuts your bid.
 

L&L: When you look at this year and 2012, what do you see as your biggest challenges to your companies? What are you working on to stay ahead of the curve?

Chris Kujawa: I think the biggest challenge is just going to be, in general, the uncertainty of the economy. We have it pretty well; a lot of our clients are the Fortune 100 companies that are headquartered in Milwaukee.

The upcoming presidential election are going to be a major factor. If it goes status quo, then it’s going to be another soft four years, but if it turns around, then it could turn around fast.

Labor for us has not been a problem at all. If we would put ads in the paper we would have guys come in tomorrow who are guys with experience. We don’t want to sprint ahead, but just keep a steady pace, and find mid-level to upper-level people to handle that load, that’s our challenge. Materials, production, and pricing are not really a challenge for us.
 

L&L: Are the rest of you guys seeing the same things?

Maurice Dowell: I wish that people were just walking in our door, production line people. We don’t see that. But we’re dependent on H-2B and that’s one of our concerns. It’s a huge challenge. Looking into the future, with the unemployment rate the way that it is, I don’t think that Congress is going to be sympathetic to our needs. But I do see a lot of Americans that do need work.

Bob Grover: Speaking of the H-2B program, we’re reliant on that ourselves, but we have made a strategic decision to move away from that because it is so uncertain. Combined with that is the growing pressure to implement E-Verify. So I think that the whole labor issue is going to be one of our biggest challenges, and we’re probably all going to be in the same boat, but the uncertainty there of where our labor will come from is definitely our biggest concern.

Frank Mariani: I think that any time you have to partner with Washington, chances are you’re going to lose. So at Mariani, as far as we’re concerned, H-2B is dead.

The good news is a couple things: Number one, all of us talked about what our revenues were, and I think that is probably the worst thing about the members of our association; they focus on the top line instead of the bottom line. So one of the things we’re doing at Mariani is focusing on the bottom line.

Secondly, I think as tough as things are, personally, if you look at the amount of revenue that is available to all of us, I just look at Mariani and think, “Well, I’ll just take the Chicago market,” and I’d be very happy. So I want to get a bigger piece of the pie. Obviously we couldn’t do all the work that’s available to us in just Chicago. So I just have to figure out how to beat my competition. And I like that challenge.

Ed Castro: We had a lot of concern on immigration reform in the state of Georgia and in Alabama. Migrant workers are not even coming through Alabama to get to Georgia because they’re going to be arrested. Atlanta is a huge market, and the labor is going to be a problem. We have 22 percent minority participation, but they are all new. They are all new. We’re going to high schools now. Trade schools, also. Not just college graduates.

It’s a responsibility that we’re going to have to reenergize America’s workforce. This $30,000 job is going to be the new norm, and you’re going to have to learn how to raise a family off of that. That’s that factory job that my grandfather or my father had.

Dale Elkins: We’re finding people in Florida. Did anyone go to the Kevin Kehoe talk to see that $19/hour rate on his map chart? The state has always had that pressure, but it’s been extremely difficult in the past two years. You couple that challenge with the foreclosure issue in the HOA market, which is a huge market in Florida. So it hasn’t been hiring the people so much in Florida but it’s the price pressures, to not only keep work but to sell new work, that’s eating away at your discretionary and training spend.

FM: What’s the $19/hour?

DE: I interpreted it as the retail rate for man hours. (Kehoe was citing the prevailing rate for basic commercial maintenance in Florida. – Eds.)

FM: People should be killed for that kind of number.

DE: There’s no way you could bid that number and expect to survive.

FM: I think when those numbers get out, the 15 percent profit margin, $19/hour, I think that it’s all bullshit.

And unfortunately I think that sometimes at these types of events like GIC, it almost perpetuates itself, because people start throwing out these numbers that are just ridiculous.

DE: You haven’t seen anything unless you come to Florida.

FM: I’m not saying it’s untrue.

DE: Oh, it is.

FM: We can go to the dance, we can dance, or we can decide not to dance. And for that 15 percent gross profit margin, $19/hour stuff, I’m not dancin’. You go to some of the seminars and conventions and somebody gets up and shows a chart that says, “This much per hour,” and I see people writing, and I think “Jesus Christ. There’s going to be a guy at $19/hour and 15 percent gross profit margins.”

EC: And he thinks that it’s OK.

DE: He’s going to bank on getting the enhancement work to make up the “magical” difference. He’s going to bank on all this money coming from a different supplemental profit. And that’s where it’s more dangerous.

FM: At $1 million it works, but at $5 million, you’re really going to be losing money.

MD: It’s really not even the smaller guys, these are the bigger guys that are at $19/hour. And our consultants come in and say, “You know if you’re going to be competitive, you have got to go below $30/hour for maintenance. And the closer you get to $20, the more successful you are going to be at getting those contracts.” That scares the heck out of me.

FM: I think that that is a flawed philosophy. I think that you have to figure out how to differentiate yourself and your services from everybody else so that you can charge the appropriate dollar amount. I mean our business has grown 9 percent this year, and it’s not because we were the lowest bidding contractor in Chicago.

Tracy Bertog: I’m finding there’s a lot of loyalty with our residential clients, but our commercial ones we’re finding that guys are putting in unsolicited bids, and then we get the call, “Hey I hate to do this but times are tight …” Even my own church that I’ve been going to for 30 years called me one day and told me they got an unsolicited bid 15 percent less than what we were charging. We hate to do it but what can you do for us?

We split it, and they stuck with us, but I’m seeing those unsolicited bids showing up everywhere now that are ridiculously lower than where we’re at. And these are accounts we’ve had for 15-20 years. But luckily our residential clients have been very loyal.
 

L&L: What do you do to combat that?

TB: We do what we can. With the church we dropped 7.5 percent, but we had to take out a fertilization and we had to cut back the scope of work that we do.

CK: I’m very blunt about it. I tell them there’s a reason that you have unsolicited bids. We’ve actually gotten two rather large maintenance accounts because they were afraid that the guy who had been servicing them was going to go out of business – that the bank was going to call to loan, that things were shaky; they needed somebody that they knew that they could count on. I bring it right up. I say, “There’s a reason that we’re KEI. There’s a reason there’s only a couple other guys like us in town. And there’s a reason that there’s all of the other guys.” Nine times out of 10 that flies, because money is tight, but there’s two things tighter: time and talent. 

All year, Lawn & Landscape will be running excerpts of the conversation, including discussions of the above pictured industry power players.

The author is editor and associate publisher of Lawn & Landscape. Email him at cbowen@gie.net.