Focal Points

Successful companies this year have learned to focus -- on their profitable services, niche segments, core customers and financial statements. To survive in a world of tight margins and tough decisions, profitable companies need to keep their eye on the details and their arms around the business.

Earlier this year, Lawn & Landscape editors – aided by independent firm ABR Research – surveyed more than 600 of our readers, and spoke with dozens more to compile the 2011 State of the Industry Report. In this story and on the pages that follow, we take a look at some of the major trends impacting landscape contractors and lawn care operators today – and what they can expect in 2012.
 

Services. Exactly what those services are depends a lot on geography, market demand and the skills of individual contractors. Some design/build companies are having their best years ever. Some are out of business. The maintenance sector remains strong – 30 percent of contractors say it's their fastest growing service – and many companies have made it work.

For general landscape contractors, the focus in the next year will be on further increasing efficiencies in their operations. The past two years have seen companies shrink in terms of revenue and people, but businesses have cut staffing as far as possible. Now, they must continue to operate as efficiently as possible to maintain profitability.

"It's a trying time, everbody knows that, that's no secret," says Kurt Bland, senior vice president at Bland Landscaping, Apex, N.C. "Guys hanging on by a tooth and a nail can't hang on much longer."

Maurice Dowell, owner of Dowco Enterprises in Chesterfield, Mo., has seen his company grow about 10 percent this year, thanks to a focus on a tight geographic area and market.

"As long as we stick to our niche, we'll be successful," he says.
 

Growth. Overall, companies are reporting flat growth or slight increases – most around 10 percent. There are some bright spots: Specialized, high-margin services like irrigation repair, landscape lighting and high-end estate gardening have helped boost bottom lines, but are not major growth areas for most companies, and cannot totally replace the revenue from large construction or maintenance divisions.

Maintenance and lawn care contractors have fared well in the past few years, thanks to the recurring revenue business model and lower overall price point, but the market has been flooded by numerous companies and prices have dropped precipitously. Property managers and homeowners are in the driver's seat when it comes to choosing a contractor and dictating price. Contract negotiations are tough and are redone every year instead of the former average of two to three years.

Jeffrey Johns, president at Coastal Greenery, Brunswick, Ga., says his commercial maintenance firm has grown nearly 20 percent this year, but the jobs bring in less revenue and expectations are still high.

"We're having to learn all over again how to manage these properties with less, with receiving less money, but getting them more service," Johns says. "That is the growing pains we're experiencing. Obtaining the work and growing the 19 percent has been very great for us. It's just learning all over again how to manage those accounts with less money coming in and providing more resources to our customers has been a challenge."

In the construction sector, average job size has decreased as consumers tightened their own budgets. Homeowners have thawed their once-frozen wallets to spend again on landscape construction, but are phasing in projects over a period of years and are buying smaller installations altogether.

In both maintenance and construction, the number of contractors bidding on new work has increased just as prices have dropped. Companies across the country report high price pressure on bid work.

"For us, it's looking how to be more efficient in the field," says Tom Heaviland, president of Heaviland Enterprises, Vista Calif. "When you are bidding at a lower rate you've got to find a way to still keep your gross margins in check. So it's looking for ways to be efficient without sacrificing the quality because the clients are still expecting a certain quality."
 

Focus. This year, successful contractors have focused on ways to drop more cash to their bottom line through operating efficiencies, more equipment uptime or expanding already profitable services. Technologies like GPS systems, routing software and other business management tools that help owners track equipment, people and input costs in real time have become ever more valuable to savvy contractors.

The industry has seen the worst of the economy and will continue to grow in the next 3-5 years. The contractors who made it through the Great Recession know how to run successful companies and adapt to changing market conditions, and will succeed in the years to come. Niche services will increase, and new forms of marketing will help contractors reach their target customers more easily and earn more profit from their existing book of business. 

The author is editor and associate publisher of Lawn & Landscape. He can be reached at cbowen@gie.net.