Squeezing Water - and Money - From a Stone

©iStockphoto.com/calvio Tim Steele needed a new idea, and fast. It was the fall of 2007, and he was at a hotel in Los Angeles, listening to a guy from Minnesota talk about how his company had increased its profitability with irrigation system maintenance.
Steele leaned back in his chair as the man spoke. He wasn’t buying it.

He needed a new program to launch in the spring, and had looked into fertilization services, holiday lighting and doing more residential design/build work. Any of those seemed more promising than residential sprinkler services in California.

“The gardeners do it themselves, or they have a landscaper do it. There’s no such thing as maintenance contracts. West coast guys are just different,” he says.

But, Steele thought about it more, and decided to check it out. He flew to Minnesota and visited Hindsight Solutions, the company owned by the speaker that day, Dave Crary. He also flew out to Florida to check out another irrigation services company. Their technicians were using touch-screen PDAs to keep track of their work orders, and the companies were making money. And – most importantly – nobody else in his area was offering this service.

But he had reservations – up until that point, Steelescapes’ entire customer base was commercial. He wasn’t sure he wanted to deal with complaints about his technicians letting dogs out accidentally or nit-picky changes to work orders. “It was another thing: what a pain in the butt to deal with Martha and Joe,” he says.

Steele started his program in February 2008. The irrigation division comprises four technicians (up from two last year) and a manager. Technicians receive all their work orders on PDAs, and the billing is done electronically through QuickBooks. Last year, this division brought in $280,000 in revenue to the 2.6 million company. This year, it’s above its projected sales goals – at $460,000 in the early summer – and the company should hit $3.4 million.

He credits the growth to his decision to focus on the irrigation maintenance and construction divisions.

“We had to implement a business plan of growth. Where in your market are you going to get your growth from? Experience in your company, your customer base, a need in the market? Where it is not already a bunch of sharks killing themselves?” Steele asks. “It was changing under us continually. We were just looking at all of our options.”

As residential and commercial customers have stanched the flow of cash from their wallets, companies like Steelescapes have had to become more creative in their service offerings. Many landscape contractors and irrigation companies now offer maintenance to existing systems, and are promoting water-saving tools to cost-conscious consumers. And they’ve learned to focus on the basics of good business to improve relationships and help with sales.

The Price Isn't Always Right
In lean times, everything is negotiable. Jeff Carowitz, the consultant who runs Strategic Force, Houston, says customers have become more cautious. Homeowners aren’t as apt to pull the trigger on large-scale irrigation systems, and commercial builders see them as an expendable way to lower the overall cost of a project.

Carowitz, who works with Steele, says contractors have to remain good salesmen and be flexible, but also know where to draw the line. He suggests contractors offer other things besides a straight price break on the core service – a coupon for a fertilizer application, project financing, a tree installed free – that consumers might value more than 10 percent off.

“No one formula works for every job and every customer. Some are going to feel like they got something extra that they value and doesn’t cost you very much,” he says. “Adjusting price is a complex decision. You want to be careful around that. Don’t mess with your base price.”

Steele had a 28 percent increase in sales over the first quarter of last year, and predicts business will be up 24 percent for the entire year. He credits hard work and his irrigation maintenance division with much of that growth. The area also helps: He says 1.2 million people live in his county, and only three companies advertise to do the same kind of work.

“I refused to bid when I was getting in a pool of sharks. This isn’t my first rodeo,” Steele says. “You push out to where the work is. (Do) aggressive ad campaigns and not draw back in like a turtle shell when it’s turned down.”

But not everyone’s business is booming. Mike Strick, owner of Carefree Lawn Sprinklers in New Lenox, Ill., says sales will be down 30-40 percent at year’s end compared to 2008, and down 60 percent from his all-time high in 2005. He has lowered prices to compete, but he worries about other companies slashing their prices. “You need to be aggressive; I don’t have a problem with that. I’m fearful many companies don’t know what their true costs are. Without knowing their costs, that’s a dangerous thing to do.”

Like many contractors, Steele has found customers very price-sensitive. They turn down big projects after they see the price tag, or they try to talk down the cost.

“You may not be installing new landscapes because they don’t have the money,” he says. Instead of jobs going for $5,000 or $10,000, contractors might just get $300 or $400. He has focused on not turning down those small jobs, and doing them extremely well, in hopes that the customers will stick with him when they do have more money for bigger projects. In the past four months, three initial contacts for service work have turned into $10,000 jobs.

“They’re more apt to spend that or commit to your company initially when they get a positive feel from that,” he says. “It’s an easy way for them to try us out.”

And while he’s seen a lot of tire kickers, Gary Gleichman, business development/customer account representative, Treasure Coast Irrigation, Hobe Sound, Fla., has seen sales increase and posted a first quarter profit this year. “We’ve actually had to accommodate more,” he says. “We will jump as high as the customer needs, but we want to be fair to ourselves and we want to be fair to the customer.”

Selling Water Savings
As prices become softer, many irrigation contractors are finding customers receptive to messages about water-saving technologies that can increase the efficiency of their existing systems.

With drought conditions gripping large swaths of the country, and more and more governments imposing water restrictions, Russ Prophit, Precise Irrigation Design & Consulting, Winter Haven, Fla., says contractors who can provide efficient systems will make it through the recession. They need to convince their customers that the cheapest system installed might not be the cheapest system after a year’s worth of water bills.

“The biggest thing that we have to do, is make sure we’re educated enough that we can actually design, install, maintain and schedule an irrigation system that does not waste water. What we need to do, is design systems that are very efficient in how they use water,” he says.

Bob Krupske, president of Krupske Sprinklers in Peotone, Ill., is a big proponent of customer education. He says one of his best sales tactics is a printout that shows the cost savings – up to $400 – based on varying levels of efficiency and water rates in his area.

“I break it down: what type of system, insurance, experience, efficiency,” he says.

And sales are good: Krupske says no one has canceled their contracts and commercial work is still strong. The company, which does strictly irrigation for 6,000 customers and pulled in $1.3 million last year, should see revenue up by five percent over last year. “Yesterday alone, I had six estimates in one day,” he says. “This year will be a better year than last one.”

Embracing new technology is a key to surviving in a down market.But that better year has meant changes. Up until two years ago, all of Krupske’s customers were within 15 miles of his shop in the southern Chicago suburb of Peotone, Ill. Now, he’s traveling more than 60 miles north to Evanston.
“We’ve really opened up our area,” Krupske says. “(It’s the) economy. There’s just not as many leads as there used to be. I need 250-300 homes a year to install. In our area, they might be building 100 that I’m going to get.”

And the water saving potential is real: Prophit recently did an audit on an irrigation system at a large home near Orlando. It was 18 percent efficient.

“Eighty percent of the water wasn’t making it to the plant material,” he says. Moving some of the heads around bumped it up to 66 percent efficient, and changing some areas to low-volume got it to 85 percent. All in all, the changes cost about $850, which would be covered by savings in water bills after a little more than a year.

“People have been doing irrigation the same way for a long period of time,” he says. “The people who embrace change and technology … those will be the people that survive in this down market.”

Contractors can pursue certifications in water management, learn about new irrigation technologies, and use this new knowledge to set themselves apart from their competition, Prophit says.

“It’s the perfect time to squeeze in and try to get some extra education. Make sure they understand all the advantages of doing things in a new way. Technology is just jumping out at us. Adapting to that can create a market now that wouldn’t otherwise be there,” he says. “There are opportunities out there for people in the irrigation industry to start a new market that they’ve never even touched before by embracing this technology.”

Staying Afloat
And when sales slump, companies have to focus on operating efficiencies to shore up their balance sheets. That means everything from new marketing programs to different services to layoffs and re-routing technicians.

Carefree in New Lennox, Ill., has gone through layoffs, cutting 50 percent of its workforce. Strick says he now sends one employee to service calls instead of two, and works more on the front end of jobs to determine exactly how many technicians are needed at a specific site. “We’re classifying jobs so that we know now how much labor it’s going to take for a service,” he says. “Now, we spend a lot of time organizing, putting the right amount of labor to the right jobs.”

Strick also focuses on having his crews and technicians be on time. “We give a very small window of when we’ll be there,” he says. “We’re not the cable company. Customers value their own time. That’s really the biggest thing is being conscious of your customers’ time. That is the single most important thing that customers appreciate.”

Carefree has offered specials with referral programs, all based on getting referrals from landscapers. They’ve worked, but this is the first time they’ve had to try a program like that. He’s also offering new products to his existing customers – things like fertilizer applications and mid-summer tune ups.

“For the dollars we spent to set up an incentive program, it was worth spending the money, (but) not an overwhelming success by any stretch,” he says.

Krupske sent out postcards to everyone in its customer database, and gave discounts on service to inactive accounts. He’s been pushing upsells like rain sensors, and has given his service techs more time on calls to work on their sales pitches. He also had to lay off two employees.

He said it can be difficult to stay positive when so much news is dour, but it helps to keep communicating with your employees and focus on the positive. This spring, he sat down with his employees and told them it would be a tough year. But, he reminded them that they were all still working 50-60 hours a week. 

“Don’t keep your employees in the dark. Let them help,” he says. “Things picked up. We’ve been busy.”

Commercial Impact
The industry slowdown has affected commercial properties as well. Prophit says he’s seen bigger design jobs put on the shelf because groups can’t sell the bonds for them. A community college in the Gulf South region is having a difficult time finding financing. Another project, comprising four large dormitories at an established university in Mississippi, was LEED-certified, and ran entirely on rainwater.

“It was a really high-profile project, ultra-conservative in everything it does,” Prophit says. “It’s just a difficult task.”
The tight residential market has pushed some contractors to try the commercial side, Prophit says, which they might not always be ready – or qualified – to handle.

“The residential market is definitely suffering really bad. It’s the worst I’ve seen, and I’ve been doing this 32 years. Now (some contractors are) out there trying to compete in the commercial market without the experience they need.
That’s just developing more problems for the industry,” Prophit says. “It’s creating havoc in the market. Prices are dropping. People are out there just trying to get a job. They’ll do a job for a loss just to move money to keep their business going. People are starving, and they’ll do whatever they can to get a job.”

Moving Forward
Times may be tough now, but Carowitz says the worst part of the recession might already be over. “Markets like Florida were already decelerating two years ago, in terms of construction,” he says. “It started quite a while ago already, and it’s pretty well known. When the recession makes the cover of Time magazine, you’re probably already on the way to some of the steps to recover from it.”

But even as the irrigation market starts to see signs of life, Carowitz says, contractors must focus on their core skills to succeed. “It’s going to take better selling skills. I would train my people to be better, market more aggressively, have a better presentation and promotional programs that get people to feel like they’re getting a savings. People are looking for a savings and a deal.

“In this case, irrigation is not different than landscaping or new furniture for the living room. Everyone is delaying purchasing big ticket items in this economy. Things fall along a continuum of essentials versus luxuries. Some are necessities, some are luxuries. If you have two children in college and you have to take a pay cut at work and your portfolio isn’t doing so well, you might delay.”

But the work is out there, he says. Contractors just have to work harder to get it. He says that by focusing on the basics like good service and good salesmanship, companies can seal deals.

“It’s the basic answers: good service. It’s interesting: A lot of what it takes is the same stuff in a good economy – the contractors that prosper are the ones that do a good job,” Carowitz says. “If you’re doing a good job as a salesperson, you’re doing a good job of uncovering those points of need. Ask a lot of questions. When you’re with a client … questions demonstrate your interest in meeting their needs, and … things that matter to them that the other guys didn’t pick up on. Like a physician – he doesn’t tell you how smart he is; he asks a lot of questions.”

Prophit says contractors must present themselves and their services as valuable and the best in the marketplace.

“I sell myself on being the best that there is versus being the cheapest. I have found over and over and over again that people, if they have a quality product  ... something that nobody else does, they have a lot better chance of selling the work,” Prophit says. “People that purchase things on a regular basis know the difference between a Yugo and a Mercedes. I’m not saying they need a Mercedes, but they probably aren’t driving around in a Yugo, either.”

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