MAINTENANCE: In the Green

Landscape maintenance contractors who cut their teeth in the residential market may consider the commercial property arena and see lots of green – in both grass and profits.
 
It’s a natural progression for landscape contractors. In fact, nearly a quarter of the average contractor’s annual sales come from tending commercial and industrial properties in 2007, according to Lawn & Landscape research. In addition, contractors indicate they derive about 40 percent of their average sales from lawn mowing and maintenance work and that lawn maintenance’s gross sales revenue increased by 12 percent from 2006 to 2007, the data says.
 
 There are many challenges in not only entering this market, but also achieving and sustaining success, too, says Ken Hochkeppel, chief financial officer and partner at Ruppert Companies in Laytonsville, Md.
 
Nearly 78 percent of Ruppert’s overall business is commercial-based, of which a mowing and maintenance makes up a quarter of those services. Hochkeppel says it’s an essential service to offer clients. “It’s one important element that our landscape management customers expect us to handle,” he says.

VARIABLES. Before a contractor jumps into commercial mowing and maintenance with both feet, Hochkeppel says there are a number of variables he should consider.
 
For one, is the contractor equipped to provide the other maintenance services a commercial client will expect besides mowing? “Likely, you will need to offer a full-service program,” he says. “Most commercial property managers prefer a provider to offer mulching, irrigation management, seasonal color rotation, weeding, etc.”
 
Another variable is whether a contractor has the personnel to meet the demands of servicing commercial clients. Good personnel is key to ensuring this accountability to the customer, Hochkeppel says.
 
Correctly managing people is an essential function in offering commercial mowing and maintenance services, including carefully attracting, selecting and retaining the best and most skilled laborers.
 
“Motivating and rewarding those people are the most important aspects of any part of your business,” Hochkeppel says. “You also need the behind-the-scenes support, which includes the maintenance of the equipment, training and tracking of safety-related functions.”
 
Other considerations include crew size and whether those crews are adequately equipped – trailers, equipment, training – to handle commercial work. Ruppert doesn’t dedicate its crews to specific job functions, Hochkeppel says. Instead, it dedicates its crews to clients’ properties.
 
“Accountability to the customer’s total satisfaction is the most effective approach to quality landscape management,” he says. “We assign all landscape management operations to a qualified field manager and they are assigned a crew. This team performs all maintenance services for the property – mowing, pruning, weeding insect control, irrigation management, etc.”

SALES. Often the biggest challenge in adding commercial mowing is gaining those first few clients, Hochkeppel says. To gain the initial push necessary to enter this market, Hochkeppel suggests contractors use all of their contacts and existing residential clients to get their foot into the commercial door. In addition, an ambitious contractor can drive new business, a smart sales and operations plan, solid marketing materials and even the additional of experienced sales people.
 
But sales are key to success, and contractors want to launch their commercial mowing sales initiatives to the time appropriate for their geographic region. For example, in the Mid-Atlantic region, most contracts are awarded on a calendar year. “Customers begin pricing work one to four months prior to the end of the year,” Hochkeppel says. “Most of our mowing and general maintenance is bid between September through January.”
 
In other regions, though, contractors renew throughout the year, which helps balance a contractor’s sales efforts across his calendar.
 
Ruppert offers its commercial mowing and maintenance as a complete grounds management service package, Hochkeppel says. And while a particular service item – such as commercial mowing – may look more or less profitable as an individual line item, when combined with associated work and services within that package, it shows a different picture.
 
“We do track line item profitability,” Hochkeppel says. “But we don’t feel it’s the best way to measure the value of a service as certain service lines are naturally associated with other service lines.”
 
One of the largest variables a contractor will have to contend with is how the jobs are priced and how production compares to the job estimate. To manage capacity, Ruppert targets an average revenue volume per truck and attempts to grow in those chunks, Hochkeppel says. To competitively price commercial jobs, Hochkeppel advises contractors develop estimates by breaking down unit costs per piece of equipment. “For example, each mower has a unit cost of how long it will take to mow an acre or a fraction of an acre,” he says. “Larger pieces of equipment will have a higher cost per hour, but also have a higher productivity rate. Through the budgeting process, you want to assign an hourly price to each mower.”
 
The most common mistake contractors make when taking on commercial mowing accounts is not accounting for the overhead expenses that come with the equipment necessary to service the client, Hochkeppel says. There’s more overhead associated with each mowing man hour than there is with basic labor work such as weeding, he says. 
 
“This has to be accounted for and included in the price of the service,” he says. “We would expect to use larger mowers on commercial properties compared to residential, so there’s more capital outlay. However, these larger mowers are more productive and reduce your labor costs.”
 
Some contractors prefer to calculate an equipment charge for each hour they use the equipment, while others build it into their overhead and charge it through their standard hourly rate, Hochkeppel says.
 
“Each size mower would get a different equipment rate and correspondingly the production rate would be greater,” he says. “Either method works as long as you have carefully gone through the process to know what your annual equipment costs are and have ensured that you’re recouping costs like gas, parts, show labor, insurance and depreciation.”