So many variables

Joe Pulliam

vice president of business development, American Landscape, Canoga Park, California

For Joe Pulliam, words like “recession” and “inflation” are dirty words — that is, they’re often associated with bad news for the client and business alike.

But he knows that he’s had to be honest with clients on where the economy is at. American Landscape has a revenue just north of $60 million and does commercial landscape construction and maintenance. Costs have grown by 3-4% across the board, and meanwhile, more and more clients are choosing not to have the work done they might traditionally request.

To make matters more difficult, there’s also more competition than before. On some jobs that used to have just three other bidders, now he’s seeing six. It’s not doom-and-gloom, as there’s still plenty of jobs out there, Pulliam says. Still, he also says that profit margins have not grown as consistently as the costs to complete each job.

“But we get it: Owners have to be smart,” Pulliam says.

On the maintenance side of the business, Pulliam says they’ve had each client for — on average — about 5-10 years. Some construction contracts are even as old as 50 years though. So, generally, Pulliam says half of American’s clients are purely number-driven, but others have that long-term relationship and try to make numbers work.

Instead of abandoning American Landscape for the lowest bidder, these clients will instead come back and say, “you’re high by X, Y and Z.” That’s where the two companies can negotiate terms a little bit more.

“We know with certain clients what percentages and what costs are going to get us close,” Pulliam says. “Each job or contract really is specific to that property.”

American’s landscape construction workers are union, so their wages were predetermined based on the last labor agreement and went up about 5% this year. But on the non-union maintenance side, those wages are purely paid on the experience of the individual, Pulliam says. Even in California, where costs for seemingly everything are high, Pulliam says he’s only noticed about a 1-2% increase in general labor wages for the maintenance team.

But a supply chain problem still throws wrenches into pricing, as plant material in particular is still hard to find. These shortages can complicate accurately pricing jobs, but Pulliam says American has gotten good at finding alternatives. He hopes for a return to some normalcy in that area soon though.

Ashley Van Pelt

president of NT Land Works, Fallston, Maryland

At NT Land Works, President Ashley Van Pelt is hoping a shift in priorities will equate to more growth — and therefore more revenue.

“Instead of focusing solely on the bottom line, we pivoted... and we’ve really started focusing more on the culture,” she says. “Improving our culture has really had a positive impact on our bottom line.”

“We’re investing in our employees to get that return on investment,” she says. “That’s our strategy for expanding and adding more crews. It looks like we’re going to be there by the end of 2023. We are looking to double our size by the end of the year.”

Currently, the company has a staff of five. And putting those five staff members first has been great for retention and employee buy-in, she says.

“It’s improved employee investment and therefore quality for the customer, so we’re getting more repeat business,” she says. “And therefore, we can raise our prices a little bit more because we’ve built that trust up and they know our crews follow through.”

Part of that investment has obviously been raising wages.

“When it comes to wages, we are encouraging more professional development so we’re willing to pay for that professional development and that new knowledge,” Van Pelt says.

Raising wages is nothing new for NT Land Works. Even before Van Pelt says she decided to focus on culture, she was paying competitively and it still didn’t help retention. But paying even more now has come with its challenges.

“I’ve had to charge customers more and I’ve had to reduce my own salary,” she says of the wage increase. “Overall, I’m happy with it.”

As a company that does a lot of subcontract work, Van Pelt says increasing prices helps her stay solvent cashflow-wise.

“For me, I’m not getting a 30-day cash cycle working with homeowners and billing out weekly or monthly,” she notes. “I bill out monthly, but as a subcontractor, which is largely what my business is, I have to wait 45-60 days. And I have to bid a lot earlier on my projects.”

Though Van Pelt says she never just instinctively raises prices. It’s always strategic and depends on the project.

“We never do a blanket 3% raise,” she says. “That’s never been our strategy.”

Jason Hone

president & general manager of Hone Landscape Company, Carnation, Washington

It’s been well documented that COVID-19 caused a boom in design/build and landscape construction work across.

But now that the pandemic has ended, some are noticing a downtrend in demand.

That’s the case for Hone Landscape Company, according to President and General Manager Jason Hone.

“There’s been a very big change in demand for work in the last six months,” he says. “There’s been a slowdown in interest in work. In the last few years, we’d have a backlog of about six months, but now we’re at like a month or month and a half right now.”

But despite the slowdown, Hone is optimistic for the year ahead. In 2022, the company did around $2.3 million in revenue. That was up 20% from the year before.

Hone says the company’s been taking swift action to try and subside the shift in demand.

“We’ve just been trying to do things a little differently to stay busy,” he says. “We’ve even shifted some things to keep work coming in.”

Hone says he suspects it’s a myriad of things causing the popularity of the work to drop off.

“It’s probably related somewhat to inflation and interest rates, and the stock market and money in general. Plus, it’s just coming down from all the COVID stuff,” he says.

Inflation has also caused the company to raise prices. With material costs constantly changing, Hone says he relies on his software to keep his pricing profitable.

“Our pricing is per job,” he says. “We input into our software the fuel prices and material costs as they change and adjust those as need be. The software then reflects those changes in the pricing.

“We don’t really raise prices, just adjust accordingly,” Hone adds.

It’s not just material costs going up either — so has the cost of labor. And both costs are getting passed off to the customer as the company’s hourly rate has gone up recently.

“We’ve raised wages the last few years,” Hone says. “It’s probably gone from $25 an hour for an average foreman to $31-32 now. For a landscape technician, it was like $18-20 and now $23-25 an hour.”

As a side note, Hone says he’s seen better retention in the last few years but he credits it more to building a network than paying higher wages.

“We’ve had better employee recruitment and retention in the last couple of years because we’ve gotten to know some people who know people and that sort of thing,” he says. “The last couple of years we’ve had a good (workforce) of employees but I don’t think it’s been related to pay.”

While Hone takes several things into account when pricing jobs, he notes that when it comes to establishing a budget, that’s not really the way he runs the business.

“I usually don’t even redo our software’s budget once a year. I usually do it every couple of years,” he says. “Basically, our budget is we look for a number we’re shooting to get and that’s basically how we budget. It’s a number we’re going to shoot for and then get enough work to reach that number and go from there.”

Gary Barker

Barker’s Landscaping, Ezel, Kentucky

Gary Barker’s held his prices steady on clients for years — that’s one of the reasons he believes they’ve been clients for years, not months.

He’s worked in landscaping for 22 years and his revenue hovers around $100,000 annually. It’s a business that he runs with his dad and brother, even despite the fact he’s got a full-time job and is roughly eight years away from retirement.

By that point, he hopes to turn the company over to his son. Barker also hopes there are clients still there for his company when he turns it over, which is why he’s kept his prices consistent for about a decade.

“I know a lot of people have raised prices, but… we’ve not had to raise our prices yet, and this year, I don’t look to be raising prices,” he says. “I’ve had some customers for nine years, and I’d really hate to lose them.”

He’s managed to keep the job costs the same in part because Barker hasn’t purchased any new equipment during the pandemic. He bought trucks and trailers the year before COVID began, and instead of purchasing new mowers, he’s just spent some money on maintenance.

Barker says the last few years have been some of his company’s best. For starters, he hasn’t changed his bids for clients since just after the Great Recession, where costs were high for materials and fuel. He was able to endure the fluctuations of these costs because they were turbulent costs when he first bid out the jobs anyway.

“I guess bidding those jobs years ago has kind of helped with that,” Barker says.

Additionally, the influx of recent homebuyers has helped his company. Barker says he’s partnered with a company that renovates and resells homes, so when they’re done with the interior, they contact him to come in and handle the landscaping.

Just as Barker’s kept his pricing model simple, determining what to pay himself has never been a concern either.

“To be honest, I don’t pay myself a lot. At the end of the year, I just kind of look at it,” Barker says. “I don’t pay myself a lot during the year. At the end of the year, if there’s any set aside, I’ll usually pay myself.”

Blake Reeder

president of Reeder Landscape, Amarillo, Texas

The past three years at Reeder Landscape have seen tremendous growth.

“We’ve doubled year-over-year for the last three years,” says President Blake Reeder. The company reached $5 million in revenue in 2022.

But 2023 is looking like an uphill battle for the business. With material prices and wages going up increasingly every year, Reeder says the company needs to make some changes to its pricing to stay profitable.

“We’ve absorbed it up until this year, but this year, we’re going to have to have an increase of some sort,” he says. “We already run pretty tight margins. So, we run a pretty slim crew for the amount of work we produce. Our only option this year is to increase prices on our customers. We’ve put it off and put it off and put it off as long as we can. We’re to the point now where we have to do something.”

At Reeder Landscape, upper management spends the offseason gearing up for the year ahead and determining prices. The last few years they’ve been able to maintain the status quo and not raise rates.

“We review every winter to prepare for the spring,” Reeder says. “We’ll have a brainstorming meeting to get everything together and start to look at what our net profit was the year before and look at our pricing to see if we need to adjust any specific areas.

“As competitive as this industry is, it’s really hard to just throw a blanket on it,” he says. “We look at each individual product or service that we provide and then we increase or do whatever is needed.”

The driving force behind the imminent increases at Reeder Landscape is the cost of labor. During peak season, the company employees 50 people.

“It’s probably been the hardest hit — the wages,” Reeder says. “Going into 2020, average pay was $10-12 an hour for our crew guys. Now, the average for maintenance is between $18-20 an hour. And on the design side, average crew is $20-25.”

On the design/build side of the business, mounting material costs are also calling for a review of rates.

“It’s been huge,” Reeder says of material costs rising. “Pipe, for irrigation, is up almost 120% since 2020. PVC is ridiculous. Plant material has gone through the roof and almost doubled as well.”

Reeder says the company has tried to increase its material costs as prices keep climbing but it’s still a challenge. And so are continuing supply chain issues.

“Even getting stuff in is really difficult still,” Reeder says.

Reeder says the increased costs of doing business harken back to a bigger concern the whole country is facing.

“The costs of material and labor wages are a direct reflection of inflation,” he says.