2017 State of the Industry Report: Beyond revenue

State of the Industry Report - 2017 SOI

Landscape contractors are on target to turn a profit in 2017.

© Matt Collins

Landscape contractors who turned a profit in 2016 say they expect to end 2017 in the black and are hopeful this trend will continue. From a service that was unexpectedly popular, to new construction in their area, contractors discuss some of the reasons they were profitable, and when they usually turn a profit during the year.

Seal of approval.

Landscape Artistry had an annual revenue of approximately $341,000, which was an increase of about $100,000 over the prior year – a higher-than-normal leap, says Paul Ruggiero, owner.

“Each year it seems to get a little bit better,” Ruggiero says. “I’m already up 11 percent (this year) over last year at this time. I know I have a couple of really good size jobs coming in. I’d say probably 20 percent, again, is what I’m hoping for.” Landscape Artistry is a design/build company primarily providing hardscaping, along with a small amount of landscape installation and maintenance in the Stevensville, Maryland, area. Customers are mostly residential and all of the work is subcontracted out. Ruggiero is the only full-time employee.

Ruggiero has been in the industry for 20 years and started by offering landscape maintenance. He later began focusing on design/build. He hopes to earn $400,000 in annual revenue in 2017 and bringing on a second subcontractor has helped with building revenue, he says.

When looking at his 2017 numbers, Ruggiero has already noticed an interesting trend. Revenue is up 966 percent with one service – cleaning and sealing of pavers.

“It seems like I’m the only company in my area that does cleaning and sealing of pavers,” he says. “I’m not physically going after that market, but it just seems like that’s taken off.”

The cleaning and sealing jobs themselves are not the highest-paying, but Ruggiero says he has welcomed the uptick in calls for that service. In addition, he says planting almost always yields a strong profit margin.

“It’s quick and easy. You get in, get out,” he says. “Planting generally gets you like a 40 percent profit margin. As long as the plants don’t die, you do pretty well.”

Ruggiero says he also typically turns a profit in October of each year. When he started his company, the first year wasn’t profitable due to the cost of equipment purchases. He later took on a partner, and it wasn’t until about five years later that the company became profitable.

As far as next year, Ruggiero says new housing also continues to provide ample opportunities for work. “There’s a lot of building going on in the area, so I would say all these people are looking to get outside, out back,” he says. “I don’t see it slowing down anytime soon.”

14 years and counting.

At Browder-Hite in Belle Haven, Virginia, landscape maintenance accounts for the bulk of the jobs based on dollar volume. Maintenance, including mowing, accounted for 39 percent of sales in 2017 so far, says Benjamin Lewis, president. Next to that, landscaping has accounted for 23 percent of sales.

Browder-Hite is a full-service landscape company offering landscape maintenance, pool installation, irrigation work and more. The company employs 26 people and it serves residential and commercial customers. The company also operates a retail nursery.

“Maintenance is the bread and butter,” Lewis says. “It pays the bills as we wait to get to that break-even point.”

Lewis says his company did better in 2016 than in 2015, with an annual revenue of $1.47 million in 2016, compared with $1.1 million in 2015. “2016 was a big year for us, as far as gross revenue,” he says. “Every year except for one, in the 14 years I’ve been in business, we’ve grown.”

Despite some challenges with finding qualified personnel for open positions, Lewis says he sees 2017 ending successfully, too.

“Year to date right now, we’re up 11 percent,” he says. “Middle of August last year compared to middle of August this year, we’re up 11 percent. We’re projecting $1.5 million.”

Lewis says his company typically moves to the black by mid-October.

His company has been profitable all 14 years since he started it, even though he started small with only $110,000 in annual revenue the first year.

Browder-Hite is slated to break ground in November on the construction of a new office. Lewis hopes this new facility will help his company really stand out among the competition.

“I really think that that’s going to bring a new level of excitement and attract a certain type of person to our business,” he says.

One large commercial project with a new hospital contributed to Browder-Hite’s bottom line in 2016 and will add to annual revenue in 2017.

Some of the revenue from the commercial project didn’t flow in until 2017, so it will be part of the 2017 total revenue.

“We are in a rural area of Virginia. Those kinds of projects just do not come around often,” Lewis says.

In addition, the opening of a garden center is expected to grow the company’s revenue.

“(We are using the garden center) as a lever to gain brand recognition, get our name out there and project ourselves as landscapers,” he says.

“Customers, as a whole, are not as afraid as they used to be to spend money for capital projects. We’re getting ready to renovate the landscape at a local bank. In previous years, they shot down the prospects of doing that.”

know your numbers.

For MSE Landscaping Professionals, 2017 marked a strong year for business. The California-based company even sought help from an outside firm to get a new perspective on its profitability this past year.

“We’re a small business, and we’re not accountants,” says Mike Seymour, president of MSE Landscaping. “We understand numbers, but we wanted to be very intentional about analyzing our profitability.”

MSE Landscaping has been in business since 2007, and Seymour says the company has continued to grow since it started. The company has about 70 employees and makes about $4.5 million in revenue.

MSE Landscaping serves customers in the San Diego and Los Angeles areas with divisions for landscape maintenance, landscape enhancement, design/build and urban tree management services.

Through the study, Seymour wanted to make sure all four of the company’s divisions were profitable and that one single division wasn’t the only moneymaker.

“We just finished and the result is that our net profit is 19 percent, which is outstanding,” he says. This is up one percent from last year, where the company made a net profit of 18 percent.

The study showed that each of the four divisions was profitable this past year. He says its maintenance division was least profitable and its enhancement division was the most profitable.

Although MSE Landscaping’s maintenance division had the lowest profits, that division managed to grow the most this past year. The maintenance division achieved about $2.5 million in revenue by itself.

Seymour adds that when this division does well, it attracts more business to the company’s enhancement and design/build segments.

Seymour raised prices the last couple of years as a result of new services offered and the escalating cost of living in California. This has shifted the clientele the company serves.

Today, MSE Landscaping focuses on serving customers willing to pay a little bit more for quality work. While the company faces additional costs such as higher minimum wage costs and surging insurance costs, profitability still increased a little because the company raised its prices.

“What’s been interesting is regardless of what situation we face like a drought, that created a new market for us,” he says. “Everything from drought-tolerant plant material to converting irrigation systems to drip irrigation. While our market has changed, revenue is still good as each of these challenges presented an opportunity.”

Hammersmith is a freelance writer based in Ohio. Smalley is an associate editor at Lawn & Landscape.