It can be difficult to take the pulse of an industry with hundreds of thousands of owners, employees and suppliers spread across not only a vast geography but also dozens of service segments.
But to sum up the state of the landscape industry in 2012, we have to say it’s getting better. Generally, sales and profits are up, companies are hiring and consumers are spending again. While the economy isn’t thriving the way it was a few years ago, top contractors have found ways to gain market share and continue to grow regionally.
This year, with help from independent research firm ABR Research, we surveyed more than 600 landscape contractors from across the country and from diverse service segments. We combined those data with interviews with dozens of other key contractors to put together this year’s State of the Industry Report.
Inside, we’ve combined our research and reporting to highlight the key issues and challenges facing core services in the green industry.
Contractors across the country continue to report similar challenges, regardless of market, service breakdown or size: downward pricing pressure, trouble finding good employees and difficulty in growing their market share. The bottom line is that most regions of the country are still take-away markets for landscapers.
A majority of the industry – 66 percent – still inks less than $500,000 in annual revenue and nearly half post net profit margins of less than 10 percent. But, more companies predict higher margins and higher gross sales for 2013.
One of the main challenges this year was the weather. Starting with the winter of 2011, which pinched the cash flow of anyone who relied on pushing snow, and ending with one of the worst summers on record, the weather in 2012 was not kind to contractors. But such a damaging drought has opened up opportunities for contractors offering resodding, turf renovation and planting services.
Combine a year’s worth of bad weather with a presidential election that focuses mostly on a still-foundering economy, and you get a lot of worried small business owners. Among the top concerns in the minds of landscapers this year are fuel prices, the rising cost of health insurance and consumer confidence.
On the positive side, two factors are coming together to indicate the potential for more mergers and acquisitions in the coming years. The average age of owners continues to increase, as does the interest of private equity firms in the green industry. That means more investment capital and more owners thinking about how they’re going to exit their businesses.
But with all the challenges, tough weather and uncertainty in political climate, contractors remain optimistic. Eighty-nine percent of our survey respondents say they are confident that the landscape industry will grow next year.
And while an optimistic industry is good, it also helps to have some money in the bank. And our research shows that these good feelings are based on real growth: Average revenue per company is up by almost $100,000 compared to last year. In 2012, the average landscape contractor will net $896,446 – about $95,000 more than they reported in 2011. Overall, net profit was 11 percent, and contractors report it will remain about the same next year, rising to a predicted 12 percent in 2013.
So read on to find out in detail what’s happening in your industry, and what you can expect next year. Good luck.
Cover Feature also includes:
|A high bar||Company breakdown|
|A building year||Sales stat shot|
|Weathering 2012||Service breakdown|
|Cautious optimism||Top concerns|
|A light in the distance||Looking ahead|
We asked how contractors are planning for 2013 service offerings. Here’s what they said they’ll have on tap for their customers.
If you could fix one economic challenge to help your business in 2013, what would it be?
If you do, what percentage of your revenue does the franchise bring in?
Do you operate a green industry franchise like lawn care or maintenance services?
Not everyone offers just core services like maintenance and design/build. Here’s how secondary services stack up.
Which of the following services does your company offer?
Andrew Kerin was hired as CEO at the Gaithersburg, Md.-based Brickman Group this summer, bringing a fresh set of eyes to the maintenance giant’s executive suite. Kerin moves to Maryland from the $12 billion Aramark Global Food, where he was group president. Before that, he was vice president with facility services firm Ogden Corporation.
We sat down with him shortly after he joined the company to talk about what he brings to the industry giant, the future of facilities management and where he sees the company growing.
What made you want to join the landscape industry? So several things, it’s always been important to me to be involved with work that matters both to the people that do it and the people it serves. Creating beautiful landscaped environments in various settings is something that people can be very proud of, because it has great meaning. It’s also something that consumers value – whoever they may be – corporate campuses, retail settings, residential settings, universities, hospitals. Doing something that leaves an imprint and enhances the environment is something that I have tried to stay involved with. There’s a lot of emotion and a lot of passion around it, and like I said, a lot of pride in the members that do the work, and a lot of enjoyment of those that receive the benefit of it.
Brickman exists toward the top of the food chain in the landscape industry. Where do you plan on taking the company from here? So to continue on the thought, I came to Brickman because of the industry that I admire greatly, but more importantly because of the values of Brickman – its’ honesty, integrity, its commitment to those people it serves. It’s got a leading position in the space, it has a great foundation, and there’s a lot to build on. It’s done a great job in its history, but we always want to continue to understand how we can better engage and provide an opportunity for our people. Continue to deliver the exceptional service and continue to evolve. This is clearly an evolving time, and as a leader you want to stay on the forefront of that. And continue also to be even more involved than they have been in the communities and localities that we work in and where our people live. My vision for Brickman is to accelerate its growth into the future, and to continue to be the preeminent landscape maintenance and snow removal company in the country.
Does your experience and background position Brickman to become more of a facilities maintenance company? My goals for Brickman and Brickman’s goals are again to continue to be the preeminent, industry-leading landscape maintenance and snow removal company in the country. My background around the ability to work with a variety of different customers in various markets, work with people in a distributed business that provide service work in communities that you can attract and retain people, those are some of the broader skills I try to bring to the organization, as well as a great passion for service.
How will you deal with Brickman’s perception in the industry? I will tell you that Brickman in my opinion has been committed to maintaining the right position in the industry, has continued to be a leader, and that will continue to be a focus of mine.
Part of the reason that I joined Brickman is because I believe that the values they have are very strong and resonate in the industry. We have an obligation to be stewards of the industry because of our position.
What’s your schedule look like in the next six months? It’s very important to understand those you lead and those that you serve. So, I have a very full agenda over the next 60, 75 days to really do a listening and learning tour and work very hard to understand how we can continue to engage our folks, continue to better serve our customers … and to understand the broader industry dynamics so we can be best positioned for our own success. I will be traveling around the country visiting with all the stakeholders that are involved with Brickman – our people, our customers, our suppliers, industry experts, etc.
What are you most looking forward to? I came with several goals. In the service business, the thing I most look forward to is when you can lead a great organization and you can grow and have a great strategy, you can change people’s life trajectory. There’s no business like the service business and the landscaping business in particular where what we can do is help people improve, learn, develop, grow and change their life trajectory.
No. 2 is, your customers vote by the business they give you, by how long they keep you and the amount of opportunity they create. You have to stand for being the most valuable provider in the industry, so assuring that we understand our customers’ needs in such a way that we can be the highest value provider.
Thirdly, take all that and ensure that we’re good stewards of the industry, but also good stewards to the communities in which we live and work.
Where do you see the company’s growth coming from in the short-term? I think the opportunities for growth in this industry are very significant. There are opportunities to do more for the customers you serve today. There are opportunities to find customers you don’t serve today that have a desire for enhanced landscape environments and more effective and efficient operations, and I think there’s certainly enough fragmentation in the industry that when you find organizations that have talent and a footprint … that there are opportunities for acquisitions as well.
As a rule, I don’t like to do wholesale revamps of the magazine. Instead, I try to incorporate the changes you ask for as soon as possible, so you’re always getting exactly what you need from us.
So, not to worry: I didn’t blow up the magazine and start from scratch, but I did incorporate a few changes to improve it. Starting this month, we’ve updated the fonts and general layout of the magazine to make it easier for you to find what you need and to read it quickly. And, our coverage for the rest of 2012 and into 2013 will focus on the most pressing issues our readers have told us they want. For example:
• We’ve expanded our popular Best Practices operations profiles, and combined them with other segment-specific coverage, so you’ll have dedicated sections for maintenance, irrigation, design/build and lawn care (those start on pg. 35);
• As part of our irrigation section, we’ll have columns from a team of industry experts from ValleyCrest Cos., including Richard Restuccia, Alan Harris and Martha Golea (pg. 75);
• To keep tabs on (and give advice on how to take advantage of) an increasingly active M&A market, we’ll have quarterly contributions from former Co-Cal Landscape owner and Leadership Award winner Tom Fochtman starting in November;
• Beginning in January, we’ll have 12 months of dedicated technology coverage;
• We’ve revamped our Market Insight Council (listed below) to add members from more diverse backgrounds, businesses and areas of the country.
I’ve always thought that my job is to find the most interesting and useful information I can and share it with you however I can. At the end of the day, you should be a little smarter after reading through these pages, and should have found a practical idea or strategy that you can put into place in your company right away.
These changes help focus our energy, but our mission at L&L remains the same: to bring you the best stories to help you run your business better and more profitably.
If there’s something else you’d like to see in these pages – a story you want us to tell, a perspective we should include – let me know. Thanks for reading.
– Chuck Bowen