State of the Industry Methodology
A random sample of 18,639 subscribers to Lawn & Landscape magazine were selected to participate in this research project conducted by ABR Research, a nationwide independent research company. E-mail messages were sent out to the sample group between Aug. 6 and Aug. 23. A total of more than 600 surveys were completed. The margin of error based on these returned surveys is calculated to be no greater than +/- 4.0 percentage points at a confidence level of 95 percent. All research in the State of the Industry report is drawn from this survey.
We ask about revenue every year, but this is the first year we asked if contractors would actually make any money at the end of December. A vast majority say they will – just one in 10 owners said they would end up in the red. But when we break down the data by relative size of company, we see smaller companies, on the whole, are less profitable than large ones: Eighty-six percent of companies grossing less than $200,000 turn a profit, while 94 percent of companies making more than $200,000 do.
About half the industry has more backlog this year than last year across all services. Just 20 percent of companies have less and a third have about the same. Those numbers look a little worse for smaller companies, which when broken out show 22 percent with less work in the pipeline and 35 percent have the same. Of larger companies, 54 percent have more work on the books and just 14 percent have less waiting than last year.
Larger companies are more reliant on construction, but are also more diversified in terms of revenue from each service – they do more lawn care and less maintenance than the average contractor. Smaller companies bring in the majority of their sales from maintenance contracts and rely less on lawn care and irrigation to balance their P&L. Niche services like snow and tree care get about the same attention regardless of company size.
Residential service still is the bread and butter of the average landscaper, producing two-thirds of sales. Commercial work (here different from HOAs and government contracts) makes up about a quarter of the average top line. For smaller companies, those numbers are thrown into higher relief: A full three quarters of sales come from single-family homes for companies earning less than $200,000 a year. That number is just more than half for larger companies, which show slightly more diversity in their clientele.
These data are on par with what contractors reported in 2012. Maintenance again ranks as the fastest-growing service in the industry. And while construction sales are up in many parts of the country, contractors are hesitant (or unable) to scale that segment the way they can for recurring revenue businesses like maintenance, lawn care and irrigation services.
Alternatives to traditional gasoline fuel (the perennial top concern among landscapers – see “Top worries,” below) have become more and more prevalent as the price of gas continues to go up and up. The top choices among contractors are propane and diesel fuel, which have been accepted by about half the market. Diesel remains the favorite, as it’s readily available and can be used easily in equipment and trucks alike. Despite some evangelists, propane hasn’t taken off quite yet. Widespread availability, cost of conversions and trust in its performance are likely keeping more contractors from trying it out.
Fuel prices top the list of contractor concerns every year, and stress makes its second showing in the top three in 2013. Compared to five years ago, housing concerns and the credit crunch have dropped toward the bottom of the list and aren’t weighing heavily on landscapers’ minds. Worries about H2B rank dead last on our list of 21 choices. As the program has become more regulated, it’s become not just more difficult to get workers, but more cumbersome and expensive as well.
Overall, the vast majority of owners keep their financial information private. By and large, smaller companies are more concerned about keeping P&L numbers secret, with nearly nine in 10 owners saying they don’t share with employees. As those companies grow, however, that number drops to about eight in 10.
About half of landscape contractors predict they’ll end the year with net profit at 10 percent or better. The national average of all contractors is at exactly 10, and that average remains the same for large and small companies alike. Companies grossing more than $200,000 tend to be more evenly distributed, but have the most owners between 6% and 15%. Those companies grossing less than $200,000 show their largest concentrations at the lowest, middle and highest points of our scale: less than 4%, 10%-15% and more than 20%.
Tree care, lawn care and construction saw the best performance for owners in 2013, with more growth in up markets than contraction in down markets. Irrigation, which includes service and installation, showed promise as well, whereas maintenance was a wash.
No surprise here: A full quarter of owners say they would improve the quality of their labor pool if given the opportunity. A close second is customer cut-backs and cancellations. Fewer owners cited healthcare challenges, consumer confidence and the housing market as in years past, which shows a concentration by owners on the problems they can solve and less focus on things beyond their control.