Landscape leaders share how they stayed in the new home construction game.
New home construction was a major liability for some landscape businesses that were heavily vested in the sector when the market dropped out in 2008 and continued to stay quiet for the following several years. But not all regions experienced the bust. And some landscape firms servicing these accounts continued to thrive, even in the tough times.
Lawn & Landscape spoke with a few landscape companies that weathered the storm to learn how they do this type of business differently today.
Reverting to renovation
Running a lean operation and flexing services to accommodate builders’ evolving needs in the economic downturn has kept new construction in the black at Prairie Tree Landscaping.
Several years ago, when the high-end builders that Prairie Tree works with began selling more renovations than new homes, the landscape firm adjusted its offering to those clients. “A lot of the builders that didn’t go under transformed into renovation companies, so we followed their lead,” says Eric Weishaar, president of the Elkhorn, Wis.-based firm.
Weishaar, a 20-year industry veteran, started Prairie Tree in 2009, a bleak time in new home construction and real estate. “It was probably the worst time,” he quips. “But I saw an opportunity that (other landscapers) would be downsizing and scaling back, and I thought it would be a good time to start up and grab some market share.”
Weishaar established relationships with several reputable builders in the custom home sector, whom he says weathered the storm “just fine.” Prairie Tree continues to work with those builders, and Weishaar says the market is starting to “reverse a bit.” Prairie Tree is working with a builder now that’s developing a five-parcelhigh-end neighborhood. Weishaar’s firm will handle the landscape installation.
But up until the past year or so, Weishaar says there has been a limited amount of new home construction. The ratio of renovation projects vs. new home landscape install shifted from 50/50 to about 70 percent renovation during leaner times. Now, Weishaar says the pendulum is swinging back toward more new home projects.
Being the go-to landscaper for builders working on home renovation projects kept Prairie Tree busy during tough times. “Builders would put on an addition to a client’s home, and we’d come in and install a patio or clean up the landscape,” Weishaar describes.
This allowed Weishaar to keep key people on board for installation projects while continuing to fine-tune operations so the company could run better. Weishaar says maintaining a low overhead has been critical for accommodating the stretched-out payment terms generally associated with new home landscape install.
“By nature, we have had to run lean because we started (the business) when the economy was challenging,” he says. “We had to be smart and savvy. And then, we did not have to grind the brakes like other companies that grew very big, very fast through the mid-1980s through early 2000s. When the brakes hit, those companies were not able to pivot or adjust.”
Prairie Tree was born lean. This has allowed the firm to accept beyond-30 day terms, which are the norm with developers, Weishaar says. “If we were 70 or 90 days out from being paid on a project, it did not hurt us as much,” he says. “And a lot of our builder clients appreciated that we were willing to work with them. We could say, ‘I get it. I understand you are waiting to get paid on a project, and so we can work with you on that.’”
Another reason Prairie Tree could afford to stretch when builders needed that payment leniency is because Weishaar was, and still is, not focused on hooking the biggest projects out there. “I’ve seen companies get really excited about $50,000 and $100,000 jobs, and that’s great, but you have to finance that job,” he says.
That $100,000 job will likely take a good month to get going, and materials must be purchased in advance. On the other hand, Weishaar can produce five $20,000 projects and reach that six-figure number while spreading out his risk and staying within his credit line. “It’s easier to finance a job that size when you are growing than it is a big monster job,” he says, adding that then the firm has five happy clients instead of just one.
In the end, diversifying and maintaining realistic project scopes has resulted in Prairie Tree’s continued success. “If you take a little hit on one or two of those smaller jobs,” he says, “you’ll still be able to survive.”
Hustling for homes
“Our diversity saved us,” says Chris Lambert, president of Carolina Outdoor Care Inc., in Raleigh, N.C. And, so did his mantra to “never stop hustling.”
Lambert says he has never worked harder in his business than today – and during the last several years. He believes in another year, the company should be in a “good position” following 2007, when revenues dropped by $600,000.
Lambert responded to the loss in new home landscape install business by leaning operations, pulling back from contracts with tract builders – many of which had halted construction anyway – and developing relationships with custom builders, where projects produce larger profit margins. (Tract home landscape jobs maybe brought in a 10 percent margin.)
Another saving strategy: Carolina Outdoor offers a range of services, including irrigation, lighting, drainage and tree services. “We wouldn’t have made it otherwise,” Lambert says bluntly.
Carolina Outdoor has always worked in the new home construction market. In the heyday, a quarter of the overall business was new home landscape installs and 45 percent of those clients were tract builders. Today, developers represent about 10 to 15 percent of the firm’s business, Lambert estimates. Andmost of those are custom builders.
“With custom, you get larger jobs and you’re not putting out your basic builder packages,” he says. “That’s more enjoyable for us, and you can add some flair to the landscape.”
There’s movement in custom home building, too, but the price tags on homes (and their landscapes) are lower than before. For example, Caroline Outdoor is working with a builder who purchased a foreclosed development that was slated for homes priced $600,000 to $800,000. That land is being redeveloped and prepared for new homes in the $300,000 to $450,000 range.
“The lighting systems need to be redone,the irrigation has a host of problems, and the landscape was done and now it has weeds,” Lambert describes of his company’s renovation efforts on the land. For now, the work his firm is doing is focused on the infrastructure. But there’s a possibility for more.
Meanwhile, Carolina Outdoor is careful about choosing its relationships with builders, and the company does a few things differently after the fallout. For one, Lambert keeps a close eye on change orders. “They can make or break a company if you don’t track the extra work you do, document it and get it signed off – and we could still do a better job of this,” he says.
The change orders slow up payment, he adds, and they can already lag. Lambert speeds that process by delegating invoicing to office staff so he isn’t trying to balance bookkeeping along with everything else.
Managing man-hours is another key to success in new home landscape installation, Lambert says. The cash outlay for materials to start jobs can require significant financing if the dollars aren’t in the bank. “I didn’t manage that nearly as well as I could have earlier on,” Lambert admits. “We ask for deposits – if you don’t ask, you don’t get.”
Meanwhile, Lambert explains that while his business dropped by $600,000 back in 2007, the company did more with less and had “a couple of decent years” in the downturn. “We were more profitable, but we were still paying for our sins of not being prepared for the downturn,” he says.
The company just celebrated 20 years in business, and Lambert says the business is growing. “2013 was a good year.”
Servicing single homes
The housing boom and bust never really shook central Nebraska, where Mike Johnson runs his firm, Johnson Lawn & Landscape. “We’re more even-Steven here,” Johnson says. “We don’t have those ups and downs like the coasts.”
That’s not to say his region escaped any impact from the economic downturn, especially the real estate bust in 2008. Business in the new home landscape install sector did slow down. And during that time, diversity was a key to staying busy, as was a willingness to travel around the area for work. Kearney, where the company is based, is a town of 30,000 people. “If projects are going on 40 miles from us, we certainly look at doing those.We can’t always hang our hat on staying here in Kearney,” Johnson says.
Kearney is where Johnson has grown valuable relationships during his 17 years in business. He began doing new home construction installs about 15 years ago, but the builder landscape is different in Kearney. Yes, there are tract builders raising developments – currently, there are three in the works with homes starting in the $200,000 range and extending to $800-plus. But Johnson isn’t contracting directly with builders to win landscaping projects. Homeowners are responsible for finishing off their landscapes, and Johnson works with them directly. (Builders refer his company to those homeowners, he notes.)
This project-by-project approach to new home construction install changes the financial picture in a big way. For one, the materials outlay is no more than with any other residential design/build project. He’s not financing materials for 15 homes before getting paid. Also, these projects tend to be more gratifying and come with better budgets than tract home work, Johnson says. “The new install projects we want to do are start-to-finish turnkey jobs,” he says. “We do the sprinklers, landscape, everything.”
The problem is, too many homeowners run out of money come time to landscape. And, Johnson adds, in Nebraska, “you have a lot of DIY-ers, so it’s tough to capitalize on some of those new construction jobs.”
The company also does new landscape installation on commercial projects but what Johnson likes about new home construction is turning a blank canvas into a property that makes a homeowner proud.
“We love to really show off our talent and if the homeowner is willing to see the value in their landscaping as much as the rest of their house – if given the right budget – we can install a landscape for them that outshines the neighbors and stands out about town,” Johnson says.