A mild winter followed by harsh drought conditions gave maintenance companies a run for their money.
Mike Stewart has about 40 tons of salt sitting in the warehouse at Stewcare in Columbus. The company’s consumption was one-third of the usual, thanks to a spring-like winter and just a handful of snow events.
With snow compromising 25 percent of the firm’s total revenues, and generally providing a financial launchpad to cover the summer startup costs, Stewcare was feeling the burn long before his region experienced a double drought.
Already beat down by a horrible winter (“Horrible meaning we didn’t do any work,” Stewart says), a 45-day period of no mowing in June and July spoiled hope for a rebound. “There is no complete recovery from having a drought two months out of the year,” says Stewart, who had to lay off some seasonal employees as customers were going three to five weeks in between mowings. “We had two droughts, one in winter and one in summer, and that’s a tough season for anyone to handle.”
Maintenance companies across the country report that disappointing weather and sluggish customer spending put a damper on what could have been a better year after roughing the downturn. Most are saying that we’re not out of the doldrums yet – and in an election year, there’s a wait-and-see feeling that seems to be stopping any big moves in terms of discretionary spending.
Serpico Landscaping in Hayward, Calif., planned for a better year in 2012. “We thought things would improve faster than they have … and the year has been quite a disappointment,” says Sharon Hanson, president. Overall the business grew, but they didn’t hit projected numbers. The firm’s homeowners association clientele cringed at the slightest price increase. “We just really expected things to be better, and the fact that it’s an election year has people in a tizzy,” Hanson says. “They don’t know what is going to happen and they are not really willing to move forward with things.”
Burned by Drought. The “double drought” that Stewart described afflicted many maintenance businesses that rely on snow business as profitable revenue bringer in non-mowing months. Adam Linnemann, president of Linnemann Lawn Care & Landscaping, Columbia, Ill., says sales were down the entire fiscal year because of the lack of snow in 2012. The company’s overall sales decreased by 15-20 percent.
But the mild winter did give Linnemann a jump on spring services. “We didn’t get the freezing weather, so we were able to get out there and cut grass,” he says. “That did help a little bit.”
But then the drought came, and in his area it was the worst since the early 1930s. “Most of our maintenance in terms of lawn care halted for up to six weeks,” Linnemann says.
So he kept crews busy in the shop, focused on training and improving systems to become more efficient and profitable. Employee hours were cut back, but everyone stayed on board. Of course, that drove up labor costs and resulted in a net profit that was about 10 percent lower than normal. “The busywork increased payroll but not profitability out in the field,” he says.
This year was the first in 14 where Linnemann did not grow his business. “That’s disappointing, but it was weather-controlled, and there’s not much we can do about that,” he says.
Weather also meant early mowing for Sebert Landscaping in Bartlett, Ill. “We were out the first week of April and we couldn’t even start our spring cleanups,” he says, adding that crews came back later to make up that work.
Shaky Consumer Confidence. Customers are still minding their budgets, and Sebert says he sees pricing in the maintenance industry continue to erode. “Competition is fierce,” he says. “Quality of work has also eroded from what I have seen, and I’m talking about being on the street and seeing the type of services other companies are providing.”
Mainly, Sebert is referring to contractors who jumped into the business several years ago, figuring it an easy entry in a depressed job market. “It makes it tough when you’re trying to sell new business and your competing against a lower price, and while the concern of the client may be quality and price, it always seems like the pricing is the overwhelming decision-maker.”
Hanson experienced the same attitudes in California. And this surprised her somewhat. “In general, people still want the absolute lowest price they can get – they’ve got an attitude of, ‘We are suffering so you guys have to suffer, too,’” she says.
Still, Hanson noticed that some customers who left her service for lower-priced providers are now coming back. “I think they got a taste of what it means when you get what you pay for,” she says.
Meanwhile, the cost of doing business continues to increase: gasoline, insurance, taxes. Hanson succeeded in raising prices ever so slightly. The scant increase barely covers costs, she says.
Sebert is worried that the cost of doing business will become a burden that is unmanageable in the next year given the political climate. He figures regardless of the presidential winner, we’ll experience another downturn.
But Brad Johnson, president of Lawn America in Tulsa, Okla., is optimistic. “Overall it was a good year,” he says of 2012, noting that the company will have beat its budget by 4 to 6 percent by the time the fiscal year closes.
He attributes the increase, in spite of drought, to an early spring that ignited sales. The company as three weeks ahead of schedule and busy in January, February and March, he says.
“I think the economy seemed to be turning earlier on, but hit a bump in the summer,” Johnson observes, adding that the spending he saw in the first months of 2012 didn’t continue past April. First quarter sales were stronger than ever. But the spending spree stopped. “We didn’t add a lot of new customers in summer, and we just didn’t do as we should have in summertime,” he says.
A slower summer didn’t put a damper on the entire year’s performance at Lawn America. And Johnson says this is due in part to rigorous communication with customers. He blogs twice weekly and sends out a monthly e-newsletter. “The bulk of our writing was on how to water properly and deal with the drought,” he says. Customer education has been critical to keeping contracts intact.
Meanwhile, at Serpico Landscaping, an emphasis on business development will continue through 2013.
“We see that as a critical part of our business in the new economy,” Hanson says of driving new sales.
Sebert agrees. “We had a bit of growth this year, and we really focused on our sales and procedures, in general,” he says.
The company fine-tuned its sales presentation and uses iPads to show customers what quality is all about. “And we’re not just showing pretty pictures, we explain who we are and what separates us from our competition,” he adds.
It’s difficult to say what next year holds, but expanding services is one way to deal with this downer year and continue to protect a business.
Johnson says the fall looks optimistic with lots of calls for fescue seeding, aeration and lawn renovation. Linnemann acquired a service from a local florist and is now offering “porch primers” that include large, decorated flower pots changed out each season.
“We’re looking for ways to diversify so we aren’t so affected by the weather,” Linnemann says.