A look back at a year of weird weather, sporadic growth and tight prices, and what they mean for contractors next year.
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.
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