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Connecting the dots

Features - Cover Story: State of the Industry

Chuck Bowen | October 4, 2013

Chuck Bowen

We do the state of the industry report every year, and every year we try to make this high-level research report as useful and helpful to our many thousands of readers as possible. In an industry where so many people can be called a landscaper, it can be challenging to wade through so much data to find the most relevant information. And we ask a lot of questions. So, first, to the more than 600 contractors who made it through our entire survey, I want to say, “Thank you.” We quite literally couldn’t have done this without you.

Apart from the data collected in our survey, the L&L editors, frequent contributors and I spend the year talking with landscapers to get a handle on how things are going in the market. The main purpose of this report is to give you an idea of what’s happening across the country to landscapers of every stripe.

Here’s what we’ve been hearing:

From our initial read of the data, things are going pretty well. Key numbers like profitability, revenue and backlog look good. Nine in 10 owners say they’ll end up in the black this year, net profit margins remain an average of 10 percent nationwide, and average yearly revenue is $664,038. For the first time, we asked about average backlog for contractors, and about half reported that they’re ahead year-to-date compared to 2012. Another third of the industry is about the same as last year.

If landscapers could fix anything, they’d fix labor. A full quarter of owners say they would improve the quality of their labor pool if given the chance in 2014. A lack of quality employees is a perennial complaint of contractors, and a close second this year is customers cancelling or cutting back services.

Input costs – fuel, chemicals, labor – continue to rise and the prices contractors charge aren’t keeping pace. So owners are turning toward technology – everything from mobile devices to equipment tracking devices to custom customer management and marketing software. It’s part of a larger trend on efficiency and a focus on how to wring even more profit out of top line revenue.

Gas prices remain the No. 1 concern of landscapers. As a result, more are starting to explore the use of alternative fuels like propane in their businesses. Propane has a small foothold in the market – about 6 percent of contractors use it so far, and use it to power just 3 percent of their equipment – but it’s going to get bigger. Gas and diesel prices aren’t going to go down, and a reliable supply of any kind of cheaper fuel will help contractors budget better.

All of this – difficulty finding labor, prices and stabilizing margins – contributes to owner stress. For the second year in a row, stress appears in the top three worries for landscapers across the country. For the largest companies, it’s tied for second with health insurance costs.

Contractors by and large are legitimately scared of what’s going to happen with the Affordable Care Act. And it’s less because of the politics of the law, but of the uncertainty it causes for them trying to run their businesses. That’s not unique to landscapers, but most everyone I’ve talked to just wants to know what they’ll have to do to comply so they can start planning for it.

The main theme of this year’s report is how landscapers have fared since the Great Recession started in the fall of 2008. Five years later, contractors have learned a lot of lessons.

Many went out of business, and many more had to reinvent themselves to stay afloat. The bottom line is that many landscapers, in the last five years, have chosen or have been forced or some mix of the two, to start thinking more like business owners.

Thousands of landscapers across the country have focused, worked hard and grown in the years since the world ended. Turn the page to read how they did it, and get an in-depth analysis of our 2013 data.

 

– Chuck Bowen
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