Atlanta - A Snapshot: Atlanta Market Report

In fact, 13 members of Lawn & Landscape’s 2000 Top 100 list have Atlanta locations. In addition, the consolidation wave has swept up at least a half dozen more Atlanta-based landscape firms.

To better understand this booming market, Lawn & Landscape surveyed 1,500 readers in the area to gain a sense of their businesses and the composition of the market as a whole –and what a booming market it is. Respondents’ average 1999 revenue was $681,400, which represented 34 percent growth from 1998.

With the uncertain economy staggering through the tumultuous last 12 months, however, Atlanta contractors have noticed a difference in business. "I don’t feel like our phone rang last fall like it normally would, and the same is true for this spring so far," related Michael Sieger, president, Planting Concepts. "The average installation job we’re getting now seems to be $8,000 to $10,000 instead of the $20,000 jobs we were doing last year because people don’t feel as rich as they did a year ago. Now they’re more interested in phasing in the landscape."

"Consumers seem nervous," agreed Scott Van de Velde, co-owner, Davis Landscape. "They’re debating whether or not to proceed with the big projects. Plus, we’re having to bid on more residential jobs that were handed to us in the past."

Fortunately, Van de Velde said Atlanta’s population growth throughout the 1990s mandates continued commercial construction. "The commercial side of our business is picking up because now companies are bringing in the services, shopping and offices to catch up with residential growth."

SURVEY SAYS. Interestingly enough, however, the average growth rate projected for 2000 from 1999 was 19 percent when we conducted the survey in the third quarter of the year. About 70 percent of respondents expected to enjoy some revenue growth last year, while 22 percent predicted their revenue level would remain consistent with the previous year, and 8 percent expected a drop off in sales.

Not surprisingly, respondents reported that a majority of their revenue (62 percent) comes from the single-family residential market. Commercial/industrial accounts are the source for 27 percent of respondents’ revenue, while 9 percent are from multi-family accounts and 2 percent from institutional clients.

In fact, 92 percent of Atlanta contractors serve single-family residential accounts, and 17 percent of the respondents service only single-family residential accounts. Meanwhile, nearly one-third of Atlanta contractors service the multi-family market and 77 percent compete for commercial accounts’ business.

While contractors in this area offer an average of 3.3 services, their most popular service offering is mowing/maintenance services (offered by 74 percent). This is followed by landscape design/installation (66 percent), tree trimming/pruning (52 percent), chemical lawn care (50 percent), tree and shrub care (38 percent) and irrigation installation/maintenance (30 percent).

Diverse service offerings in particular may help some companies deal their customers’ decreased budgets. "Landscape maintenance seems to be cooling off pretty dramatically," observed Van de Velde. "We’re getting into bid situations on larger developments, and even the small commercial and some residential clients are cutting back."

A tighter market forces pricing competition, unfortunately, and many survey respondents noted that TruGreen LandCare’s consolidation of the Atlanta market has exacerbated this problem.

"TruGreen’s pricing scheme seems to be centered around picking up more business to justify the acquisitions," related Sieger, who has been in the Atlanta market since 1983. "I don’t see prices with a margin that would warrant being in this business."

"I don’t know how TruGreen is making a profit at these prices, but they’re definitely lower than the rest of us on maintenance pricing," added Christopher Morris, president, Environmental Accents.

Van de Velde is concerned that other companies will follow suit, creating a dangerous price-cutting cycle. "There may be a lot of companies bidding for some of this work, and they won’t be around much longer if they keep that up," he related. "Times like these call for tightening up your business practices."

His company evaluated its overhead 18 months ago, which led to higher profitability last year. "We took the waste out, so now we know exactly what things cost and what we can install jobs for," he noted, adding that such an evaluation requires carefully examining every expenditure. "Look at every accounting fee, every advertising fee and every other number instead of just total labor. If you’re thinking about getting new computers, do you need them? What’s wrong with the one you’ve got? The same goes for equipment and trucks."

Employees are obviously the key to any company’s growth, which means front-line personnel are in demand in a market filled with expanding firms. The average respondent employees 10.3 full-time employees.

Yet labor is still scarce. In fact, respondents said that, on average, they would hire 2.2 more employees immediately if they had an unlimited labor pool.

For some companies, general labor isn’t as challenging as finding more experienced field personnel. "We’ve got all the labor we need," related Van de Velde, adding that he has about 15 employees throughout the year. "The hard position to fill is the upper manager who run things in the field."

Nearly 60 percent of respondents said their company employs at least one foreman, and the average salary is approximately $30,000, with a range of $20,000 to $42,000.

The 67 percent of respondents who offer mowing services said they pay their entry-level mower operators an average of $8.30 an hour with a range of $6 to $11 an hour. Only 30 percent of respondents employ lawn care spray technicians, and they pay them an average of $10.50 an hour and a range of $8 to $14.50 an hour.

FUTURE FORECASTS. Despite the challenges associated with labor shortage and slowing growth, Atlanta-area contractors remain optimistic about their future. When asked to rank their optimism on a scale of one to seven with seven being the highest, the average response was a 5.7.

"People are just discovering what landscape work can do for their property, so I think the industry will continue to grow," commented Morris. "We may have to go through a slowdown since the economy has been on an upswing for awhile, and that might mean not getting some of those extra jobs here and there. If companies have enough clientele and have enough monthly maintenance work, that can carry them through this."

"I don’t know what type of growth we’ll get, but I don’t think anything will happen that will really hurt the industry," agreed Sieger. In tougher times, he said contractors can expect to see more emphasis placed on relationships and referrals.

"At some point, general contractors figured out that if they had higher quality subcontractors handling their work the job would go smoother, they can finish up earlier without the problems and they make more money," Sieger explained. "So the market is moving more in the referral direction now."

"I’ve been here since 1991, and everyone is talking about a slowdown happening right now," noted Van de Velde. "But I came from Boston, and that was a slowdown. This is just more of an opportunity to relax a little bit."

Despite their optimism, there is concern for companies that aren’t prepared to survive in a more challenging market.

"Companies could face problems if they’ve built up too much equipment inventory," remarked Morris.

"There are a lot of landscape companies out there that have never been through a slow time, and they might not be in a position to weather a storm like companies who have done this before," added Sieger.