Joel Allen looks at bad weather as an opportunity, not a problem.
Sure, it’s irritating to rework a crew’s schedule at the whim of excess rainfall, which is uncontrollable. But Allen, the owner of Selena’s Landscaping in Pennsylvania, reminds his team that rain makes plants grow, and lawn care operators will have more work to do and can charge even more if weeds have grown to a certain height.
What’s more, he still asks his crew to come in during bad weather to use that time in different ways. He will go over safety protocols, lead instructional meetings to correct mistakes and evaluate equipment with his employees. And as for catching up with rained-out days in the field, Allen sets aside money when he creates an annual budget for overtime. For his six seasonal employees, Allen usually amounting to roughly what he paid out the year before.
“If it’s raining… it gives us a better chance to get more in-depth into what’s going on with our equipment, changing things that we might’ve missed, going over safety rules, things of that nature,” Allen says. “When bad weather happens, it’s actually good weather because it gets you to go indoors to do things you don’t normally do.”
Not everyone shares the same rosy outlook on wet seasons, but most contractors have to deal with the elements in some way. Whether contractors are out east like Allen or closer to the Pacific like Aurora Outdoor Power’s Fred Joyner, planning ahead can prevent headaches that last all season long.
Joyner says they experienced one of the most average years they’ve had in Oregon in recent memory – no harsh heat, no overly rainy weather. However, this was a departure from the norm, meaning the weather has been entirely unpredictable for a long time. To navigate this, Joyner says landscapers have to “get creative.”
“In Oregon, no matter what happens, come hell or high water or if the dinosaurs come back, it’s going to start raining Oct. 30 and it’s going to stop March 30,” Joyner says. “All of our plant material and lawn grasses are used to a lot of water, so if you hit a drought by the end of May, it’s not good. When we go from really wet to really dry…it dries out our plants.”
Joyner owns an outdoor power equipment dealership, but he remains a fully licensed landscape contractor and has been since 1980. He remembers a time from when he worked at a larger national company where they had to somehow salvage $3.5 million in sales from fertilizer despite a severe drought. As people called to cancel those purchases, he replied by telling them that if they made their program payments like normal, he’d make up for it with complete fall lawn renovations.
“We aerated, overseeded, fertilized, and the fall rain came. Everybody’s lawn came back and it was a win-win,” Joyner says. “It didn’t cost us that much to do a renovation… but you had to sell (the service).”
Doug Cincurak, who runs his landscaping company out of Green, Ohio, says he’s no different than anybody else – excessive rain forced him to push back plenty of jobs this season. Some service got shoved six weeks down the schedule because there were a few weeks they didn’t even mow all week long. They’d spend twice as much time on each of those properties without being able to charge extra for it, so they’d eat those costs.
“We certainly weren’t able to get done the amount of work we wanted to get done in the spring,” Cincurak says. “We lost quite a bit of business. You can’t plan for that. In all reality, you’ve just got to roll with the punches. If you’re not working, you’re not making money.”
Cincurak recommends saving up money during the offseason to plan for rain outs, especially if a company is able to plow snow in the winter as a means of making additional money. It didn’t quite work out for him this season, as there were several weeks without snow at all in his area, but it’s traditionally a way to navigate bad weather during the spring and summer.
“That in and of itself compounded the issue of the spring because we didn’t have the working capital to go forward from last year to this year,” Cincurak says. “I did far more salting than I did snow plowing… and I didn’t even make enough in March to pay my March bills. If I didn’t have enough money left over from January and February, I wouldn’t have been able to pay my bills.”
“When bad weather happens, it’s actually good weather because it gets you to go indoors to do things you don’t normally do.” Joel Allen, owner, Selena’s Landscaping
NOT GOING AWAY.
As EJ Lawler’s EJL Landscaping in New Jersey dealt with several rain delays this offseason, he was just thankful there weren’t many complete rainouts like usual.
“We’ve always had to deal with it, but I will say that it’s gotten worse over the years,” Lawler says. “It cuts down on our bottom line because there’s a lot of down time for us to pay guys to either sit around or do maintenance around the shop.”
Explaining these delays to some clients has been difficult who don’t understand that everyone is experiencing the same setbacks. Sometimes they’ll forego his scheduled services to run with another company, but largely, most get that there’s nothing a company can do to prevent bad weather. It’s simply how they handle it that’s important, Lawler says.
“Sometimes, it’s playing the jockeying game of moving some stuff around or working later days to get to the customers that are going to be the problem ones,” Lawler says. “You kind of shuffle things around because you know which customers are going to complain more than others.”
Cincurak has noticed much of the same trend regarding bad weather. In fact, this was the first year he didn’t skip a week because the grass was too dry; often he’ll get some brownout and the grass will be too brittle, but has been seeing less of that in recent years.
He also says some properties he’s always serviced now have standing water all season long, even in spots that weren’t problems when they first signed those clients. But he remains relatively steadfast that companies who are willing to put in the work or creativity to navigate bad weather can prevail.
“It’s been getting wetter and wetter and wetter as the years go on,” Cincurak says, “but this is now par for the course. The strong people and the strong companies are going to survive, and those weaker companies are just going to end up going by the wayside.”
Looking back at 2019, Lawn & Landscape has reported on more than 20 mergers or acquisitions this year alone, and by the time you’re reading this, that number will have increased.
The success this industry has seen over the last several years has also caught the eye of outside players like private equity firms, who know one thing is for sure: there’s money in mowing.
“Knowing that you can actually develop a game plan to make an acquisition build value by improving the operations of the business and adding acquisitions and then successfully exit within a reasonable timeframe…is a message to all the other investors out there that landscape is probably a pretty good investment,” says Ron Edmonds, consultant with the Principium Group.
We talked to a few green industry consultants to find out what’s keeping the business going and if the trends will continue into 2020.
Where’s the money?
“There hasn’t been anything like this before,” says Tom Fochtman, CEO of Ceibass Venture Partners. “In the past five years, there’s never been a better time to be a seller of a landscaping company.”
At the moment, there are about 20-25 active buyers in the industry, Fochtman says. The buyers are backed by private equity companies who have a good amount of capital to burn, and they want to spend it on landscaping companies. “There’s never been so much (money) available,” he says.
Jeff Harkness at Three Point Group says the number one force driving this M&A surge is private equity companies still raising capital. “(The private equity companies) have people who want to invest,” he says.
The public companies, like BrightView, also have shareholders who want to see them grow in size and revenue because that only increases their price per share, says Greg Clendenin of Clendenin Consulting.
“They care about their company’s value in the eyes of investors right now, and investors are buying to grow the companies,” he says. Fochtman says while private equity firms see that it’s a prime market to invest, the firms are likely invested for the profit margins that come along with the type of revenue streams the industry offers.
“These private equity guys are in it purely for the profit and they're taking the profit and getting out,” Fochtman says. And, while it’s a predictable move, he says the industry is seeing younger companies, about five to seven years old, starting to sell as well. “There's a couple examples of these recently formed landscape holding companies now selling, so the market's still pretty prime.”
With the influx of investors coming in, Edmonds says the demand by investors is currently higher than the supply of landscaping companies readily available to buy, which means some of the appeal for these investors has shifted a bit. It’s also opened the door to competition between investors. Harkness says companies up for sale have the benefit of weighing different offers before making any final decisions. Multiple offers are the norm now for a company on the market.
Investors are looking for recurring revenue, as it’s a proven and reliable source of business. In the green industry, this comes in the form of commercial maintenance, a precedent that Fochtman says was set back when Brickman and ValleyCrest (now merged as BrightView) were purchased, putting commercial landscaping on the map. Clendenin says he’s typically heard buyers asking for companies with a 70 percent maintenance and 30 percent design/build split.
“There are transactions being made where a clear percentage of the business that is pure maintenance is lower than what you might've seen sometimes in the past,” Edmonds says. Edmonds referred to a deal that happened last year that ended up involving a company that was more design/build than maintenance, but still proved to be well worth it. “At one point a few years ago, you wouldn’t have seen anything like that,” he says.
And, going along with the changing tides of the M&A market, he says years ago investors didn’t put much value into the snow industry – something that is also starting to shift as the market becomes more saturated with people ready to buy. “The best managed snow companies, along with that landscape maintenance component, is much more attractive than it used to be,” Edmonds says.
The overall market of the industry is also highly fragmented, Harkness says. Combined with the recurring revenue in commercial maintenance, investors are starting to see a return of four to five times their investment – typically two to three times the investment is considered “good” he says.
Ready your business.
Even if you’re not thinking about selling, you should be preparing your business to sell, says Clendenin. Whether you follow through with a sale or not, readying your business will only cause growth.
“If you get in shape to sell in order to be the most attractive, you’ll grow,” he says. “(Once you do that) you’ve really got your foot on the gas and you'll do better now, but you'll be more attractive as an acquisition later, too.”
With that in mind, Harkness says a lot of companies aren’t where they need to be in order to secure a solid sale based on the age of the business and its earnings alone.
“I don’t really think the luster is going to fall off of commercial landscape anytime soon. It may just slow down a little bit.” Tom Fochtman, CEO, Ceibass Venture Partners
The elephant in the room.
If you’ve watched the news you know we’re supposedly on the brink of another recession. With money moving in the green industry, the experts don’t seem to think the movement in the market will take a hit. In fact, most agree that this industry is, in a way, resistant to the downfalls of an economic recession.
“I don't really think the luster is going to fall off of commercial landscape maintenance anytime soon,” Fochtman says. “It may just slow a little bit.”
Edmonds says his long-term outlook for the industry is good, and he sees activity increasing within the next five to 10 years. He’s also optimistic about the market surviving the next possible recession. “In my opinion, one of the reasons that there's this been as much investment in the industry as there has been, is that the industry performed markedly better during the Great Recession than many people would have thought that it would,” he says. It’s no surprise, either, that the appealing part of the industry – the recurring revenue – is what will bolster the market in any sort of economic recession.
“Homeowners will cancel their lawn service and mow their own lawn when things get really tough,” Fochtman says. “But the building owner is not going to start mowing his own lawn…so commercial just has the aspects and those dynamics to it that make it a little bit bulletproof.”
And, there may be a silver lining that comes out a potential recession. Fochtman says he thinks we will see some interest spike when it comes to the residential maintenance segment of the industry. It will be a bit more challenging because of how highly fragmented it is, but Edmonds echoes his sentiment as well.
“I think we will see some figures emerge in the lower end of the residential market, which a lot of people thought would not happen,” Edmonds says. “There’s a lot of money to be made there.” A potential shift of the spotlight to residential maintenance could be due to the marketing efforts those companies push.
Advertising weekly mowing programs can lead to building up a dense customer base, which Edmonds points out circles back to the allure of recurring revenue. He admits it would take a larger player to invest in that type of business, but sees it as a viable possibility.
Fochtman says, “There’s still going to be a lot of capital available and a lot of good deals to be done.”
Red Cedar was founded almost three decades ago by Steve Relyea. In the acquisition, Red Cedar will continue to operate its landscape design, building and maintenance business while selling their arboricultural business to SavATree. Certified Arborists Michael Barker, Owen Henning, and the team of specialists, will merge with SavATree, providing uninterrupted service to clients.
“We’ve shared a territory with Red Cedar in New York for a long time,” said Daniel van Starrenburg, CEO of SavATree. “They have an exceptionally knowledgeable team and we’re excited for years of friendly competition to become a strong partnership.”
With the merger, clients will have access to an expanded range of professional landscape services, including lawn health care, deer browsing deterrence, and organic treatment options.
“Our mutual commitment to high quality care will make SavATree and Red Cedar a great team going forward,” said Steve Relyea. “Our customers will be well taken care of.”
BOISE, Idaho - Cutting Edge Landscape, a commercial exterior maintenance company in Idaho, acquired Community Landscape Services headquartered in Bluffdale, Utah. This acquisition will enable Cutting Edge to expand its position in the Utah market.
More acquisitions are planned to further enhance geographic reach.
Community Landscape was founded in 2005 and provides landscape maintenance, design, installation, and snow removal services to the greater Salt Lake City area. CLS will be re-branded and operate under the name Cutting Edge Landscape.
“We are looking forward to increasing our presence in the Utah market. As the third fastest-growing state, Utah presents a unique opportunity for us with its proximity to our Idaho operation,” said Bob Wheeler,
co-owner of Cutting Edge.
Ben Helton, co-owner, commented, “Expansion into Utah is a natural path for us. Mike and his highly skilled team are a great addition to our operation.”
Mike Wilson, owner of CLS agreed, “Our team is excited to join Cutting Edge. We look forward to continuing to grow the business while utilizing the additional resources and synergies that this move provides.”