Frustrated by fuel

State of the Industry Report - 2021 State of the Industry Report

Rising gas prices have become a concern, and contractors are trying their best to circumvent them.

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November 4, 2021

Illustration by Michael Marsicano

As prices at the gas station continue to rise, landscape contractors say the increases are irritating but a necessary cost of doing business.

Zack Stratton, CEO of Stratton & Bratt, says the Utah-based company’s fuel bill is reaching $20,000 a week. However, Stratton says he isn’t too worried about the expense.

“For a company of our size, our fuel costs are really just a marginal part of $20 million in sales,” he says. “Even a $100,000 bump in fuel costs doesn’t really move the needle much for us.”

Stratton and Bratt is spending on fuel to power the fleet and equipment needed for crews to be operating at peak performance. During the height of the season, Stratton says there are about 250 employees.

“We have north of 100 trucks, 30 skid-steers in the fleet, mowers, mow crews and the whole bit that goes along with that,” he says. “It’s pretty extensive.”

Over in Healdsburg, Calif., Peter Estournes, vice president of Gardenworks, says high fuel bills are nothing new. But recent spikes in gas prices have been difficult to deal with.

“We’re used to it in California,” Estournes says. “We hate it. Our fuel bill last month was like $5,000 and typically it’s around $2,000 or $3,000.”

In September of 2020, gas prices in California averaged about $3.24 a gallon, according to research by AAA. Now, prices have been steadily over $4 a gallon.

“It’s showing over on the financials, but the reality is there’s nothing we can do about it, and it happens all the time here,” Estournes says of the increase. “We’re already paying the top amount for fuel in California anyway. The fact that it went from $3.29 to $4.39, it’s definitely a bother.”

Working around the increase.

Both Estournes and Stratton say their businesses are working to find ways to ease the financial burden of the fuel increases as best they can.

Years ago, Stratton & Bratt developed a strategy for implementing fuel surcharges when prices began to creep up too high.

“We thought about it six years ago when there was another big spike in fuel costs. We got together with the team and added at the bottom of all our contracts the opportunity for us to come back and give a surcharge if fuel costs rise above a certain amount,” Stratton says. “At the end of the year, we sat down and made that mark. Last year, we decided that for anything over $3.25 a gallon, we reserve the right to add a surcharge to the bill.”

So far in 2021, Stratton says they’ve been selective in utilizing the surcharge.

“We’ve exercised it on a handful of our larger accounts that use a lot more fuel and a lot more equipment,” he says.

And while some might think that a surcharge would be a surefire way to upset clients, Stratton says his customers have been surprisingly empathetic.

“I think by and large our client base has been pretty receptive and understanding to price increases,” he says. “Just because of the overall competitive landscape of what’s going on... Obviously, they have their limits, but a 3% increase hasn’t been much for them to swallow.”

At Gardenworks, Estournes says the business does whatever it can to avoid fuel surcharges. He adds they instead try and weather the uncertainty through thoughtful, thorough financial planning.

“We write it into the budget and write it into our crew average wage, so the burden is on the project,” he says.

Estournes says the most effective strategy to lower the costs is by simply utilizing less fuel.

“What we try to do is manage the accounts tighter for lawns and jobs that use power equipment,” he says. “So, we’ll do a lot more management with the irrigation systems and fertilization. So that most of the summer we can get by with every other week mowing on a lot of projects because we just stop fertilizing so it doesn’t grow as fast.”

Estournes says having crews be mindful about what equipment is necessary for a job has helped curb their fuel bill.

“We just don’t let the guys take the hedge trimmers and things out without knowing what they’re going to use them for,” he says. “We try to manage the usage of the equipment.”

And being water conscious is another contributing factor.

“We’re real strict on our water budgets so we aren’t inducing extra soft growth,” Estournes says.

Finding fuel alternatives.

Since fuel costs are so high and are expected to stay that way for some time, some landscaping companies may consider making the switch over to propane- or battery-powered equipment.

Gardenworks, which averages about 30 employees, isn’t ready to go that route just yet though.

“We’re too small and it’d be too much,” Estournes says. “We’re looking into it and looking into battery-powered technology. It just doesn’t seem to be a good fit yet.”

Estournes says the biggest hesitation he has when it comes to adopting battery-powered equipment is the massive overhaul it would take.

“It’s a standardization thing,” he says. “You’d have to train all the guys to make sure they know to have enough batteries in the truck and that there’s a power source to plug into so you can charge…whether that’s solar panels on the roof of a trailer or the new trucks out there.”

“What we try to do is manage the accounts tighter for lawns and jobs that use power equipment.” Peter Estournes, vice president of Gardenworks

Estournes notes that right now, with all the supply chain problems caused by COVID, replacing an entire fleet of trucks would not be practical.

“We don’t have any plans to buy new vehicles right away — especially with the availability of new vehicles and costs,” he says.

In fact, Estournes says costs are another reason the company isn’t switching over anytime soon.

“They would probably have to bring the cost down a little more,” he says of the equipment.

Cost is also associated in Stratton and Bratt holding out from going electric.

“The cost is still a little bit high when you map it out,” Stratton says. “There isn’t a ton of data on the longevity of that sort of stuff yet. Once data is produced, it’s really easy to build a financial model and say, ‘We’ll pay this off after X amount of years, and this will be our ROI.’”

Stratton says the company has been doing some initial research into battery-powered equipment.

“We’ve definitely talked about it and are looking into it,” he says. “What attracts us to it more than anything is the autonomous mower market. We are always looking into that.”

The ongoing labor shortage has made autonomous mowing look even more appealing to Stratton.

“We’re no different than anybody else — filling those front-line positions is really challenging,” he says. “I tell the guys as we start to look into this, that they won’t lose their job. They will just have the opportunity to get retrained and make a higher wage…it really creates an opportunity for them.”

Overall, Stratton says he feels his market, and most of the country, isn’t quite ready to accommodate the change.

“The challenge we’re facing is that we are probably five to seven years away from where the public works infrastructure is set up for us to really consider doing that on scale,” he says. “There has to be enough gas stations that have propane or natural gas, or there are enough fueling stations or places to plug in the trucks for electric charging.”

An unbothered bottom line.

Despite paying more at the pump, 2020 and the early part of 2021 has been successful for Gardenworks, yet Estournes expects growth won’t be quite at last year’s level.

“2020 wasn’t too bad, the pandemic notwithstanding,” Estournes says. “We managed to meet our budget. Our margin wasn’t as good as previous years, but we made our sales budget.

“And it’s been about the same,” he adds of this year. “Margins are still eroding but we’re on track.”

The same goes for Stratton and Bratt.

“Revenue is up. Profit is up. And everything is just up across the board,” Stratton says.

He also predicts that the fuel prices will be plateauing in Utah sooner rather than later.

“I don’t anticipate it doubling or anything,” Stratton says. “In Utah, I see it topping out at $4 a gallon, and then holding there before coming back down.”