Sometimes in business, it pays to go with your gut. At K&D Landscaping in Santa Cruz, California, the payoff came in the form of 30 percent growth over a year-long period.
Skirting around a sometimes-risky market segment, K&D decided to table their residential design/build efforts for several years. The company shifted its services towards commercial design/build projects in 2014, and it wasn’t until a good interview and some brainstorming years later that they realized the potential in the residential market.
In 2016, owner Justin White was in the process of interviewing a new project manager. The 32-year-old company was growing, and he knew he had the opportunity to bring someone on. The interview process was lengthy, according to White. He says he spent a good six months getting to know the candidate, ensuring that his values lined up with K&D’s. Plus, he heard about the prospective new hire from a trusted source – one of his employees, who encouraged his brother to pursue something with the company. The other thing keeping the conversation moving was this candidate’s interest in the residential design/build market.
“(I thought,) we’ve done residential in the past and I think it would be good to diversify a little bit,” White says. “So we decided to bring on this individual and start building up a new department basically.” After the lengthy interview process, which involved a phone call to dicuss the opportunity, several lunch meetings, and talks with his father and his brother, also owners of the company, White hired Jeremy Ross to head up the revived department.
“My philosophy as an owner and CEO is I want to hire people who specialize in something better than I can,” White says. “When I interviewed and talked to this individual, I said, ‘wow, this guy, he knows everything.’”
Ross wanted to grow the department from the start, and using his past vendor connections and a solid network of designers, he was entrusted to get the ball rolling.
“(Justin) liked the idea of bringing on a new area and kind of increasing the revenue section (there),” Ross says. “They always had a design build (segment), even if it wasn't very large. Justin said he would be willing to give me the tools that were needed in order to make that happen.”
Let the games begin.
The first order of business for Ross was solidifying a good network of vendors, which was relatively easy because of past relationships he built working as a project manager for a smaller company.
Keeping up with the Joneses: Several of K&D’s clients end up being in the same neighborhood after they see the work they can do.
“I did have some designers that I brought with me,” Ross says. “I was immediately able to bid on large stuff…that was a big one because we started getting more and more projects from (that designer) and most of her (projects) are really large.”
White says he put full faith in his new project manager to grow the residential design/build segment. “It took a little while to get traction, but we started to get some referrals and we started getting some opportunities to bid on some really cool projects,” White says. Ross says the opportunity to bid on those large projects was what really kicked things off for the success of the residential design/build department.
Before Ross joined the team, K&D was getting design/build leads through phone calls in the office. “Then they would go meet with a client without a design and have to come up with some ideas and get them some simple things,” he says. Now, the company refers out most of those calls because they’re set with projects that already have a design in place.
With the residential sector ramped up, the company needed more hands on deck to complete the projects coming in. White says they were transparent with crews, letting them know of their plans to grow this segment of the company, and offered the opportunity for employees to transition over. When the residential segment started to pick up, the company was sitting at about 50 employees. At the monthly company meeting, White told employees to apply for the residential side of things if they wanted and explained that they would offer a $500 referral bonus to employees and their friends who signed on.
“That really brought in most of the people right there. It was a win-win situation for the employees. They are getting something out of it,” White says. “And when they refer a friend, they really had that ownership. They want them to work.” When Ross started with K&D, the company was operating their design/build segment with roughly two or three crews and two workers per crew. Now they’re up to five crews with an average of four workers per crew.
Back in business.
Letting clients know that K&D was back in the residential business was fairly straightforward, White says. The company dedicated 2-3 percent of its revenue to marketing.
“When we decided to go into the residential sector, it was exciting for me because we now have this huge audience to watch TV, who read the newspaper, who do all these things,” White says. Doing high-end work in neighborhoods with coastal backdrops didn’t hurt, either. Word would get around about K&D’s projects. “We were going into a neighborhood, we would do one house and pretty soon we were doing four other houses in that neighborhood because all the neighbors would talk about it,” White says. “So, it was really a deliberate move to go into it and then it snowballed. 2017 was the first year we really got started. In 2018, we really got some traction and we did about $2 million in revenue.”
The next step, White says, was tuning into community needs. Once a month, K&D takes on a project in the community at no cost.
“We decided to start doing community beautification projects and this was what gave us our biggest return,” he says. Whether it’s creating garden boxes at women’s shelters or enhancing the landscape, White says local newspapers and TV broadcasts often show up and cover the process.
“You can beautify your community and you also get really great press coverage and it's a win-win for everybody,” he says.
The residential design/build projects K&D takes on sit at around $30,000 right now and White says they typically don’t take on a project less than that. Additionally, the projects are almost always designed beforehand. So, K&D’s crew can show up to the job and get to work on the install. However, it wasn’t always like that. “With our growth, we’ve gotten to kind of put a filter on the clients we take,” White says.
White says the company approaches taking on a new job like an interview process. “We’re looking for clients who really shared the same values as us as a company,” White says. “We’d interview a client and if they'd be rude, they’d be short and they would be really disrespectful, we could tell they were going to be disrespectful to some of our foreman and our lower level workers and we would immediately – even if the job was a big, juicy job – we’d know that we don't think we're a match because this job is going to hurt our team.”
Ross also personally meets with all the clients.“We're lucky enough that we can tell people that we don't think it's going to work,” he says.
Staying steady: With talks of a looming recession, the company is careful not to put all its eggs in one basket. Each division is able to support other areas in the company.
A healthy mix.
The design/build market is a target for dips in the economy, but White says K&D has a diverse enough company with processes in place that he isn’t too worried about an impending recession wiping out their hard work.
“We see it as a huge opportunity for our company because we're in a place where we're pretty much zero debt and we're building up a really nice cash reserve,” he says. “I know there's going to be some type of recession and it is going to slow things down, but in that market you can actually still make a really good profit if you approach it in the right way and you're ready for it.”
Ross says the other service areas in the company will be able to support their design/build segment if things do take a dip.
“Everybody's worried about the economy and what it's going to do to their companies,” he says. “For us, it's important that we have our maintenance, our commercial and our residential because at any given point one can be helping the other.”