Rebuilding for recovery

Image: Rob JohnsonThis year can be summed up in one word: maintain. Flat is the new up. It seems every positive report of hiring increasing or consumer confidence creeping up was followed by another contradicting it: Housing starts were down; unemployment is up; it’s a double-dip recession.

LCOs and landscape contractors responded to the uncertainty in the market and found pockets of growth. Many moved to maintenance and away from the stabilizing (but still shaky) design/build segment. Maintenance services were the fastest growing segment for 36 percent of companies in 2010, and 39 percent predict it will outpace other services in 2011, too.

Owners – who say they’re confident in the industry’s ability to bounce back and improve in 2011 – still are hesitant to invest in equipment. Forty-six percent say they’ll increase their equipment budgets slightly. Owners fret over their clients’ worries: 38 percent say they would fix consumer confidence if they could change one thing to turn the economy around.

After an up-and-down year, owners are left to rebuild. More companies are making less: A majority make less than $200,000 a year. Many have fewer people and fewer clients. But some – at least the ones who have a good handle on their numbers – have been able to expand into new services and achieve higher profits.

Lawn & Landscape surveyed more than 400 landscape and lawn care company owners and spoke with dozens more to compile the 2010 State of the Industry Report. In this story and on the pages that follow, we take a look at some of the major trends impacting owners today – and what they can expect for 2011.

Losing on price
Tom Heaviland, president of Heaviland Enterprises, Vista, Calif., has seen prices drop to a level he hasn’t seen in a decade – thanks to construction companies entering the maintenance market – and that’s had a direct impact on his bottom line.

“We’re seeing extreme price pressure. We’re 30 to 40 percent off our existing price,” he says. “We started losing contracts that went to bid, and we didn’t make the price adjustment and we were just getting smoked. Our first reaction was ‘We can’t do it for that.’ Then we decided that somebody’s doing it for this.”

Heaviland, who does 100 percent commercial maintenance work, says he’s been forced to drop his prices by property managers who know they can get similar results for a lot less.

His response? Cut costs, find ways to do the same work faster or cheaper, and pocket the difference. Heaviland has been able to hold things together, but it’s hurt. Heaviland went from $10 million in 2008 to $6 million in 2010. He cut pay to management, restructured crews to have fewer high-wage employees and laid off workers.

“I feel like I’m building it again at $6 million,” he says. “I always am optimistic. I’m not fighting in Afghanistan, for crying out loud. I’m fighting in San Diego. It’s hard work. Other than those first years starting out, I can’t remember a recent year that’s been this hard.”

Getting smaller
Andy Blanchford, Blanchford Landscape Contractors, runs a small design/build company in Bozeman, Montana. Things have been slow, and in the summer, his backlog had dwindled.

“We’re not real comfortable with where we’re at,” he says.

He’s eschewed the cutthroat commercial market to focus on what he does best: high-end residential work. But price is still key.

“People have a real hard time looking past the price, even when they know what they’re going to get with us, because the market has softened so much. They know there’s a better price out there,” Blanchford says.

Blanchford also got out of the commercial snow business, which was breaking even. Now he only does snow removal for his residential customers, and makes a profit.

And, he’s leaned out his operation. Revenue is up more than 10 percent to about $1 million with 14 employees. In 2007, he grossed $1.5 million, but had 35 people on the payroll. Now, he’s the only year-round full-time employee. 

Training day
Steve Pattie, CEO of the Pattie Group in suburban Cleveland, has had to combine sales and design jobs, which can limit his qualified labor pool.

He says his customers – high-end residential or corporate estate clients – are phasing more projects in over several years, and are also hounding him for price breaks.

“We’ll bend, but we try not to break,” Patttie says.

He’s also started a commercial maintenance division, and expanded his residential teams into what he calls “super crews” – a dedicated team that handles everything on a property. For 2011, he’s focused on more training for crews and targeting jobs that are most profitable.

ValleyCrest Landscape Cos. has also invested in training its people, as well as refining its processes to increase efficiency.

Burton Sperber, chairman, founder and co-CEO of the nearly $1 billion Calabasas, Calif.-based firm says this “will allow us to serve customers even better once the economy improves. This approach worked in past economic slowdowns, and ultimately we came out stronger when work became more plentiful.”

The author is editor of Lawn & Landscape. Send him an e-mail at cbowen@gie.net.