Over the past couple of weeks I have received a large number of comments from landscapers stating they want to fill staffing vacancies with independent contractors.
By hiring independent contractors, companies can avoid paying burdensome administrative costs that will improve their profit margin. Yet, if the IRS or a state agency determines the independent contractor position should be classified as an employee, the company will face sizable fines, tax liabilities, interest charges and retroactive benefits costs.
Employer control. The IRS has determined that an independent contractor can be a legal solution if the hiring company satisfies three rigorous tests: behavioral control, financial control and type of employment relationship. These three tests are presented in Form SS-8, which can be downloaded from the IRS website. A company should review this form for every potential independent contractor.
In short, if the employer exerts control over the worker, the worker should be classified as an employee. Conversely, if the worker demonstrates control over his/her own work habits, the worker may be considered an independent contractor.
When preparing to classify a worker as an independent contractor, the company must ask the following 11 questions that correspond to the three IRS tests before making an advanced decision:
1) Does your company provide the worker with direction about required work hours, where the work must be done, or the sequence in which the work must be completed; let the worker use company tools, materials, or equipment; or specify where the worker must purchase supplies?
2) Does your company provide any training to the worker?
3) Does your company reimburse the worker for job-related expenses?
4) Does your company have more equipment, resources, or materials invested in the work being performed than the worker does?
5) Does your company insist the worker work only for your company throughout the duration of the contract?
6) Does your company pay the worker without first receiving an invoice?
7) Does your company have more profit and loss concerns for the work being performed, than the worker actually doing the work?
8) Does your company allow the worker to perform work without first signing a thorough Independent Contractor Agreement?
9) Does your company provide benefits (e.g., medical, 401k, workers’ compensation, vacation) to the worker?
10) Does your company plan to provide continuous work for the worker beyond the completion date of the current project?
11) Does your company expect the worker to perform functions that are a key aspect of regular business operations?
If the answer is “yes” to any of those questions, the worker may actually be an employee, instead of an independent contractor. The more “yes” responses there are, the more certain the “employee’s” status becomes.
Actions to Avoid. Even when a company correctly classifies a worker as an independent contractor, certain actions can still create ambiguity regarding the worker’s employment status. As such, the following key actions identify what a company must not do when dealing with an independent contractor:
A situation with this much impact should be discussed with a qualified lawyer, human resources professional and accountant before making a final decision.
Last fall in Louisville, Lawn & Landscape invited the owners and executives from top companies across the country to sit down and talk. Regional to international. Two million a year to $600 million. They do tree care, commercial maintenance, high-end residential design/build, snow removal, lawn care.
The idea was to bring together strong, intelligent voices and take a pulse of what the industry’s best minds think about 2012 and beyond. Over the course of three hours, we talked sales, pricing, closing contracts, labor and regulations.
All year, Lawn & Landscape will be running excerpts of the conversation. In the first installment, we discuss the crumbling H-2B program, $19-an-hour production rates and what to do when your own church cuts your bid.
L&L: When you look at this year and 2012, what do you see as your biggest challenges to your companies? What are you working on to stay ahead of the curve?
Chris Kujawa: I think the biggest challenge is just going to be, in general, the uncertainty of the economy. We have it pretty well; a lot of our clients are the Fortune 100 companies that are headquartered in Milwaukee.
The upcoming presidential election are going to be a major factor. If it goes status quo, then it’s going to be another soft four years, but if it turns around, then it could turn around fast.
Labor for us has not been a problem at all. If we would put ads in the paper we would have guys come in tomorrow who are guys with experience. We don’t want to sprint ahead, but just keep a steady pace, and find mid-level to upper-level people to handle that load, that’s our challenge. Materials, production, and pricing are not really a challenge for us.
L&L: Are the rest of you guys seeing the same things?
Maurice Dowell: I wish that people were just walking in our door, production line people. We don’t see that. But we’re dependent on H-2B and that’s one of our concerns. It’s a huge challenge. Looking into the future, with the unemployment rate the way that it is, I don’t think that Congress is going to be sympathetic to our needs. But I do see a lot of Americans that do need work.
Bob Grover: Speaking of the H-2B program, we’re reliant on that ourselves, but we have made a strategic decision to move away from that because it is so uncertain. Combined with that is the growing pressure to implement E-Verify. So I think that the whole labor issue is going to be one of our biggest challenges, and we’re probably all going to be in the same boat, but the uncertainty there of where our labor will come from is definitely our biggest concern.
Frank Mariani: I think that any time you have to partner with Washington, chances are you’re going to lose. So at Mariani, as far as we’re concerned, H-2B is dead.
The good news is a couple things: Number one, all of us talked about what our revenues were, and I think that is probably the worst thing about the members of our association; they focus on the top line instead of the bottom line. So one of the things we’re doing at Mariani is focusing on the bottom line.
Secondly, I think as tough as things are, personally, if you look at the amount of revenue that is available to all of us, I just look at Mariani and think, “Well, I’ll just take the Chicago market,” and I’d be very happy. So I want to get a bigger piece of the pie. Obviously we couldn’t do all the work that’s available to us in just Chicago. So I just have to figure out how to beat my competition. And I like that challenge.
Ed Castro: We had a lot of concern on immigration reform in the state of Georgia and in Alabama. Migrant workers are not even coming through Alabama to get to Georgia because they’re going to be arrested. Atlanta is a huge market, and the labor is going to be a problem. We have 22 percent minority participation, but they are all new. They are all new. We’re going to high schools now. Trade schools, also. Not just college graduates.
It’s a responsibility that we’re going to have to reenergize America’s workforce. This $30,000 job is going to be the new norm, and you’re going to have to learn how to raise a family off of that. That’s that factory job that my grandfather or my father had.
Dale Elkins: We’re finding people in Florida. Did anyone go to the Kevin Kehoe talk to see that $19/hour rate on his map chart? The state has always had that pressure, but it’s been extremely difficult in the past two years. You couple that challenge with the foreclosure issue in the HOA market, which is a huge market in Florida. So it hasn’t been hiring the people so much in Florida but it’s the price pressures, to not only keep work but to sell new work, that’s eating away at your discretionary and training spend.
FM: What’s the $19/hour?
DE: I interpreted it as the retail rate for man hours. (Kehoe was citing the prevailing rate for basic commercial maintenance in Florida. – Eds.)
FM: People should be killed for that kind of number.
DE: There’s no way you could bid that number and expect to survive.
FM: I think when those numbers get out, the 15 percent profit margin, $19/hour, I think that it’s all bullshit.
And unfortunately I think that sometimes at these types of events like GIC, it almost perpetuates itself, because people start throwing out these numbers that are just ridiculous.
DE: You haven’t seen anything unless you come to Florida.
FM: I’m not saying it’s untrue.
DE: Oh, it is.
FM: We can go to the dance, we can dance, or we can decide not to dance. And for that 15 percent gross profit margin, $19/hour stuff, I’m not dancin’. You go to some of the seminars and conventions and somebody gets up and shows a chart that says, “This much per hour,” and I see people writing, and I think “Jesus Christ. There’s going to be a guy at $19/hour and 15 percent gross profit margins.”
EC: And he thinks that it’s OK.
DE: He’s going to bank on getting the enhancement work to make up the “magical” difference. He’s going to bank on all this money coming from a different supplemental profit. And that’s where it’s more dangerous.
FM: At $1 million it works, but at $5 million, you’re really going to be losing money.
MD: It’s really not even the smaller guys, these are the bigger guys that are at $19/hour. And our consultants come in and say, “You know if you’re going to be competitive, you have got to go below $30/hour for maintenance. And the closer you get to $20, the more successful you are going to be at getting those contracts.” That scares the heck out of me.
FM: I think that that is a flawed philosophy. I think that you have to figure out how to differentiate yourself and your services from everybody else so that you can charge the appropriate dollar amount. I mean our business has grown 9 percent this year, and it’s not because we were the lowest bidding contractor in Chicago.
Tracy Bertog: I’m finding there’s a lot of loyalty with our residential clients, but our commercial ones we’re finding that guys are putting in unsolicited bids, and then we get the call, “Hey I hate to do this but times are tight …” Even my own church that I’ve been going to for 30 years called me one day and told me they got an unsolicited bid 15 percent less than what we were charging. We hate to do it but what can you do for us?
We split it, and they stuck with us, but I’m seeing those unsolicited bids showing up everywhere now that are ridiculously lower than where we’re at. And these are accounts we’ve had for 15-20 years. But luckily our residential clients have been very loyal.
L&L: What do you do to combat that?
TB: We do what we can. With the church we dropped 7.5 percent, but we had to take out a fertilization and we had to cut back the scope of work that we do.
CK: I’m very blunt about it. I tell them there’s a reason that you have unsolicited bids. We’ve actually gotten two rather large maintenance accounts because they were afraid that the guy who had been servicing them was going to go out of business – that the bank was going to call to loan, that things were shaky; they needed somebody that they knew that they could count on. I bring it right up. I say, “There’s a reason that we’re KEI. There’s a reason there’s only a couple other guys like us in town. And there’s a reason that there’s all of the other guys.” Nine times out of 10 that flies, because money is tight, but there’s two things tighter: time and talent.
All year, Lawn & Landscape will be running excerpts of the conversation, including discussions of the above pictured industry power players.
The author is editor and associate publisher of Lawn & Landscape. Email him at firstname.lastname@example.org.
How low can you go? That’s what prospective clients want to know today – and they’re inviting multiple companies to the bidding table to collect proposals for landscape services, and any service for that matter.
“Owners and property managers are much more active in shopping all of their facility services,” says George Gaumer, vice president and general manager of the commercial grounds management division of The Davey Tree Expert Co., Kent, Ohio.
Existing clients want to know how you can nip-tuck that contract so the price looks svelter. Residential customers call for your services, but let you know they’re collecting offers to work on their property. (As if you needed the reminder that you’re not the only game in town.) Property managers have orders from the “big man” to “cut costs across the board.” And that means deflating the size of the check that goes to you, too.
So how do you compete and win in this stifling bidding environment? Lawn & Landscape spoke with three firms that shared their approach to creating proposals that please prospects without sacrificing profit.
Prequalify before proposing
Not every customer is “the one.” That’s why prequalification is such an integral part of the sales process at Davey Commercial Grounds Management. Managers make sure a job fits the company profile before bidding on it.
“It’s best to understand and learn which customers are the ones that will fit your company’s capabilities best, because they are going to be the ones you will have the highest batting average on in terms of closing ratio,” says George Gaumer, vice president and general manager for the commercial grounds division at The Davey Tree Expert Co. in Kent, Ohio.
Special attention is paid to these job characteristics before any bid goes out: location, property size and how the property is used (retail, HOA, etc.).
If a job is a match for Davey, then it’s on to the bidding process, which Gaumer says has become more competitive over the last few years. “More owners and property managers are shopping all of their facility services, not just landscaping,” he says.
For Davey, this means more opportunities to bring on new business, Gaumer says. And it also means sticking to that prequalification process.
About 40 percent of the commercial grounds division’s business today comes from bid invitations from qualified companies. The remainder stems from negotiated sales: a customer calls Davey, but is also comparing its proposal to other service providers’ offers.
Gaumer says another change is the scope of work requested from clients. Davey has to be creative because “the customer doesn’t want a lot of extra frills,” he says. In years past, if Davey estimated a job and recommended five lawn care applications rather than the client’s requested four, this suggestion would be presented and generally accepted by the client. Same goes for landscape enhancements and maintenance. “We can’t do that anymore,” Gaumer says. “There is no room in the price for that.”
Instead, Gaumer finds that winning a bid is dependent on providing the most service for the best value. That’s just the way it goes these days.
Price is not something Davey will negotiate down just to win a job. And it’s lost work because of it. Sometimes Davey has won work it previously bidded on because the client originally went with the low bid and wasn’t happy with the end result.
Gaumer stands by these key steps to winning a bid that the company can service up to standard: First, prequalify the prospect, then perform a thorough quantification of all assets to be maintained and tasks to be performed. Figure in labor hours and equipment required to do the job. Manage the performance of the job and ensure the results live up to the bid promise. Finally, continue to focus on running a lean operation.
Show the specifics
When Bertog Landscape can show prospective clients what a professional can do for a property, winning the bid is that much easier. Sure, a photograph portfolio of completed “wow” projects always helps. But whenever possible, Tracy Bertog likes to give potential clients a tour of the company’s blue chip accounts.
“We have some prestigious properties across the north shore (of Chicago), and we point those out,” says Bertog, CEO of the Wheeling, Ill.-based firm, which he started back in high school and has steadily grown during the last four decades. “We offer to meet clients at a property so they can see the type of work we accomplish.”
Quality costs more. That’s why it’s important to show, not just tell, prospects the kind of value they can expect.
Also, Bertog aims to make all bid presentations in person at the client’s home or office. “If we can get in front of them, walk them through the whole proposal and share how we do it at Bertog, they get a better feel and see the value in what we are doing,” Bertog says.
Spelling out this quality is more important now than ever before. Because clients and prospects are asking for more – “Will you throw in this service ... add this shrub?” – and expecting that the company pick up the tab as a favor, an extra. “It’s becoming difficult to say no, and hold your ground and let them know what’s not in the contract,” Bertog says.
And it’s even harder to walk away from a job or opportunity to bid. But Bertog does if he recognizes that price is the only factor a prospect cares about. “I don’t know how some companies can afford to do the work as cheap as its being bidded out,” he says. “And unfortunately, some clients are willing to accept lower quality to save money. Standards have dropped. And a lot of companies aren’t following specifications.”
Bertog points out, companies like his can win back those clients. “We had a blizzard here last winter and a lot of companies didn’t perform well, so we picked up new business that way,” Bertog says.
In the end, he finds that sticking to his high-value prop wins the best clients.
And being flexible also helps. For existing clients that threaten to bid out the work to get a lower price, Bertog does work to tailor the proposal to meet a new, lower budget. One of Bertog’s “Big 19” clients needed to shave 5 percent off its costs. “I said, ‘When we get to the late summer months, we can skip two (mowing) visits,’ and that got us down the 5 percent.”
Bertog is glad when existing clients ask how they can lower the bill. “We can help them work through it,” he says.
What he isn’t pleased about and is seeing much more is that 30-day notice from clients with multi-year contracts. “A competitor comes in and says they’ll do the job for half of what you were getting paid and the client sends you a 30-day notice and cancels the contract you priced based on being there three years,” Bertog says.
There’s really no way to plan for this.
“If out of the blue, a clients says, ‘We are sending this job out to bid,’ then you drop your bid,” he says, “ ... and the others come in under you, and you still don’t get the work back.”
Bertog says the company can’t ride on getting work like this because these types of clients aren’t sustainable.
So instead, his crews work hard to exceed expectations. “If a customer only cares about money and doesn’t care what the property looks like, that’s not a good mix for us,” he says.
Education by explanation
It’s not unusual in this environment to compete with a dozen companies for an attractive account. But if you’re the company that wins the job, the success could stoke a feeling of insecurity.
Did you make a mistake in your pricing? Did you forget to specify a service, include certain materials costs, figure in subcontractor labor? Uh, oh.
“After the excitement of getting the big project comes fear and questioning whether you made a mistake somewhere because there were so many people bidding on the project,” says Lee Keenan, director of construction project management at Mariani Landscape in Lake Bluff, Ill.
Mariani Landscape is generally not in this position because the high-end design/build firm usually doesn’t produce the lowest bid. And, importantly, the company takes care to compete at its level. “We know we can’t always be competitive in every arena, so we focus on (jobs) that are in our scope and fit our company,” Keenan says.
The sweet spot for Mariani is high-end residential design/build projects that may eventually turn into long-term maintenance/enhancement accounts. Even so, the firm feels pricing pressure like any landscape company these days. “In the world we live in, people are being more conscientious than ever to make sure they get value for their dollars,” Keenan says.
That’s why explaining proposals in detail is a big part of winning the bid. Mariani Landscape’s proposals are extremely thorough, listing out services and descriptions of exactly what each line item entails. For example, bringing on a masonry contractor for an outdoor living space, or identifying each step in amending soil to improve drainage.
Ultimately, the proposal doubles as an estimate and an educational tool.
“When there are multiple bids, it’s important for clients to understand that we are their advocate,” Keenan says.
And its equally important for clients and prospects to understand fully what a proposal includes so they can make a smart decision among service providers. That means including every dirty detail.
“We cover every specification of a project and explain our process – we explain that we are not going to take steps one or two, but our processes might involve four or five steps that, in the long-term, ensure the best finished product,” Keenan says.
Clients are only expecting the best, he says. “We have to explain why our number might be higher than someone else’s and how we bring value to the project.”
The more information a proposal includes, the better, Keenan says. Clients do not want to see added costs mid-project because a proposal didn’t cover every material, labor hour, you name it. “We don’t want to go back to the client for extras,” Keenan says, adding that project prices are well thought out to avoid this.
Mariani Landscape also reviews the maintenance investment design/build projects will require before any contract is signed. “We don’t want clients to be surprised at how much it will cost to maintain the landscape and keep it moving forward,” Keenan says.
The author is a frequent contributor to Lawn & Landscape.
Not too long ago PLANET and American Nursery & Landscape Association discussed combining in order to better serve the needs of members and the industry. Those conversations stalled, and now, ANLA has announced a joint venture with OFA, the Association of Horticulture Professionals, which could lead to a future merger. Todd Davis, publisher of Lawn & Landscape’s sister publication Nursery Management, caught up with Bob Lyons, ANLA president and owner of Sunleaf Nursery in Madison, Ohio, to find out the implications of this joint venture on the green industry.
So let me get this straight, this new joint venture doesn’t mean the end of ANLA and its 135 years of history?
You are correct. ANLA is not going away. We are combining some of our strengths with their’s to provide the members of both organizations a combined 215 years of leadership, service, knowledge and history to better meet the needs of both groups in these challenging times.
How long have these discussions been going on with OFA, and how were they different from the discussions you had with PLANET several years ago?
We have been having discussions about working with them since 2008, but with the untimely death of their executive director, John Holmes, it was not until 2011 that we renewed our discussions in earnest.
With PLANET, we were seeking a true merger in short order. The proposed joint venture with OFA will focus at first on education and advocacy. As we move forward, if it makes sense to collaborate on more things, then we will certainly consider it. Both organizations have many strengths and we want to focus on those strengths and avoid duplication of efforts. It’s the same sort of thing that’s going on with strategic alliances in our industry businesses.
The ANLA Management Clinic is your organization’s premier educational event. Do you see it continuing beyond 2012?
We are in the process of deciding what will follow this year’s clinic. This joint venture offers some exciting opportunities for a premier educational event in 2013 that will attract both organizations’ owners and senior management teams using the strengths of both the ANLA and OFA staffs.
How do you think ANLA’s lobbying efforts on Capitol Hill will be affected by the joint venture? Will our leaders in Washington have to be reintroduced to our industry association?
There will be no re-introduction.
The ANLA’s lobbying and regulatory staff will remain in Washington, D.C., and will be configured to meet the needs of both ANLA and OFA members.
Many of the concerns of government intrusion and regulations are the same for members of both organizations so it is a natural fit.
Will there be a joining of the boards of directors of both OFA and ANLA? Is there going to be a new leadership structure for the two organizations?
There are no current plans to join boards and leadership structures. It is easy for the mind to jump forward and say, “This is going to be one organization.” At some point in the future it might be, but currently we are focused on education and advocacy. We need to be successful at these things before we think about doing more.
What about the Wholesale Nursery Growers of America and the Horticultural Research Institute?
The same holds true for these groups along with the retail, landscape and distribution divisions. The “community within the community” that they represent will remain an important part of our organization. It is our hope that HRI will attract new donors as we do more activities with OFA and their members see the valuable research that is being done.
In January, the American Nursery and Landscape Association and OFA (the Association of Horticulture Professionals) announced a new joint venture. This venture is the first step toward a formal merger of the two groups, one consisting of mainly nursery growers, the other mainly greenhouse growers. For now, the associations will be combining efforts in education, national lobbying and other member benefits. But you can bet, after a few years of shacking up, the two groups will do the right thing and tie the knot all-legit like.
But first things first, we need to come up with a name for this new association if and when it does merge.
As longtime advocate and self-appointed spokesperson for both these fine organizations, I recommend the following names:
About seven years ago, ANLA was having merger talks with PLANET. I stood up and addressed a group of maybe 300 ANLA members and asked, “Rather than merging with a landscape group, shouldn’t we be looking at merging with OFA, whose members are a lot more similar to us? We both grow plants that people plant in their yards.”
Nobody had a good answer. It had just never been considered before.
As proud members of FANNIE, we will stand for nothing less.
– Todd Davis
Find coverage from the 2012 ANLA Clinic at www.lawnandlandscape.com.
The author is publisher of Lawn & Landscape’s sister publication Nursery Management. He can be reached at email@example.com.
|Charles Fishman, author of “The Big Fish,” talks about the role of water in the modern world.|
The 4th Annual WaterSmart Innovations Conference provided landscapers water-conservation insight.
The event, held last October in Las Vegas and hosted by the Southern Nevada Water Authority, covered a broad range of water-related topics geared to the water purveyor and, specifically, their water conservation department. Landscape irrigation is always a major subject of interest at the conference, which has a global approach. The conference comprises eight presentations on different subject themes, one of which is landscaping.
The conference included a number of pre-conference events including committee meetings and the annual meeting for the Alliance for Water Efficiency (AWE) and committee meetings for the new International Code Council’s (ICC) sprinkler standards (officially called emission devices). Each year at the conference, in conjunction with AWE, the Environmental Protection Agency has its WaterSense Partners of the Year awards banquet.
Awards presented included the Irrigation Partner of the Year, which went to Christopher Curry, a principal at Sweeney + Associates Irrigation Design and Consulting in Orange, Calif.
The keynote speaker for this year’s conference was Brian Richter from The Nature Conservancy. He detailed water use throughout the world and pointed out that each of us has a water footprint of 800 gallons per day, the equivalent of 12 bathtubs of water. Richter says that currently half of the world’s river basins experience severe water shortages for some part of the year. He also commented on the drought in Texas, saying that it will have a long term effect on the state and that Texas does not have, and will not have, enough water. The Texas drought was the subject of much discussion at the conference.
Landscape sessions included talks by various irrigation contractors, consultants and manufacturers. Updates were provided on the Irrigation Association’s Smart Water Applications Technology (SWAT) initiative and the EPA’s WaterSense programs.
David Zoldoske of the International Center for Water Technology in Fresno, Calif., gave an interesting presentation on performance testing of soil moisture-based irrigation controllers. The design and installation of rainwater harvesting systems was the subject of several presentations, with the speakers toting the benefits of rainwater as an irrigation water source. Conversely, Karen Guz of the San Antonio Water System presented a session on the “Top Problems with Rain Water Harvesting Systems” and “Three Ways to Succeed or Fail.”
The Southern Nevada Water Authority presented the results of a study of when people are most inefficient in their watering. The results showed that Las Vegas residents are most inefficient during the months of October through January.
As a result, Las Vegas’s water restrictions are more severe in those months than in the peak summer watering season, which results in more water being saved.
Other presentations dealt with proposed new green codes and their effects on landscaping, landscape water budgeting and outdoor water efficiency programs. As with any water conference, especially one geared toward conservation, outdoor water use is a big topic of discussion and the focus of many presentations.
The author is president of Irrigation Consulting in Pepperell, Mass. He can be reached at firstname.lastname@example.org.
Slides from the conference are available on the WaterSmart Innovations website www.watersmartinnovations.com.