When the McHale brothers were in college, they decided to combine their talents in landscape architecture and form a landscape company. The two had been mowing lawns together since they were in the third grade in their hometown of Upper Marlboro, Md.
So after graduating from West Virginia University, Kevin moved back home and started the firm – his brother, two years behind him, came home on weekends to help install jobs. “I would meet a client, measure the property and mail him the site plan at school and he would do the design,” Kevin McHale says.
In 1983, Stephen completed his degree and the brothers jumped into the business together full-force. “We just hired a couple of childhood friends to work for us as laborers, and from there, it just evolved,” McHale says.
“We consider ourselves a true, single-source design/build firm,” says McHale, who is president. “We handle everything for clients and we do most of the work in-house.” The only specialties the company subcontracts out are lighting and irrigation – and then, the firm works with two longtime partners who have been on board, and “on call” for McHale, for more than 20 years.
This business philosophy grew from the company’s early days, when the brothers focused on doing everything for the right customer. “Our goal was, we’ll do anything as long as it’s in the right neighborhood,” McHale says. “We marketed ourselves in the high-end suburbs of Washington D.C. – we’d clean out sheds, plant flowers, do whatever we could as long as it was for our target clientele.”
So when the McHales sold their first patio, Kevin visited the local stoneyard and talked to the owner. “I said, ‘I just sold a flagstone patio, can you tell me how to build it?’” Then they sold more patios and the construction division evolved as the McHales learned and grew.
“It has benefited our business over the years that we were the ones doing the work,” McHale says. “So, we were much more capable of managing people as the company grew because we knew what it took to do the work.”
Today, the firm employs about 200 workers and has four locations, with headquarters in Upper Marlboro and offices in Annapolis, Easton and McLean, Md.
A specialty approach.
McHale Landscape Design has four key divisions: construction, masonry, carpentry and maintenance. Each is run like a separate business, with a dedicated budget, specially trained people and managers who oversee projects. “Each has a different pricing structure, different gross margin requirements, different labor and equipment requirements – so we really try to focus on running each division the way that ‘industry’ needs to be run,” McHale says, adding that the divisions have dedicated salespeople.
Use city laws to your advantage
When Kevin and Stephen McHale purchased a 25-acre farm in Upper Marlboro, Md., their intent was to turn the property into headquarters for McHale Landscape Design.
But in 1985, the city zoning department had a different idea. “We learned quickly that they would allow us to grow plants, but not operate a contracting company,” says Kevin McHale, president.
“That forced us into the situation where we had to do something with the farm.” That something has evolved into a nice profit center for McHale Landscape Design. Indeed, the brothers decided to grow there, purchasing smaller material that they plant and nurture until it matures.
By purchasing smaller plant stock, the firm saves money. It costs very little to care for a plant once in the ground.
Today, the farm holds about $1 million in plant inventory at any given time. Why purchase plants and hold them? For one, acting as the nursery gives McHale a competitive edge.
“It keeps our costs lower,” McHale says, relating that especially in today’s price-driven economy, the ability to save a little on materials helps keep projects within clients’ budgets.
Taking this a step further, the brothers purchased equipment to make their own mulch from debris. And, the firm processes excess soil from job sites and mixes it with recycled organic landscape debris to make a nutrient-filled soil mix.
“This year, we will have enough topsoil so we won’t have to buy any the entire year,” McHale says. The investment in machinery to make this possible was well worth it – and McHale crunched the numbers carefully. “We call it smart purchasing,” he says.
Each of these separate “businesses” falls under the large McHale Landscape Design umbrella. Additionally, the firm has an internal profit center: a 25-acre farm that holds about $1 million in plant inventory at any given time. Essentially, the company can compete better because of lower prices for materials. McHale may buy a 6-ft. holly, plant it on the farm, then grow it to 8 feet, saving significant cost and investing very little “input” expense other than time.
“If you can spend money on something that will make us money, then we’ll do it,” he says.
McHale relies on expert tradespeople for its masonry and carpentry division, in particular. The brothers chose to create these in-house “businesses” rather than subbing out the services to maintain better control over scheduling and quality. “We don’t have to wait on subs to get to our jobs, and we can be more cost efficient if we are doing it ourselves, so that is a benefit to our clients,” McHale says. “It keeps our prices in line. And if our people are doing the work, they know what we expect so we don’t have to educate a sub on how we want something done.”
Masons and carpenters report directly to jobsites rather than starting at McHale offices in the mornings. This way, they can immediately jump into the job without wasting time picking up materials or commuting from the shop to site.
“The pay rates for carpenters and masons are far beyond what they are for landscape crewmen,” McHale says. “So to be cost-effective, you have to maximize their production time on the job. You can’t afford to pay a mason for a 10 to 11 hour day. And you can’t afford to pay them to pick up materials.” McHale says wages for these trades are usually 30 to 40 percent higher than those for landscape crewmembers.
Different by design.
When courting a new client, McHale takes the prospect on a field trip to see properties designed and installed by competitors. The point: To show them the quality, to hopefully set a priority of value over price. This is especially important in today’s business climate, where clients are still not completely confident.
“We show them our work, and we show them all the detail and research and planning that goes into our work,” McHale says. “Then we go to a competitor’s job and compare the difference.”
Sometimes, McHale says, a client just doesn’t get it. And that’s OK. “Sometimes we’ll work with that client to change the scope so we aren’t using the highest-quality materials or plant materials available, that way we can get them on budget,” McHale says.
The firm will walk away from irresponsible price requests. “The common law of business prohibits paying a little and getting a lot,” McHale says. “We try to tell our clients to be cautious. If someone is giving you a price that seems too good to be true, it probably is.”
McHale says the market they serve is somewhat protected because the greater Washington, D.C., area has an active business climate in spite of economic stress. But the firm certainly felt the blow, and spending is still “sluggish.”
Fortunately, the firm anticipated the recession and worked with banks in 2007, before the crash, to secure adequate lines of credit for future use. “We were prepared ahead of time, and we even got banks to compete for our business – we have a good track record,” McHale says.
And in 2008, when McHale budgeted $16 million for the then $20 million business, he analyzed every line item in the budget and cut $2 million in expenses: water and coffee services, etc. The “little things” added up.
Rather than laying off a few employees, the entire team shared the burden and agreed to some furlough and reduced hours in some cases. “We restructured the company and cut our price margins so we could have enough work to keep all of our people busy,” McHale says, noting that now the company is back where it was and working to boost those margins.
“If we had slashed and burned the company and then things started to turn around as they did for us last year, we would not have had people in place to handle the workload.”
Photos courtesy of McHale Landscape Design