JOHN DEEREMake it last. This is an equipment mantra for many landscape contractors in 2009 and going into 2010. Eighty-six percent of respondents to Lawn & Landscape’s 2009 Benchmarking Your Business Survey say annual equipment purchases/leases will not change in 2010.
Eric Brand is one of those business owners. The owner of P & L Landscaping in Merrimack, N.H., might have followed through with an $80,000 bark blower purchase, and a new truck to replace one of the three in his fleet that are nine years old. But adding more debt would not please the bank.
“If we get more debt from buying another piece of equipment and our income doesn’t stay up, our debt-to-income ratio may not match the covenant of our bank loan,” Brand says, noting that means penalties to pay. “We want to keep the bank happy.”
Applying the “make do” theory to equipment purchasing, Brand has increased his equipment repair budget by 30 percent; field workers will use hand-held equipment “until it’s dead.” Hand-held equipment is one area survey respondents reported higher likelihood to invest in 2010, with 39.7 percent planning to make purchases.
But not all contractors have stifled equipment purchasing. Contractors like Aaron Jung have been marking consistent 30 percent annual growth since starting his business in 2007, just as the economy began to decline in some areas of the country. Jung needs to purchase equipment to accommodate new accounts. But he is spending conservatively – and using cash, when possible.
Jung purchases demo equipment, and used equipment if a piece will not be worked heavily. “We look at the lifespan of the equipment and determine what will be the best value,” says Jung, owner of Horticultural Impressions in Platte City, Mo. For instance, he will not purchased a used snowplow truck, knowing it will confront rugged conditions daily during winter months.
However, for an aerator or backup mower, a used piece of equipment is just fine. The key for Jung is to buy gradually, and buy what he can afford mostly in liquid. He only buys equipment after selling work to keep that piece busy.
Certainly, companies that will significantly bolster their maintenance divisions to supplement revenue lost from once-booming design/build operations may need to build their equipment force. “We have purchased a lot of equipment over the last two years, because our company has grown a lot,” says Jon Sternfels of JonBoy Landscaping in the Detroit area. Sternfels has picked up lightly used equipment from private sellers, “So we’ve been able to purchase basically brand-new equipment at a fraction of the cost.”
Stretching the equipment budget is possible if business owners take a proactive approach to training and employee accountability for equipment repairs. Following are some strategies for making the most of an equipment fleet.
Standardize the Fleet
Purchasing consistency – designating one brand of mowers, string trimmers, etc., as your company’s line – allows you to easily stock spare parts. You can train field employees to operate that specific machine, and technicians can become experts at repairing the chosen brand. Loyalty to a dealer who carries this brand is also valuable.
“If you take a look at the success behind Southwest (Airlines), they have one type of plane,” relates Judith Guido, president, Guido & Associates, Moorpark, Calif. “When you start standardizing your equipment, operators and mechanics become subject-matter experts in that machine, and this helps increase the longevity of any equipment.”
Focus on Training
“Unfortunately, many workers are just thrown on a piece of equipment, and training can also help with longevity,” Guido says. Most manufacturers and distributors provide training for the equipment they sell, and investing time by sending workers to education sessions will prove to them that equipment care is important to your business.
Buy on a Budget
Rather than buying brand-new, some landscapers like Jeff Berghoff, president, Jeff Berghoff Design Group, Scottsdale, Ariz., has sourced equipment from peers who closed down operations. “Some people were going out of business and had nice trailers, so we bought them,” says Berghoff, adding that his business is in the position to add new equipment, but he’s not prepared to jump on a new truck purchase just yet. He’ll keep shopping.
Depending on the job a machine will do in the field, and the age of a used piece, purchasing new equipment with a warranty might make more fiscal sense. Involve crewleaders in the buying process by asking their input on equipment use, recommendations and other issues since are close to in the field.
Consult with an accountant to determine if purchasing equipment is a wise tax decision. “We spent a lot of money at the end of last year after work was done,” says Aaron Smith, general manager, S&D Landscapes, Essex, Vt. “We sheltered our profits from tax by buying equipment, and picked it up this spring, so we’re using a lot of new (machines).”
For more information on Section 179 tax deductions including equipment purchases for tax year 2009, logon to www.section179.org.
Buddy Rodgers, president, Buddy Rodgers & Son Professional Landscape, Leavenworth, Kan., holds each employee accountable for equipment through a chart that lists each member of his three crews. When an “unnecessary expense” arises – such as a certain $900 repair after a crew planted a zero-turn rider into a wrought-iron fence – that cost is recorded. “At the end of the year when we dole out bonuses, we show employees, ‘This is how much could have been added to your bonus,’” Rodgers relates.
At a higher level, two years ago Kinsella Landscaping in Blue Island, Ill., hired an asset manager to protect the company’s estimated $5 million in equipment. Purchases are made carefully, and each machine is treated as an investment on which the company must make a return. “The asset manager can look at trends of what is breaking on equipment, and if certain crews or employees have a history of damaging equipment,” says Greg Semmer, president. A detailed Excel spreadsheet contains a breakdown of every single piece of equipment. The report is carefully reviewed and updated monthly.
A business needs the proper tools to complete a job well done, and there’s a fine line between “making do” and letting equipment go past the point of productivity. Like Ted Bentz of Second Nature, Rapid City, S.D., find ways to enhance the machines you already own.
“We may not be looking at (buying) as many new pieces, but supplementing some (equipment) with attachments to make us more effective and reduce the number of man-hours on a project,” Bentz says. “We’re still buying, but we may wait a year or two to upgrade equipment, but we are certainly not going to stop buying attachments for existing equipment.”
The author is a freelance writer based in Bay Village, Ohio.