Look Before You Leap: Marketing Stratgies That Work

Expanding services is one of the most commonly employed solutions to a variety of business dilemmas. Do you need to keep employees working through the winter? Let’s add snow removal. Is maintenance slowing to a crawl? Let’s do some construction. The customers want a one-stop shop? Let’s do it all.

In fact, many contractors have gone into new areas of business with this game plan — let’s get started, and we’ll deal with the issues as they come at us. Some have been successful, but many have failed.

This was never more true than in the late ’80s and early ’90s when many overly expanded businesses imploded because they got into areas of business in which they had no expertise, explained Charles Vander Kooi, president of Vander Kooi and Associates, Ft. Collins, Colo.

“Rather than trying to get a bigger share of their markets, a lot of companies added profit centers,” said Vander Kooi. “So instead of growing slowly from a $1 million company to a $1.3 million company, they went to horizontal growth.”

This, he explained, is the difference between aiming at a target with a shot gun instead of a rifle. A well-aimed rifle will hit the target consistently, but the shot gun blast is inconsistent, unpredictable and inefficient. While the majority of the shot may hit the target, the rest is wasted.

In the same way, companies that try to do too much waste their energy and resources, rather than concentrating on what they do best. This philosophy came home to roost in the early ’90s, said Vander Kooi, when companies that had grown exponentially by adding new profit centers quickly began coming down to earth.

Contractors learned a hard lesson about business — it takes time to grow any new piece of business you add. This is especially true of businesses that are not directly related. Vander Kooi believes there are really four profit centers that require their own specialized expertise — landscape construction, landscape maintenance, nursery and greenhouse. In these cases, it will take 18 months to 2 years to make a profit center turn the corner.

The timetable may be smaller with less traumatic additions, such as adding irrigation maintenance to a preexisting maintenance division. It still, however, requires expertise, preparation and flexibility to create a successful new profit source.

GOING HOME. About five years ago, Steve Coffey, president of Scapes, Atlanta, Ga., took his company in an entirely new direction. After growing up and cutting his teeth in the commercial landscape construction market, Coffey decided to move Scapes from very few residential accounts to almost 100 percent residential clientele.

Coffey based his decision on two trends — growing competition in the Atlanta area commercial market and his own assessment of the residential market’s potential.

“The commercial market pushed pricing down to the point that it was impossible to make a profit,” said Coffey. “We were losing money, and efficiency only goes so far — after a point you bottom out on costs. I ended up saying, ‘What can we do about this?’”

The residential market seemed to be the answer. Coffey banked the corporate change on one of the country’s biggest overall trends — the aging baby boomer population. “Many of these people are willing to spend their dollars on high-end landscape features, such as walkways, patios, etc.,” explained Coffey. “The baby boomers are going through a process of nesting right now — instead of spending money on going out, they are fixing up the home.

“For example,” he continued, “in years past, you never would have heard of someone installing a $75,000 kitchen. But these people want to be the kings and queens of their own palaces now.”

The personnel issues were some of the most difficult to manage for Coffey as Scapes refocused its marketing efforts. A high percentage of the employees left for other commercial opportunities.

“We tried to explain the reasons we had to do something, to make a decision to move the company forward,” said Coffey. “It was not a pleasant task.”

Immediately, project manager positions in the commercial business were eliminated, and landscape architects were hired. On the production side, 10 to 12 people have been able to generate the volume of residential work that 50 generated with commercial work, Coffey observed.

One personnel factor that surprised Coffey was the amount of dollar volume that a designer could generate in a year. In the beginning, he estimated that an average landscape designer could generate $1.25 million to $1.5 million in business, but the actual figures have been between $500,000 to $750,000, which he said is comparable with industry averages.

Another difference from the commercial market has been that residents are much more season conscious. “We talk to clients a lot about fall plantings, but realistically, they have not been very interested in getting work done in the fall.”

Personally, it has taken some time for Coffey to orient himself to the residential market. “I realized early on that I needed to get involved in the process and go on lead calls,” he explained. “For a period of time, I was back in ‘school,’ but after three or four years I feel pretty comfortable.”

It’s also been personally draining, taking up a lot of evenings and weekends going on sales calls with designers.

But after five years of experimenting and learning lessons, Coffey feels the company will be hitting its stride next year. “We’re certainly not totally comfortable, but we feel that in another year we’ll be in good shape,” he noted. “The direction we’ve gone takes a lot of commitment, but if we’re positioned correctly in the market and if we continue to educate customers on the contribution of the high-end landscape to the quality of life, it could mean that a huge amount of sales volume will come our way.”

GONE COMMERCIAL. Commercial construction was the most recent frontier undertaken by Dennis’ Seven Dees Landscaping, Portland, Ore., nine years ago. President David Snodgrass said this new market definitely provided some new challenges from the company’s other markets, which include residential design/build, irrigation, outdoor lighting, wood construction, water features and maintenance.

One of the biggest challenges in opening the new market was getting the doors of commercial builders, general contractors and landscape architects to open for Dennis’ Seven Dees as a contractor. Snodgrass said this meant proving that the company was competent, accurate and timely as well as competitive.

He admits he thought the company could perform well even with a significant amount of open bid work, but Snodgrass realized the difficulty of achieving both quality and profitability in such a competitive arena.

“I knew from the beginning that negotiated work would be the best situation to be in, but I didn’t understand until later that it’s the only place to be,” said Snodgrass. “We maintained our commitment to quality and worked hard to build strong relationships that would bridge us to future negotiated work.”

The company grew slowly into the new market, letting some crew members move between the residential and commercial division in the first few years. “Until we got enough business to support a regular team of employees, it made sense to move employees that were capable of doing either type of work between the divisions,” noted Snodgrass.