Market Trends: June 2001

Entrepreneurship helped stabilize the economy’s recession in the early 1990s, according to the Small Business Administration, which stated that the U.S. economy was reinvented "by fostering and promoting entrepreneurial activity."

To encourage small business owners, BizMove.com created "The Top 10 Deadly Small Business Mistakes and How to Avoid Them."

1. Sticking with one idea too long – Don’t get married to one idea. Play with many ideas and see which ones bring money and business success.



2. The absence of a marketing plan – A marketing plan creates the kind of attention you need to get in front of the right types of clients.



3. Lack of customer knowledge – Changes in customers’ preferences and competitors’ products and services can leave a company in the dust unless it gets to know its clients well. Learn what they want now, will likely want in the future and what their buying patterns are.



4. Ignoring your cash position – Clients don’t respond even to superior services in a timeframe that a company thinks they should, so keep plenty of cash for stability.



5. Ignoring employees – Motivating, coaching and managing staff is an important challenge business owners can’t avoid.



6. Confusing likelihood with reality – The successful entrepreneur lives in a world of likelihood but spends money in the world of reality.



7. Lack of a sales plan – Without a sales plan, there’s no serious way to gauge the financial growth and progress of a business. Business owners need realistic maps showing where the sales will come from, how they’ll come in and from whom.



8. Being a Lone Ranger – A business owner may be the key to his or her company’s success, but that person cannot do everything and grow the business simultaneously. Even modest success can be overwhelming unless the right staff is hired and responsibilities are delegated.



9. Mastermind deficiency – Get an advisory board or a mentor. Having someone available to give objective opinions on ideas is critical.



10. Giving up – Some of the most successful entrepreneurs failed several times before doing extremely well. Fail, learn from mistakes and then try again with this new wisdom.

ENERGY CRUNCH
Increasing Energy Costs Hurt Growers’ Bottom Lines

WASHINGTON, D.C. – The sharp increase in the prices of natural gas, propane and gasoline over the last six months has had both a direct and indirect impact on the nursery and landscape contracting industry with potential long-term consequences, according to many members of the American Nursery & Landscape Association.

Due to a variety of factors – lowered supply, increased demand and drastic temperature fluctuations – these soaring natural gas prices hit greenhouse-growers particularly hard late last year and during the early part of this year. Greenhouse growers often rely on natural gas to heat their greenhouses for the production of seasonal crops or to over-winter non-hardy plants indoors during cold winters.

While fuel prices create a direct impact on the industry, rising oil and gasoline prices also are indirectly affecting many companies. For instance, plastic products that growers use to wrap plants or grow plants in are more expensive to produce. Growers with decreasing profit margins are bearing these price hikes – some of which are more than 20 percent, ANLA explained. But most ANLA members reported that the biggest loss has come from prior contracted sales.

MERGERS & ACQUISITIONS
RBI Continues Acquisitions

LITTLETON, Colo. – The RBI Companies expanded its geographic reach with the acquisitions of Richway Landscaping in the Houston, Texas, and Jack’s Nursery, New Orleans, La. RBI, No. 8 on the Lawn & Landscape Top 100 list last year with revenue nearing $70 million, now has 13 offices in nine major metropolitan areas.

Richway Landscape earned revenue of about $3 million last year, primarily from landscape maintenance work. Jack’s Nursery (No. 86 on the Lawn & Landscape Top 100 list) grossed annual sales nearing $10 million from a mix of golf course, landscape design/build and maintenance work.

The acquisitions will help RBI bolster its already diverse service mix. "RBI will be developing the landscape construction team in Houston and projects having profit centers for heavy construction and reclamation within five years," explained Jody Randall, vice president of internal operations for RBI.

Chuck Rich, former owner of Richway, will oversee landscape construction and maintenance operations in the area.

RBI hopes to expand its geographic market through Jack’s Nursery, since the company was handling projects in Louisiana, Tennessee, Mississippi, North Carolina and Indiana. In addition, RBI will expand Jack’s Nursery’s services to include site development, heavy construction, reclamation, erosion control and sports facility work.

MERGERS & ACQUISITIONS
Scotts Announces Acquisitions

MARYSVILLE, Ohio – The Scotts Co. announced a series of acquisitions for its Scotts Lawn Service division. These include:

• Liqui-Green Lawn Care, Peoria, Ill.
• Northern Lawns, Omaha, Neb.
• Real Green Lawn Care, Detroit, Mich.
• Munie Lawn Care, St. Louis, Mo.
• Green Valley Lawn Care, Kansas City, Kan.

These deals mean that Scotts has acquired 23 companies and more than $15 million in annual revenue in the last few months as it builds its lawn care division, according to Mark Long, vice president, Scotts Lawn Service. "While our acquisition program may not be as aggressive as previous consolidators, our focus is the acquisition of the right companies in new cities," Long explained.

Long left the door open for Scotts Lawn Service to offer other services as well. "We may, in the future, begin looking at companies offering more than lawn care," he said, declining to list specific services offerings they company may consider.

Scotts’ lawn service division, while only a few years old, continues quick growth. According to its first quarter earnings report, Scotts Lawn Service generated $4.4 million in net sales during the first three months of 2001 – a 69-percent jump from 2000. In fact, Scotts Lawn Service was the only division to achieve double-digit growth for Scotts Co. in that timeframe. Long said Scotts expects lawn service revenue to exceed $41 million in the current fiscal year and double next year.

FIRST-QUARTER REPORT
TruGreen Sales, Income Slide

DOWNERS GROVE, Ill. – Performance problems persist for TruGreen-ChemLawn and TruGreen LandCare, although the latest financial numbers released by the company indicate that the situation is improving in the lawn care and landscape divisions.

"Our primary operating challenges are the TruGreen and Management Services segments," related Jon Ward, chief executive officer and president. "TruGreen’s performance was affected by unfavorable weather conditions and integration challenges.

"We anticipate increasing momentum in the second half of 2001," the new CEO continued. "We expect to see improving performance in our TruGreen-ChemLawn unit and continue to make progress in the landscaping business. Our perspective is supported by our branches that are meeting profitability standards and the progress we have made in a few under-performing locations."

The overall TruGreen segment reported revenue of $258 million for the first quarter of 2001, down 2 percent from the same period of 2000. In addition, the combined operating income for TruGreen-ChemLawn and TruGreen LandCare fell 47 percent, from $32 million in the first quarter of 2000 to $17 million this year.

ServiceMaster attributed much of the sales problem to this year’s long winter. Revenue from landscape work was consistent with last year’s first quarter, the company reported, "reflecting management’s decision to enforce stricter profitability standards on contract sales and renewals. In addition, management is repositioning the business portfolio to increase its concentration on more predictable maintenance services."

The company’s stock is trading at approximately $11 a share, still well off its price of approximately $21 a share at the time it acquired LandCare USA in early 1999.