The Answer May Lie Within: The Interior Market

Any business looking to grow its revenues can us-ually do one of two things: offer a better product or service, or offer its existing product or service to a new audience.

Raising the level of service provided can be difficult for many landscape contractors who are already facing challenges of shrinking profit margins and increased competition. This has led a growing number of contractors to turn to the interior-scaping market as a potentially profitable option for boosting their business while even more fledgling companies are entering the industry by offering interiorscaping services exclusively.

“The interior plantscaping market is definitely growing,” noted Emily Thompson, vice president for sales and marketing, Orkin Plantscaping, Dallas, Texas. “I think the clean air message and the value of plants for healthy air is getting across to the general public, and we’re seeing a shift in the interior design tendencies away from sculptures and hard objects to live, green plant materials because of their positive impact on people.”

In a recent nationwide survey conducted jointly by Lawn & Landscape magazine and the Associated Landscape Contractors of America, 70 percent of the respondents said they generated increased plantscaping revenues in the first six months of 1996 vs. the same period for the previous year, with 42 percent enjoying an increase of at least 10 percent.

And even more indicative of the expanding nature of the interiorscaping market, 81 percent of the respondents anticipate increased interior revenues this year vs. 1996.

NEW AND OLD ALIKE. Although it can be an attractive market segment for start-up exterior contractors, the average interiorscape company is by no means inexperienced. The average survey respondent has been in business for nearly 16 years with a range between six months and 80 years, and nearly two-thirds of the respondents service the interior market exclusively.

Specialization appears to be a definite asset to these interior plantscapers. They have stuck to their niche and satisfied their customer base. Their reward is an increased revenue flow as well as an optimism about future revenue increases.

It should come as no surprise that commercial customers drive interiorscaping business — more than 96 percent of the companies offer interior commercial installation services, and more than 93 percent offer interior commercial maintenance, compared to 76 percent and 71 percent for the same residential services, respectively. Obviously, a retail mall or a large-scale hotel project has significantly more revenue potential than a large home, and therefore, most interiorscapers target these commercial prospects. However, a few interiorscapers have targeted high-end residences and charge accordingly.

These are certainly not the only services interiorscaping companies offer, however. Better than 82 percent of the respondents also offer plant change outs, while more than 76 percent offer Christmas decorating services. Other popular offerings include pesticide applications (65 percent), other holiday decorating (34 percent), water features (27 percent), hardscaping (23 percent) and lighting (22 percent).

PERCEIVED VALUE. It seems these interiorscaping companies do indeed have reason to be optimistic about their future, based on the areas they identified as their fastest growing market segments. Interior commercial maintenance was by far the fastest growing area, with nearly 40 percent of respondents putting it number one.

This number is particularly informative when compared to the 23 percent who said interior commercial installation is their fastest growing market segment.

This would indicate that all of those commercial clients who have been hiring interiorscape contractors to install projects in their offices and buildings are realizing the value of having those projects maintained professionally. Reasons consistently cited by these property owners include increasing tenant occupancy, improving the curb appeal created by attractive lobbies, the psychological effects of using foliage and flowers as well as the health benefits — foliage helps to counter sick building syndrome.

“At the end of the 1980s and the early 1990s, when the interior industry really struggled, a lot of companies who were customers of interior plantscapers cut back on their maintenance programs and ended up losing the dollars they had invested in the inventory because the plants died,” explained Thompson. “These customers learned the hard way that the perception that interiorscapers only water the plants isn’t true, and it made them appreciate the value of the service they had been receiving.”

THE HOLIDAY BOOM. As everyone knows by now, interest in the professional holiday decorating business is booming across the country. Almost 19 percent of the respondents highlighted holiday decorating as their fastest growing market segment, and nearly 20 percent of those companies planning to expand their service offerings said they will enter this market within the next five years.

“Holiday decorating is becoming a huge part of this industry, and I don’t think we’ve even begun to tap that market,” added Thompson, noting that the bulk of the holiday decorating customers are commercial accounts. “There’s such a narrow window for installing the materials and removing them that, as an interiorscape contractor, you have to have a really healthy markup to make the profits worth the work. And those markups are generally found with commercial clients.”

NO SIZE FITS ALL. The survey data paints an interesting picture regarding the size of the average interiorscaping company. While large numbers of employees are not required to offer interiorscaping services, some larger companies do service this market. Nearly 58 percent of the respondents had less than 10 full-time employees, while better than 25 percent had more than 20 full-time employees.

An interesting survey result was that just one-third of the total respondents provide both interior and exterior services, but half of those companies that have more than 20 full-time employees offer both interior and exterior services. This would indicate that half of large companies servicing the interiorscape market are actually full-service landscape companies which can take advantage of their exterior contracts and relationships to generate interior work.

This assessment makes sense due to the necessity for establishing a relationship in the commercial arena. If the relationship, trust and communication already exists in either the interior or exterior area, the sale of the other horticultural area is much easier.

(Note: Contractors planning crossover from one market to the other should use caution. The horticultural and business disciplines between the two markets are significantly different. The people, capital needs, equipment, vehicles, job costing, accounting needs, communication needs and scheduling issues are unique to each market).

CONSOLIDATION MOVES. Further proof that the interior market mirrors most business markets, with a minority of the companies making most of the money, was shown by approximately 20 percent of the respondents indicating they generated more than $1 million in revenues in 1996, while more than 58 percent earned less than $500,000 last year.

“There has been a great deal of consolidation in this market, and that has really created a gap between the big companies and the small companies,” said Thompson. “That seems to be an attractive expansion option for successful exterior contractors who have the advantage of cross-marketing over their customer base.”

An overwhelming majority of the respondents are optimistic about growth in both revenues and profits in coming years, however. More than 82 percent of them said interiorscaping revenues for the first half of 1996 were better than the first half of 1995, and more than 50 percent of those companies boosted their revenues by better than 10 percent.

Almost 92 percent of the respondents anticipate higher profits from their interior work in 1997 compared to 1996, although most of them (73 percent) are expecting less than 10 percent growth.

“The growth will only continue if the members of the industry will focus on getting the message out that plants do clean the air,” encouraged Thompson. “Not only is this a good message for the environment and the people, but it will support additional growth for the industry.”

West is Associate Editor with Lawn & Landscape magazine. Ott is director of training with Orkin Plantscaping, Atlanta. The survey was conducted in a joint effort between ALCA and Lawn & Landscape magazine.