Financials From Georgia Landscape Maintenance And Lawn Care Firms

Positive trends in retailing seem to be matched by the development of the landscape maintenance and lawn care (LM/LC) industry. The expansion prompted this study with the underlying objective to identify factors influencing firm gross revenues and partial net revenues. The partial net revenues are defined as gross revenues excluding the reported labor costs for each company. Information on the effects of firm characteristics on revenues is indispensable for improved decision-making and successful management.

DATA. Data used in this study were collected by faculty cooperating with the Center for Urban Agriculture College of Agricultural and Environmental Sciences, University of Georgia. Specifically, data were collected through a mail survey in the spring of 1999. The design of the survey instrument was developed in conjunction with three major professional organizations, including the Georgia Green Industry Association (GGIA), the Georgia Turfgrass Association (GTA) and the Metropolitan Atlanta Landscape and Turf Association (MALTA).

Mailing lists from these associations provided addresses of firms that received the questionnaire. The survey was conducted in three stages in the first half of 1999 - following the first mailing, a postcard was sent a week later as a reminder; two weeks later, a second mailing of the questionnaires went to those firms which did not respond to previous mailings. The 45 percent rate of return was obtained after deleting the firms that were no longer in business or had incorrect addresses with no proper forwarding address. The obtained participation rate among businesses is considered high and was possible because of the support received from the industry.

RESULTS. Table 1 (see above) shows a cross-tabulation of major characteristics of a firm by four income categories. Business characteristics, such as age of the company, are important indicators of the success of a company. The age of a company is an implicit measure of management experience in providing consistent quality services. An earlier similar survey of the industry showed that companies in business for longer periods can expect larger revenues, and this survey supports that tendency (Table 1). The largest percentages of firms falling into the lowest and the highest revenue categories were at two extreme age categories. Firms operating five or fewer years in business were more likely to earn no more than $200,000 annually. Firms staying in business more than 20 years dominated in the $1 million or more income category.

Further statistical analysis confirmed the importance of the company age for gross and net partial revenues. Time allows companies to gain experience in managing resources, build a customer base and establish competitive position in an area. Without the ability to provide quality service, a company would not be able to stay in business for an extended period of time.

The data for type of company coincide with the revenue volume distribution across the four categories. Whereas the largest percentage of independently owned firms reported revenues not exceeding $200,000, corporations or franchise operators were mostly reporting $1 million or more in gross revenues for 1998. Furthermore, the distribution of corporation or franchisees across income categories showed less concentration in a single group than in cases of companies classified as independent or others. This trend may underlay a major difference reflected in the ownership type - for example, corporations may see a progression from a low-income category to a higher income category over time. Corporate management may enable larger earning by using a different approach than independent ownership, which typically depends on a single person to make operational and strategic decisions. By taking the responsibility for making all decisions, a single operator-manager limits his time to plan ahead in terms of the future directions, thus maximizing earning potential because day-to-day management needs are a priority. Statistical analysis confirmed a positive relationship between the corporate type of ownership and gross/net partial revenues.

Price discounts were used by almost one half of firms participating in the survey. One justification for using price discounts is to facilitate the management of labor by a company - for example, a price discount may attract additional customers between regularly scheduled maintenance or other planned jobs. Although statistical analysis confirmed the positive influence of the price discount for the gross revenues, it did not have any affect on the net partial revenues.

The education level of supervisors did not show a clear tendency when cross tabulated across four revenue categories. Regardless of the amount of schooling received, the supervisors were either in companies reporting no more than $200,000 in gross revenue or $1 million or more in 1998. The largest percentage of supervisors with the highest educational attainment level, 47 percent, was in the lowest revenue category. Consistent with the data in Table 1, supervisors’ education had no statistically important influence on gross revenues, but that statistic was significant and positive regarding partial net revenues. In short, well-educated supervisors may not generate more revenue, but they are able to improve company profits.

IMPLICATIONS. The LM/LC industry is labor intensive. Survey data revealed that labor cost formed one third of the total gross revenues received by a company. Statistical analysis revealed that labor cost has a positive impact on the revenues of the industry.

The ownership type represents an indirect measure of the scale of operation of a firm. The growth of a company depends on the influx of capital which is raised more easily by a corporation than by an independent owner. Larger amounts of capital, in turn, allow for the expansion of the customer base. An earlier study (Hubbell et al., 1997) found that LM/LC companies organized as corporations were more likely to offer a wider range of services then individually owned firms and, therefore, were able to attract customers interested in various services. The survey results show that companies listed as corporations are earning larger gross revenues when compared to the independent ownership.

The business practices adopted by a company are important for economic success. For example, an offer of a price discount on services to clients is one of the proven practices to increase a company’s revenue. Survey results show that the offer of price discount on the services can help the company in increasing its gross revenue.

Supervisory personnel employed by a company have an important role in the efficient operation of a firm. Supervisors must be aware of the changing needs of customers, new technologies and changing regulations, especially regarding labor and pesticide use. Education helps them to efficiently use knowledge in applying available resources to influence the economic performance of a company.

The dynamic changes of the LM/LC industry require continued research. However, without detailed data from the companies, it is difficult to prescribe any specific actions that should be undertaken. Continuous, substantial cooperation from the industry in data collection is required.

REFERENCES. Hubbell, B. J., Florkowski, W. J., Oetting, R., & Braman, S. K. (1997). Pest management in the landscape/lawn maintenance industry: a factor analysis. Journal of Production Agriculture, 10(2), 331-335.