Think back 10, 15, even 20 years ... to the days when cell phones were unique and refueling your fleet didn’t require a second mortgage. Competition was keen back then, although not as keen as it is today. And insurance, although necessary and costly, wasn’t becoming prohibitively expensive.
Some people define the 1980s and 1990s as the “good ole days.” Those were the days before mergers and large acquisitions irrevocably changed the business landscape, before the American workforce seemingly abandoned the service industries for greener pastures, and before Mother Nature threw a temperature tantrum that raised awareness about potential global warming.
Yes, change is inevitable, and how an industry responds to these changes is a fairly good indicator of what’s in store for the next couple of decades.
The bar has been raised
Bill Gordon, owner of Signature Landscape in Olathe, KS, has been in business 20 years. “One of the biggest changes is the competition,” says Gordon, whose company primarily does commercial grounds maintenance and enhancements. “Years ago, if you put out a good product—with good lines, beautiful flowers and lots of detail pruning—you could easily differentiate yourself from the competition. Today, though, competition is much stronger and, like other companies, we have had to figure out ways to stay ahead of the competition. In other words, we’re striving to learn faster than they are.”
To stay ahead of competitors, Gordon has honed the bidding process. He has also determined where his company’s strength lies, and focuses on those strengths and his people. “People are so important today, in large part because good people are at a premium,” Gordon adds. “Successful owners make a concerted effort to hire individuals who have strengths they don’t have and who can build careers with their companies.”
Gordon goes on to say that in the early 90’s, labor was “somewhat” available. Then the supply dwindled until Hispanic workers became more prominent. “Of course, change is in the wind and none of us know how things will be five years from now,” he emphasizes.
Among other industry trends, Gordon sees a positive change in perception. “Over the past 15 years, the public perception of our industry as a whole has changed significantly. Our industry was once viewed as a poor man’s way to make a few dollars mowing grass. Today, I believe the green industry is viewed with respect, drawing bright young people with college degrees and a desire to build a career working with plants and people.”
COMBATING RISING COSTS
“The biggest change I’ve seen is the cost of doing business, which requires companies to look for more efficient ways to conduct business,” reports Dan Standley, owner of Dan’s Landscaping & Lawn Care Inc. in Terrytown, LA. “One of the biggest costs is fuel. We recently installed an active GPS system that saves us money in several ways.” In business for 27 years, Standley says the new system displays efficient vs. inefficient routes, monitors vehicle idling time, and overall saves fuel, time and wear on the engine.
“We sell time and cannot afford to have that time siphoned off by employees who are not working as efficiently as they can,” Standley adds. “The GPS also allow us to locate our trucks in real time via the Internet, which allows us to keep tabs on speed limit violators. The same system will help find a stolen truck. Even though the monthly per-unit cost is $33, it saves us 10-15% on insurance and, as mentioned, reduces fuel costs and wasted time.”
Technological advances have improved operations in countless other ways. Thirty-year industry veteran Burt Blanton, owner of Super Green Lawn Care in Springfield, MO, no longer has to push a fertilizer spreader on large properties. “Ride-on units save incredible amounts of time and energy,” he emphasizes. “I can do three acres in 20 minutes with just one spreader.”
Blanton, who services approximately 500 customers, notes that technology has improved his competitive advantage, too. “Because of the competition, it’s a bit harder to sell today than it was when we first started in business. The Internet, though, has given me the opportunity to show prospective customers just how nice my properties look.”
For both Charlie Bowers, owner of Garden Gate Landscaping Inc. in Silver Spring, MD, and Rick Doesburg, CCLP and owner of Thornton Landscape Inc. in Maineville, OH, new technology has helped ramp up communication with customers, which is always a good thing.
“Email is becoming the preferred method of basic communication with our heavily ‘wired’ customers,” explains Bowers, who has 45 years of industry experience under his belt. “So many of them travel all over the world that email is truly the only way they can communicate. Right at home, we email most of our smaller and repeat customers instead of mailing a letter or visiting them in person. New and larger accounts, though, still require that personal touch.”
Doesburg agrees. “Cell phones, computers and email have all led to better and faster communication with clients. The new technology has been just as helpful for maintaining relationships with suppliers, as we can even order plant material right online.”
For Bowers, being able to order online and going to a single-source plant materials provider has saved, in his words, “tons of money,” and has truly simplified doing business. “We have our supplier’s inventory counts right in our estimating system, which is updated weekly,” he adds.
“The computer, or more specifically the AutoCAD program, has had a dramatic impact on the design portion of our business,” says Doesburg, a 40-year industry veteran himself. “The system saves us tremendous amounts of time just in laying out projects, something that is especially noticeable with bigger projects. After all, we’re selling our knowledge and creativity; otherwise, we would be selling only a commodity. The computer allows us to get this information, our knowledge and creativity, to customers in a hurry.”
|Twenty years of change|
|More competition||Understand costs, focus on strengths, hire and train good people|
|Rising costs||Practice LEAN management principles, take advantage of new technologies and efficiencies|
|Commoditizing of services||Fulfill promise to customers and always be professional|
|More intrusive government||Stay up-to-date on government regulations, become involved|
|Knowledgeable customers||Improve response time and communicate with them|
|Changing markets||Be aware of market conditions and be proactive|
|More "green"||Be aware of environmental issues, but balance possible with practical|
SERVICE IS NOT A COMMODITY
Many veteran contractors will tell you that the price they’re getting for mowing and maintaining a property hasn’t changed significantly in 20 years. In some markets, the price may have even gone backwards. What could be the cause?
One of the more subtle changes is in the perceived value of the products and services companies are offering. Currently, the trend is to define mowing and maintenance, especially commercial mowing and maintenance, as a commodity. With little or no perceived differences among service offerings, customers tend to focus on price alone.
“Two stages of mergers and acquisitions, the first in 1998 and the second in 2005-2006, led to some good independent companies going out of business,” explains Ron Kujawa, CCLP and former president of Kujawa Enterprises Inc. in Oak Creek, WI. “The new, larger companies approached landscape maintenance with a cookie cutter mentality. Service became very regimented, with all customers being treated the same way.
“In essence, these companies tried to commoditize service, but service is not a commodity,” Kujawa goes on to say. “No one can store or inventory service. Unlike a commodity, service cannot be evaluated or measured until it is delivered. Therefore, selling your services is the same as selling your promise to do something in a certain way for a certain price to the satisfaction of the client. Your reputation, your retention rate and your references are the best indicators that you will deliver as promised.”
This industry veteran emphasizes that fulfilling that promise to customers is more important today than ever before, to help dispel the commodity label and differentiate competitors. But quality is not the only measure of service.
“We’re in the image business, and business owners sometimes allow their employees to become too casual in their appearance,” Kujawa points out. “The industry has come a long way over the years, but landscape contractors still have some work to do to be viewed as true professionals.”
Kujawa identifies environmental issues, including the green movement, as new service drivers. “Some of the issues are trends, and some are fads,” he notes, “but we have to address or at least be aware of them because they impact our clients. One of the challenges we face today is striking a balance between what is possible and what is practical.” As Kujawa points out, the price of having a completely green planet would be one that few people would want to pay.
Doesburg cites Newton’s Third Law of Motion when asked about new environmental initiatives. “As a nation and as an industry we create way too much waste, and there are several steps we can all take to be more environmentally responsible. At the same time, our government should not indiscriminately initiate legislation without thinking about both the long- and short-term consequences of its actions. As Newton observed, ‘For every action there is an equal and opposite reaction.’”
As examples, Doesburg notes that production and use of ethanol has caused an unsuspected backlash from grocers who claim that it is the culprit behind the spike in food costs. You may neither like or appreciate the heavy-plastic packaging today, but to do away with it means you do away with someone’s job. Do away with backpack blowers and property owners need to be prepared to pay a higher cost for cleaning drives and walks. “Another change we’ve all experienced is the presence of a more intrusive government, especially at the regional and local level,” says Doesburg. “Government is everywhere with licensing fees, and every city has its set of tax laws. Everyone wants a share of the payroll tax. Government initiatives are not only costly, but force small business people to employ an individual whose job description is almost exclusively dedicated to complying with new rules and regulations.”
It all contributes to the rising costs of doing business, Doesburg emphasizes. “Insurance, including workers’ compensation, is going up every year. Health insurance is out of sight, to the extent that most small business owners cannot offer health insurance as a benefit.” Fuel, equipment, plant material … nearly everything a landscape contractor touches is going up, except what he or she can get for services rendered.
The upshot, says Doesburg, is that landscape contractors and lawn care operators have to rely on sharp pencils to make a profit, and work diligently to drive costs out of their operations. “We have more pressures applied today than ever before to keep costs down,” Doesburg reports. “That is one reason why we participate in the LEAN management program. We’ve been holding company-wide LEAN meetings for less than a year, and already they are paying back dividends.”
More competition and fewer employees, more government and higher costs, new technologies and new trends all make for an interesting patchwork of challenges for contractors.
Customers are changing, too. Cell phones and emails are a double-edged sword. The customer’s ability to communicate quickly with his or her service providers also raises expectations. The Internet, websites and horticulture links all contribute to more knowledgeable homeowners and property owners.
Markets are also changing. “The design/build business in our area has seen its ups and downs over the years,” says Bowers. “Currently, customers are more focused on hardscape elements than having gardens that are balanced between hardscapes and plantings, which they have historically favored.
“We’ve gone back and forth between subcontracting our hardscape installations to doing them in house,” Bowers continues. “Right now we’re focusing on the latter, which generates more margin and revenue per man hour. The fact that we’re offering this service with our own people also allows us to develop a highly skilled and effective labor force.”
In other parts of the country, the sluggish economic climate has created a challenging design/build environment. In the Cincinnati market, Thornton Landscape’s new landscape maintenance division is expected to pick up some of the slack this year. In the New Orleans area, Standley mentions that increased expectations among high-end homeowner customers have forced his company to switch over to commercial maintenance.
Business owners need not face new challenges by themselves. Among other noteworthy changes over the last decade or two, industry participants seem more willing than ever to form strategic partnerships.
“We have solidified all vendor relationships and tend to give most of our business to folks who are accommodating and appreciative,” Bowers relates. “They also have to have good service, the right products and fair pricing. We’ve made it a win-win situation by being reasonable and paying them on time, all the time.”
Strategic relationships are equally effective when formed between contractors, as they try to take advantage of each other’s strengths. Peer groups are also gaining in popularity, giving business owners the opportunity to share ideas and ways to deal with the demands of a new world.
The changes in this industry are nothing less than dramatic, and they have set a new course for contractors to follow. Doing business the old way may not be totally out of vogue, but company owners who are not taking advantage of technology, changing recruiting habits, developing strategic relationships and driving out costs will likely find themselves fighting an uphill battle.