Despite the late spring and dark clouds created by the ongoing H-2B guest worker fiasco and countdown to the Affordable Health Care Act, 2013 was a good year for the Green Industry. Based on the results of an October survey of Green Industry Pros readers, most landscape contractors and equipment dealers took another step forward in their now four-year recovery since the industry took a pounding in 2009. The "landscaping services industry" is now at its largest volume ever (roughly $70 billion), and is expected to continue growing at a modest but healthy rate for the next five years.
According to the survey results, roughly half of contractors said both landscape installation and maintenance business was up this year, 39% said lawn care business was up, and 19% said irrigation was up. The majority of those contractors said that growth was less than 20%.
Some contractors did have a tougher time this year, proving that we're still in a business environment where stealing market share is critical to achieving above-average growth. Roughly 24% of contractors said installation business was down, 27% said irrigation business was down, 14% said lawn care business was down, and 12% said maintenance business was down.
Most equipment dealers are seeing growth in each of their three primary revenue centers. Roughly 56% said both equipment and parts sales were up, and 49% said service revenue was up. Fewer than one in five dealers said business was down this year.
Some dealers are still struggling to get a handle on increasingly unpredictable weather patterns and customer buying cycles. Roughly 31% said they have too much leftover equipment inventory to close this year, while just 11% said they have too little. With respect to parts inventory, 28% said they have too much, and 13% said they don't have enough. That said, most dealers plan on ordering a normal amount of new inventory for next year. However, 38% plan on ordering less equipment, while just 14% plan on ordering more. As for parts, 23% plan on ordering less, and 14% plan on ordering more.
Outlook for next year
Green Industry professionals remain an optimistic bunch. More than half of contractors expect both installation and maintenance business to improve next year, roughly half say lawn care will improve, and 35% expect irrigation business to get better. Few anticipate seeing a sales decline. Most expect growth to be less than 20%, although one in five contractors expect maintenance sales to grow by more than 20%.
Equipment dealers are equally optimistic. Roughly 42% expect to sell more equipment, while just 16% foresee selling less. As for parts, 48% of dealers plan to sell more, and just 11% plan to sell less. When it comes to equipment service, 43% of dealers expect more business next year, and just 10% expect less.
Most equipment dealers continue to sell to both landscape contractors and everyday homeowners. Half of dealers expect to see more business from consumers next year, while 31% expect more business from landscape contractors. Few dealers expect to see a decline in sales to these two key customer groups (13% consumers, 16% landscapers).
Finding employees top of mind again
For the past several years, the soft economy and increased level of competition were foremost issues in the minds of both contractors and dealers. Many are now more concerned about finding employees to keep up with expansion goals—another sign of improving business conditions.
Roughly 36% of contractors added maintenance laborers this year, but 45% plan to do so next year. Additionally, 29% plan to hire additional maintenance foremen, compared to just 20% that did so this year.
More contractors (38%) also plan to hire additional installation personnel next year; just 29% added staff this year. Then, 23% plan to hire more foremen, compared to just 17% that did so this year.
Contractors also plan to hire more help for their lawn care divisions in 2014. About 31% plan to hire more techs; just 21% did so this year.
Few contractors (less than 10%) plan to reduce field staff next year in any of their three main service centers (installation, maintenance, lawn care).
One area most contractors are not looking to grow payroll is in general overhead. Just 17% are looking to hire more managers, while just 12% plan on hiring extra administrative help.
Equipment dealers are also looking to do more hiring next year:
- 30% plan to hire extra service technicians; 22% did so this year
- 19% plan to hire extra parts department staff; 13% did so this year
- 11% plan to hire extra sales staff; 5% did so this year
- Just 2% plan to hire extra office staff; 8% did so this year
At the same time, only 1-2% of dealers plan to reduce staffing levels next year. And not a single dealer said they would cut back on service technicians.
Pricing is recovering
For most contractors and dealers, the days of having to cut employees could be behind them. Likewise, the days of having to slash prices could be fading into memory, as well.
Most contractors think they'll be able to raise prices with at least some of their clients next year. Commercial accounts are going to be a little more difficult.
- Residential Maintenance – 16% no way, 45% with a few clients, 16% with half, 16% with most, 7% with all
- Commercial Maintenance – 25% no way, 42% with a few, 14% with half, 12% with most, 7% with all
- Residential Installation – 17% no way, 37% with a few, 12% with half, 22% with most, 12% with all
- Commercial Installation – 30% no way, 37% with a few, 11% with half, 14% with most, 8% with all
Equipment dealers have done a good job over the past few years of getting their shop labor rates up to where they should be.
- 3% charge less than $50/hour
- 23% charge $51-60/hour
- 41% charge $61-70/hour
- 33% charge more than $70/hour
Looking ahead to next year, 44% of dealers plan to raise their shop labor rates.