The market for landscaping services is much improved, but this business is still rife with challenges. According to a survey of landscape contractors subscribed to Green Industry Pros magazine, three primary issues remain foremost in the minds of landscape contractors:
- Finding, training and managing employees
- Government policies and/or regulations which impede the ability to maintain acceptable profit margins and grow
- Dealing with "fly-by-night" competition
Actually, according to the survey, a couple dozen issues were brought up by contractors. Some are interrelated, and each tie back to one of the three main issues listed above. For this article, we'll break it down just a little further into seven topics of conversation, while also providing possible solutions as recommended by landscape contractors themselves.
Contractors are expressing concern for not only the inability to find good field workers, but also good managers. One contractor said, "We need to keep our trained employees happy, engaged and growing within our structure … this can be more than a job if one is career-oriented."
For most contractors, though, laborers are the bigger issue. The past few years have been especially difficult because wages, generally speaking, have had to remain flat. Additionally, finding on-demand, temporary help for the occasional larger job can be a real challenge. One contractor said he has actually had some success hiring existing customers to help on new projects he has landed.
Continuing on the topic of temporary help, the H-2B seasonal guest worker program, although utilized by fewer than 5% of landscape companies, has certainly been causing headaches for those who do rely on it. One such contractor said, "My biggest challenge is hoping to get my H-2B employees of 12-plus years back (this) year. If this was not such a tight rope to walk each year, my company could grow much larger. Without having to worry and spend so much time and money on H-2B, I could concentrate more on my business."
Whether the uncertainty is over guest workers or homegrown, there's no doubt that contractors spend more time than they'd like on employee recruitment and retention efforts. One contractor said, "With our track record and reputation in the community, we could easily sell more work and grow our business, but we have to be able to find, hire and retain a quality workforce that is able to fulfill our commitments." This contractor is focusing on two things to accomplish this: 1) advertise more to find the best possible job candidates in the area, and 2) take steps to enhance the company culture in order to better retain good employees while also making it more "uncomfortable" for unproductive employees.
Hopefully you are able to work your pricing and budget so you can start throwing a little more your employees' way, and also spend a little more on recruiting. Then, as one contractor put it, "We need to simply improve our hiring process, taking more time to qualify applicants." Another contractor added, "We have a healthy market here, but are now having trouble finding good installation employees. We'll be increasing our marketing and trying to get smarter about finding good field employees."
Better training is also a focal point of many contractors. One survey respondent has implemented a new employee development program. "We see this as the solution to many of our problems," the contractor said.
Keep in mind that 75% of landscape contractors don't have more than a few employees. In fact, many fly solo. One such contractor offered the following approach that, although a bit risky, could prove advantageous on occasion for not only him, but for other landscape companies in his area. "My few employees quit last year, but my sales stayed the same," the contractor said. "So this year I'm continuing to work alone. I'm doing a few less lawns and will instead focus on selling more planting jobs. I'm also looking to purchase equipment that can help take the place of one or two workers.
"I will look for experienced help on larger jobs, and just pay them what they are worth," the contractor continued. "Or, I may look to partner up with other landscape companies on the large jobs I get. This would give the customer better service with two 'owners' on site at all times."
2. Government & Regulations
"The government, with all of its taxes, laws and restrictions, is my biggest challenge," one contractor said. "Changing regulations make it impossible to stay competitive and budget costs," added another. "Plus, vehicle and equipment regulation changes require me to purchase new equipment when I really don't need new equipment."
Regulations at the municipality level can be a challenge too. Leaf blower, fertilizer and/or pesticide ordinances are great examples. They pop up sporadically from coast to coast, sometimes with little warning. Seattle was one of the more recent cities to look into leaf blower restrictions, for example.
Let's face it, regulations are something all small businesses must deal with. They are rarely convenient, sometimes unnecessary, and often costly. The best thing a landscape contractor can do is get involved in their state landscape association in order to stay on top of emerging issues and participate in any lobbying efforts. It's also a good idea to look into joining a national association such as PLANET in order to stay abreast of issues at the federal level.
Speaking of issues at the federal level, The Affordable Care Act (Obamacare) has been in the spotlight over the past several months. One owner of a large landscaping company with 50-plus employees said, "We're trying to plan for what would be best for our company. It would cost us around $400,000 a year, which would put us at a competitive disadvantage since no other contractor in our area offers insurance. We are monitoring all of the rule changes to see how we should react to any new regulations that are created … One thing we are watching closely is how employees are counted, and how we could use part-time workers and seasonal workers to stay under 50 employees."
The owners of small landscape companies are also being affected. "Being self-employed, paying for my individual health care policy is a concern," one contractor said. "Obamacare has raised my health insurance premium 280%."
The Health Care law is actually spooking some contractors into taking drastic actions. "I will do nothing that further adds to my cost of doing business," one survey respondent shared. "Obamacare has me scared."
3. Industry Professionalism
The lowballing onslaught commenced in 2009. Things have gotten better for some contractors, but not all. "Non-licensed and uninsured businesses are killing the market in our area," one contractor said. "Fly-by-night contractors do a crappy job and drive down prices," added another contractor. "Competitors who are paying their employees under the table are hurting us," said one other contractor. "Competing with illegal contractors who take cash only is a big challenge," said one more contractor.
Unfortunately, the concept of "industry professionalism" extends beyond the low-end competitors you have to face. Many contractors also express concern over how the average consumer has come to view the landscaping trade.
"People who have money to spend don't look at the landscape industry as legitimate," one survey respondent said. "Not like, say, an electrician. Many consumers think anybody can do landscaping, and they treat you that way."
The downside—or perhaps potential upside—is that today's consumers also expect more from their service providers. The true Green Industry Pros can rise to the challenge, and make sure the customer understands what value really is.
"There are just too many guys out there who think they are landscapers," one survey respondent said. "The challenge (for reputable contractors) is to prove themselves all of the time. I've been doing this for over 30 years, and it's hard to compete against the fly-by-nighters who will mow an acre for $40. I try to educate my customers so they know what they are getting for their money."
4. Staying Price-Competitive
The first thing lowballing contractors do is drive down pricing. But pricing pressure cannot solely be blamed on these semi-pros. Many landscape companies, big and small, have disrupted pricing in different markets around the country. Some of that can be chalked up to strategically smart business, and some of it to desperate foolishness. Regardless, some degree of pricing pressure will continue to persist for some time.
The industry is growing again at a steady rate of a few percent a year. Still, many contractors feel like things are still touch and go. "Money is still tight for my customers, both residential and commercial," one contractor said. "Some commercial accounts are even opting to keep maintenance in house, just to give their current employees something else to do."
"My biggest challenge going forward is the size of my upscale client's 401k," said another contractor. "I'm afraid that the present economy might even start to affect the upper class," another contractor added.
One more contractor feels a little more encouraged. "There still seems to be a lot of fluctuation in the economy, and our business tends to move in the same direction. But overall it seems like people are starting to spend more—especially with their outdoor spaces."
As the industry continues to recover, it's still best to remain on your toes. "Lack of consumer confidence is always hard to overcome," one contractor said. "So we'll focus on careful estimating and bidding, as well as cost control."
"As margins go down on projects, employees gain leverage on employers for higher wages, and when health care reform kicks in, it's going to be very costly to continue keeping prices down," another survey respondent shared. "I think most landscape companies make a profit, but not large enough to support ownership and balance sheet payments. So cash flow is very important, as is having your equipment close to projects so you can minimize drive time and fuel costs. We are moving trucks closer to our larger projects, and now have employees report right to the site."
Estimating/bidding is a big concern for some. "Our newly hired landscape manager underbid 90% of the projects he bid on last year," one contractor shared. "We believe much of the losses were a matter of how efficiently he handled his crews and materials." So in a case like this, it's not so much a matter of not knowing your numbers or maliciously lowballing a competitor. It's a matter of execution, which is why efficient systems and tight controls continue to be important tools in a landscape contractor's management toolbox.
5. Pursuing Best Opportunities
As the market for landscaping services has improved, some contractors have become more selective as to which jobs and clients they pursue. For the past few years, any job seemed to be a good job. Now at least some contractors are focusing on what they feel their best opportunities are. Here are a few things different contractors had to say about what they'll be pursuing this year:
- Focus on making our labor-intensive maintenance division as profitable as possible
- Winnow out underperforming residential properties and try to replace them with higher-performance ones
- Focus more on "organics" which I feel is a big potential growth area
- Grow our fertilizing and spray division
- Increase number of snow accounts and build route density
- Get away from public bidding, prevailing-wage work
- Raise our prices and find clients willing to pay for quality
6. Building Customer Base
Other contractors are taking a more simplistic approach. "We just need to rebuild our customer base," one contractor said. "We're going to focus on customer service, doing that little extra thing even when we don't necessarily need to," said another. "Our biggest challenge is gaining name recognition in the regional marketplace as we work to grow our market share," said one more contractor.
Sometimes these more simplistic approaches, when executed effectively and consistently, can pay big dividends. Just take a look at responses to a research project commissioned by PLANET last year:
- Price (69%) and quality (68%) were equally valued as the most important trait/aspect by consumers when selecting a lawn care or landscape company
- Also high on the list were customer service (35%), references/recommendations (33%), and licensed/certified staff (26%), followed by types of services offered (9%), offering sustainable practices (9%), and the image or look of the company and employees (6%)
Price and quality are no-brainers, right? But it's encouraging to see that customer service, references (i.e. your reputation) and qualifications are next on the list. These potential deal-making or breaking factors are completely within your control, which is why today's most successful contractors are taking control of them.
Today's successful contractors are also taking better control of their marketing campaigns. "In the last five years, there has been a dramatic change in how potential customers contact us and request estimates," one Green Industry Pros survey respondent said. "Technology is rapidly advancing with smartphones and tablets. Therefore, (landscape company) websites need to be responsive, offering the best viewing experience. Keeping up with technology has proven to be the difference between five website sales leads per week or 50."
7. Managing Growth
Profitably managing growth opportunities is the final issue on our top-seven list. According to the survey, this projects to be a challenge for just about half of contractors this year.
"Our biggest challenge is keeping up with phone call and email volume," one contractor said. "We often have to ignore potential new customers if the volume from existing customers is high. We might have to hire more office and sales staff."
Next to finding qualified labor, raising capital is one survey respondent's biggest challenge in his quest to grow. "We're working with the SBA (Small Business Administration) in trying to secure financing," the contractor said. "It doesn't look good right now, but we're trying."
The rising cost of doing business is also increasingly difficult for some contractors. "Equipment prices keep going up faster than my ability to keep other costs in check," one contractor pointed out. "Labor costs, material costs, equipment replacement costs and chemical costs all seem to be rising, but the payback is not equal to the costs," added another contractor.
The bigger problem, another contractor explained, is that his prices haven't been able to increase fast enough to keep up with his rising material costs. "Our challenge is to determine how we can be more efficient with our other resources, such as labor and overhead, to still deliver our service profitably," the contractor said.
"Controlling labor and trying to maintain growth that is profitable is my main focus," said another contractor. "We have grown over 100% in the past year and a half. It's been difficult, but we're learning how to control the overwhelming flow of work. We've increased prices, and will continue to going forward—as long as the amount of work stays strong. The opportunity is great."