For our annual State of the Industry report, we sought feedback from industry professionals from all areas of the landscape and irrigation markets. In Part 1 we discussed some of the challenges the industry has seen in the past year, and delved into some thoughts as to what 2012 might bring.
State of the Industry: Part 1
For our annual State of the Industry report, we sought feedback from industry professionals from all areas of the landscape and irrigation markets. Association leaders, manufacturers, contractors, designers, and more lent their insights to this overview of industry issues. In Part 1, below, we discussed some of the challenges the industry has seen in the past year, and delved into some thoughts as to what 2012 might bring.
Landscape and Irrigation: What have the biggest challenges for the industry in the past year, and how are those challenges being met?
PLANET President Jerry Grossi, Landscape Industry Certified Technician: The biggest challenge, in my opinion, has been water issues. We had some victories with the Environmental Protection Agency (EPA) and the green building code, but the issues aren’t going away. It is important to stay vigilant and use good economic sense to stay engaged in issues such as the banning of fertilizer and pesticides. The challenge for us is to win the emotional appeal of these issues.
Another challenge we saw in 2011 is the immigration and visa issue that came with the H-2B ruling. We’ve had a temporary victory on this issue, but we need to stay attentive to win this for good. Challenges that are hovering in the background, like ethanol issues, will surface shortly, but we have a stay on these battles.
PLANET President-elect Norman Goldenberg, Landscape Industry Certified Technician: Another big challenge we are facing is the local ordinances that have been adopted around the country and that have hindered operations on local levels. As Jerry said, the water issues are challenging in that we have science and technology on our side, but the perception of the industry is not based on science. Wherever there are waterways issues or water is scarce, the green industry is seen as wasting water. This negative perception gets all of the publicity. We need to be better about touting the benefits our industry provides for the environment.
Tim Banfield ASLA, president, Outdoor Living, Inc.: Unstable economy, large inventory of foreclosed homes, lack of support from banks.
David Brock, owner, manager and chief field technician for D B S Pest Control: Taxes and the resulting uncertainty affecting planning. The politicians seem to be representing their personal agendas, not the country at large. I know, as a one-man shop, there seems to be great uncertainty coming from Washington.
Maria Candler, CLP, president, James River Grounds Management, Inc.: Even with unemployment percentage so high, we struggled to find and keep good labor. In some of our offices we experienced 120 percent turnover. This has caused our safety scores to be affected, as well as morale in general. To work on overcoming this, we have had to go through somewhat of a cultural shift in how we think of performance. We have beefed up our human resource team, and are working on a total performance management system that factors in everything from an improved screening process, a more thorough on-boarding process for new employees, and a genuine environment of trying to gain the performance you need from someone instead of the old mindset of “if they aren’t what we need exactly, get them out and move on to the next.”
Pat Cappucci, president & COO of Schiller Grounds Care, Inc. (manufacturer of BOB-CAT, Classen, Little Wonder, Mantis, Ryan and Steiner brand equipment): Rising fuel, energy and materials costs have made pricing services more difficult, especially as growing the top line has become more difficult. Also, making things more complicated is that contractors have been forced to re-engineer their businesses in light of declining installation projects. To be competitive in the marketplace, there is a desire to absorb as much of these increased costs as possible to maintain and grow business. However, the across-the-board increases over the past few years have made absorbing those costs nearly impossible — no matter how lean and efficient a company has learned to operate in today’s economy. On a positive note, in our industry, the services provided are valued as much for their aesthetics as they are for their functionality, practicality or necessity. So long as the increase in price is not stark or severe, customers will pay a reasonable increase in cost to maintain their property. In bidding on new jobs, contractors shouldn’t sell their services short. Lowball bids, often considered a way to get your foot in the door, may not equate to long-term customer retention in this economy. Bidding a job at a fair price that includes a line item in the bid that represents a fuel/material surcharge may allow for some pricing relief as the customer is becoming more familiar these terms and charges. Coupling this with extraordinary customer service will help landscape professionals grow their businesses by offering additional services, and taking focus off the specific price of the job.
Coming into 2012, new engine-powered equipment will come equipped with new CARB- and EPA-compliant engines, better fuel tanks, and in some cases new fuel delivery systems as well. For contractors, the advancements in engine and fuel delivery system technologies will offer better fuel economy and increase unit and engine life, providing immediate fuel cost savings, lower emissions, and long-term lower cost of ownership. Purchasing new equipment that features these advancements will offer immediate and long -term costs reduction benefits.
Allen Chariton, president, Tierra Verde Landscape, Inc.: The biggest challenge for the landscape and irrigation markets in 2011 has been competition. The playing field is no longer level in this recessed economy. Competitors used to be equal in stature, experience, credentials and efficacy. Today, contractors are bidding projects at all-time lows and unlicensed, less experienced individuals are downgrading the competition. The result — it takes more work to make less.
Scott Cohen, garden artisan, The Green Scene: Consumer confidence in taking on the larger projects. We have designed “Master Plans” that can be implemented over time in smaller, less expensive pieces.
James R. Day, Turf Teq/Spec Fab: The ability for businesses to remain profitable. These economic times have required all businesses to take a closer look at their operations and operate smarter and more efficiently.
Carl Dowse, irrigation manager, The Bruce Company: Decreased demand — residential new construction is at historically low levels in our market, and commercial construction has also suffered. As a result, we have had to be more aggressive in our sales and marketing efforts and adjust our pricing structure to get the amount of work required to keep our employees working and cover fixed costs.
Employee morale — With the reduced workload and price we are getting for our product, we have not been able to reward ourselves and employees with wage and benefit increases. Not all employees understand that we have had to do more “bid” work at lower margins just to keep everyone working and on the payroll.
Tom Duffy, spray equipment sales manager, SherrillTree: Excessive weather extremes, especially in the mid-south/central U.S., Texas and N.E. states. Hiring and retaining qualified spray rig operations specialists has been difficult in some markets (i.e. New England).
Rene Emeterio, certified arborist, CLIA, CLT, Specialized Landscape Management Services, Inc.: The downturn in the economy has pushed companies to be more competitive, some lowering their prices so low to where it’s a lose for them just to keep their doors open. Trying to compete with these companies has been challenging. We’ve had to become more creative on our sales presentation or packages, still being higher than our competitor, but coming down a little on our end and offering more for less.
Bill Engler, director of sales-LSC, industrial & distribution, Ariens Company: The biggest challenge in 2011 for landscape companies has been renewing contracts at a price where they can make a reasonable profit. This was caused by the increase in new first-time (small) landscape contract companies operating without understanding their costs, or established but desperate companies (because of the increased competition) bidding contracts at or below their cost. The good landscape contractors have had to diversify their service offerings to add value to maintain current business, [and] continue to offer more for similar pricing.
Alex Fransen, landscape development manager, Steele Blades Inc.: Customer loyalty competitor pricing. We are starting to engage with our customers on a more personal level. Find out what they like to do, and do it with them — build more a personal relationship (hunting, sports, etc.). We feel this builds trust and that helps every year when they are approached by other companies.
Every year we have customers calling stating they had another company give them pricing for the season and it is substantially cheaper than ours. If we have their trust then we can more than likely review proposals with them. We obviously don’t want to lose customers.
Judson Griggs, director of garden development at Lambert’s, and one of Green Media’s “Most Influential People in the Green Industry” (2010): Dealing with the uncertain economy has definitely proven to be a challenge for us. Dealing with the high-end residential market, we have been fortunate to have designed and built a number of incredible projects this year. With that said, there are others that were put on hold due to the economic uncertainties. It is not that our clients don’t have the means to complete the projects, but they chose not to go forward until things stabilize — both in the U.S. and abroad. This made scheduling and staffing very difficult. We went into the season confident that many of the economic challenges would be behind us, and the pending projects would go forward. We budgeted and staffed accordingly. When some of these large projects didn’t go forward, it became necessary to make cost cuts and staff reductions. Those decisions are never easy.
Susan Jasan, MS, landscape designer, Landscape Creations by S Jasan: People assume that since the market is still very soft they can get any work at a much reduced price, and want to negotiate down service costs. Yes, we’re all being more frugal with our money, but there’s still overhead and being profitable enough to feed our own families. Irrigation wise, the drought in 2011 certainly impacted the irrigation business from what I hear from area contractors. They had a boom year in repairs and installations.
David Johnson, director of corporate marketing, Rain Bird Corporation: The biggest challenges continue to stem from the economy. With fewer construction projects, including homes, commercial and recreational, there is less business to compete for. By making products that inherently save the most water, we appeal to customers’ needs for saving money. By saving water, they will save money.
Michael Jones, president of the Americas, Husqvarna: The continued discussion in Washington [D.C.] around regulations, and the implications of regulation on our industry was a concern for landscape and irrigation markets in 2011. Those challenges are being addressed through sharing of information on the long-term implications of these regulations by our industry associations, manufacturers and others concerned.
Terry Kurth, director of development, Weed Man Lawn Care: Most landscape and irrigation owners seem to be lamenting the condition of the economy as one of the most challenging issues to deal with in 2011. Most have responded by cutting back on personnel, capital expenditures in general and/or advertising in particular. Some have made a solid decision to either start or expand their maintenance practice areas as these are more recession proof, especially if geared more toward residential. Other astute owners have taken this opportunity to expand their advertising in hopes of gaining more market share. Another challenge is finding the right employees to join your team and help you grow. Higher use of online employment search sites and rewarding current employees with incentives for bringing in new employees seems to be helping.
Eileen Laber, co-owner and sales and product manager, Aqua-Flo: The biggest challenge in this industry is the amount of decision making being done by uneducated, low-paid, relatively uninterested workers. A lot of work is being done by sub-par workers, at least in California. These are the people making numerous water-use and water-quality decisions every day. The same guy who is qualified to push a lawn mower is also making irrigation and fertilizer management decisions, based on “make it green,” with no additional parameters. If he applies fertilizer and then over irrigates with a high-precipitation sprinkler system, we get fertilizer in the run off, and wasted water.
Rich Lahren, C.P., landscape division manager, Hebron Brick & Block: Shipping costs. Trying to line up and finding a trucking company to get the product to our stores. We have been using many different trucking vendors to accomplish this. With the economy in flux we have been keeping inventory levels down. Practicing the “Just in Time” material inventory method. Staying competitive (labor) trying to keep the price down to keep bringing in business. Working on efficiency methods/lean management principles to help with this.
Bill LaSalle, Lambert’s: The client’s perception is that pricing must be lower because demand is low and service/construction suppliers need cash flow to stay in business. Therefore the market wants low-priced work performed but quality is to remain high, as well as timely customer service. In actuality, with reduced staff, timely customer service is managed very closely and maintained; however, overhead and material pricing has not drastically reduced. The reduced pricing is just not out there, especially because we are bidding things so tight. We are using less-expensive subcontractors that need more supervision and finding deals on some plant materials — but this is not enough to maintain a constant margin. We manage through the ebb and flow of workload with variable hours for the crews, reducing the total number of hours to meet the workload. We are putting off capital improvements and investments till a smoother work load conditions occur. We are searching for better talent, training the talent we have, and critically managing our time and resources.
Mark Marcus, president and CEO, CentreScapes Inc.: Customers do not care or want us to make a profit. We have to meet those challenges by simply working harder.
Charles A. McGrath, CAE, executive director, Interlocking Concrete Pavement Institute: The biggest challenge we have seen for the hardscape/landscape industry in 2011 is obviously the economy and new housing starts. The residential hardscape market has seen incremental growth [in recent years]. Since new home construction has slowed, hardscape installers have taken advantage of a growing home retrofit and renovation market. Some contractors have diversified services into paver maintenance and sealing for residential applications.
Dennie Melton, owner, Dennie’s Lawn & Landscaping Services: As a small landscape business in the greater Sacramento, California area, I have seen over one dozen companies in our area [go out of business]. I feel it was partly because some refused to downsize their smaller commercial operations into residential [or] other services to offer.
Todd Monge, president/owner of Custom Landscaping of Eagle River, Inc.: Lower number of new homes being built has reduced the demand for new construction. Too many contractors doing jobs for wages, and poor construction practices.
Brad Murphy, executive vice-president and COO, Subaru Industrial Power Products: I think the volatile weather we saw in 2011, and even in recent years as well, has been a major challenge for the industry. It has just been so extreme, from severe drought in some areas of the country to the major flooding in others. It’s unusual and tough to predict, and therefore presents a lot of challenges.
Because we can’t always accurately predict these weather patterns, it’s really tough to respond. I think we just need to be more proactive upfront and conserve water year round, as it will help ease the conservation needed when and if drought does become a problem. And regardless, conservation is a good idea, as it’s just not responsible to waste resources.
Jody O’Donnell, president, LMI Landscapes, Inc.: Rebuilding your business with fewer resources.
Susan Olinger, 2012 president of the Association of Professional Landscape Designers (APLD): I feel that the biggest challenge in 2011 was a result of the recent economic recession. Due to decreased spending by homeowners, there has been an increase in unlicensed, uninsured contractors that underbid work, competing with those professionals that “follow the rules” by paying their taxes and insurances, providing for their employees, obtaining required permits, renewing professional licenses, etc. This results in a higher cost of staying in business, which must be passed on to the client. Those “discount” contractors often provide free landscape designs, without knowledge or training, that do not properly address the site’s conditions or environmental hazards of poor design, often resulting in problems that the homeowner must deal with and pay for in the long run.
This challenge is being met with continuous education, both for the consumer and for the industry professional. The more the consumer knows, the better their decisions will be in regard to hiring the right person. This education can be provided with good public relations through the industry’s professional associations. These professional organizations, such as APLD, also provide educational opportunities to their members, giving them the tools to succeed in their profession. An educated landscape professional will be more likely to survive through a struggling economy because their work will sustain for the long term, and their clients will refer them to others.
Lou Palazzi, Jr., PCH Palazzi Landscape Gardening: The two biggest challenges are low-balling and the continued labor problem.
Roger Phelps, Landscape Industry Certified Professional and promotional communications manager for STIHL Inc.: The economy was of course the big issue, but the green industry also had to face one of the most challenging regulatory environments in its history. There is no doubt that businesses were hurting in 2011, but, at the same time, the recession provided some opportunities for businesses to reexamine every facet of their operation, and successful businesses used this as an opportunity to clean out waste and redundancy from their operations. On the regulatory front, associations like PLANET provided business owners with resources to communicate with their legislators and express their concerns. We saw some victories like with the EPA Water Sense ruling, but more remains to be done.
Ed Pinckney, Edward Pinckney/Associates, Ltd.: The economy — like it or not, the landscape industry is based largely on discretionary money. So when budgets and/or whole projects get cut, the landscape is often the first to go.
Jody Shilan, president of the New Jersey Landscape Contractors Association, and FromDesign2Build.com: The biggest challenge has been, and still will be, the state of the economy. Most of our members are having a solid year and some are doing better than expected, but the overall feeling is still cautiously optimistic with prayers for a lot of snow. Other big issues in 2011 [were] more and more regulations and restrictions on the industry regarding fertilizer, pesticides and blowers. Labor is always an issue and the additional pressures on the H-2B program, thanks to the Department of Labor, combined with the potential “doubling” of wages has not helped the industry at all.
Tim Smith, president and CEO of LandOpt, LLC: The green industry’s transformation and maturation has been an ongoing challenge. We are in the process of a business revolution in key areas such as labor, technology, environmental concerns, and customer expectations. These challenges are radically transforming the industry from one that is simply focused on trade skills and providing a basic menu of services to meet a customer’s requests, to an industry with a true business-focused approach where the contractor has a clear understanding of the customers’ overall expectations.
Landscape contractors are becoming a valued business partner to the residential and commercial customers that they serve. Horticulture is now a part of the business, meeting needs that had previously never been considered, such as environmental concerns, providing value in employee retention in the customer’s workspace, reducing customer risk and overall customer enjoyment. Evolving to this new level of professionalism requires a shift in business practices, including everything from formalized professional selling to a strong knowledge of repeatable business systems and processes.
Troy Tiedeman, owner, Tiedeman, LLC: Trying to work within clients’ budgets. Clients have been cutting back greatly, so trying to work with them on payment plans or alternative cheaper programs. We had a 15-percent cancellation rate or reduced services due to tighter budgets. Normally we only have around 2 percent.
James Truan, vice president of sales and marketing of TurfEx: One of the biggest challenges is a lack of confidence, [which] often leads to poor decision-making within a business — from equipment purchases to overall business planning.
Wayne Volz of Profits Unlimited and Wayne’s Lawn Service, Inc.: Collections — we have been much more aggressive on calling and contacting accounts before letting them get too far behind.
Stacey Werner, CLT, CLP, ICPI, president, Tryon Creek Landscape, Inc.: Cost of jobs sold — there are a lot of people in desperation mode. I believe these companies do not know their costs and are selling jobs below what they should, and it is driving the already-weak market down. We have to keep work coming in so we try to go as low as possible but this is a problem — no profit margin. To offset this, we are cutting costs, negotiating with vendors for cheaper materials, no pay raises, cutting employee benefits, etc.
Hal White, vice president of sales and marketing, Wright Mfg.: The economy continues to be the biggest challenge.
Kevin Wiebe, owner and president, North County Lawn Care: With increasing process in fuel, equipment and taxes, one challenge has been [being] efficient to get the most we can with what we have. We have done a great job through route efficiency through computer programs to conserve fuel, and by implementing a four-day work week to further save on drive time and fuel. We also try to think outside the box for more ways to be a more efficient and productive company.
Douglas York, CEO of Ewing Irrigation Products: The two biggest challenges our industry will continue to face are water, as it relates to availability and resource management, and a decline in construction financing by the banking industry. I believe we are still going to face headwinds in the banking arena until most of the foreclosures and real estate values in this country have been reset. Water requirements for our industry are likely to get a nice lift when the Environmental Protection Agency (EPA) releases its new labeling protocol for weather-based irrigation controllers.
Landscape and Irrigation: What do you think will be the industry’s biggest story in 2012?
PLANET President Jerry Grossi, Landscape Industry Certified Technician: I think the biggest story will be the amount of change that is occurring. People will need to embrace that change and learn from their peers, because things are changing faster than ever. I don’t think that’s going to slow down in 2012; I think it’s only going to accelerate. Businesses are trying to deliver value with high-quality products at a fair price, but what we need to do is operate with good business practices, in a lean and ethical manner. This industry has evolved and become so sophisticated that those who are offering the higher-grade services will be the leaders of the future.
PLANET President-elect Norman Goldenberg, Landscape Industry Certified Technician: I think the story will continue with the economy. I think number of new homes built will be low, which will reduce landscape opportunities. Survival of the fittest is a great phrase, and it fits our industry, as it does others. Those strong companies have cut back, stayed lean, and taken advantage of resources from PLANET. I think these practices will continue to benefit the industry.
As this is an election year, a lot of topics will be thrown around as well, including the economy. Many corporations have downsized, and technology is replacing people. The technology of serving customers better and routing, scheduling, and managing more effectively will weigh in for 2012 and beyond.
Tim Banfield ASLA, president, Outdoor Living, Inc.: Continued recovery of the housing market.
Maria Candler, CLP, president, James River Grounds Management, Inc.: I would like for it to be that the industry rebounds and clients starting paying a price around value. I think it will be all about how the regulatory environment is punishing small business.
Pat Cappucci, president & COO of Schiller Grounds Care, Inc. (manufacturer of BOB-CAT, Classen, Little Wonder, Mantis, Ryan and Steiner brand equipment): In two words, economic recovery. I believe that we will begin to see continued positive effects of community and industry economic development and recovery. Looking back on 2011, there were some dramatic first steps taken. The revenue for many rental companies rose significantly, which is a great sign that people doing projects again and business is expanding. Also, sometimes you have to tear something down before you can build it back up. With new housing construction still flat and mortgage lending still tight, local government turned to the task of dealing with abandoned foreclosed homes. Foreclosed homes that sit unoccupied fall victim to squatters, theft and disrepair, becoming an eye soar and a safety issue. Outside of a watchful eye, the properties become havens for crime, blight and insect and rodent infestation. In 2011, many local governments began investing in the demolishment of foreclosed homes, which offered local companies work (in construction and landscaping), brought back up property values in the community, and provided unobstructed property attractive to new development. Again, just another sign that things are well on their way to recovery.
Allen Chariton, president, Tierra Verde Landscape, Inc.: 2012 will not improve the landscape industry arena. Both an election year and California’s depressed economy will influence people’s confidence and stability to develop.
Scott Cohen, garden artisan, The Green Scene: As we begin to grow again, I am very concerned about the lack of inventory. Pipe, block, stone, plant material — our vendors are all very lean and they have all tightened up credit lines. The big story will be, “How do you grow when you don’t have access to the materials to get the job done [in a timely fashion]?”
James R. Day, Turf Teq/Spec Fab: Consolidation of landscape companies and equipment manufactures. Landscape companies are fighting to stay profitable and economies of scale will drive many to consolidate. Equipment manufacturers are facing similar issues with increased operating costs related to technical and EPA regulations.
Carl Dowse, irrigation manager, The Bruce Company: I hope and pray it is the upturn of our economy. Realistically, I think it will be who has, and will, survived another slow year with modest growth.
Tom Duffy, spray equipment sales manager, SherrillTree: Weather and invasive pests-related events.
Bill Engler, director of sales-LSC, industrial & distribution, Ariens Company: Lack of revenue from snow removal will change the way the northern landscape contractors go to market in many aspects; i.e. equipment, quotes, labor, etc.
Alex Fransen, landscape development manager, Steele Blades Inc.: Green infrastructure and sustainability.
Judson Griggs, director of garden development at Lambert’s, and one of Green Media’s “Most Influential People in the Green Industry” (2010): The landscape industry is recognized on an even plane with architects, engineers and other allied professionals. Unfortunately, I think that is still wishful thinking. Until we, as landscape contractors, start thinking of ourselves as professionals and function as professionals, we will not be considered as equal members of development teams. Decision makers will continue to look at us a no more than a commodity. If we can make advances in our professionalism and become part of the decision-making process, that truly would be a big story in 2012. Until that happens, we will be relegated to cutting prices to get projects.
Susan Jasan, MS, landscape designer, Landscape Creations by S Jasan: Possibly more improvements in technol