Landscape Contractors See Favorable Year Ahead

The overall outlook among landscape contractors is rather favorable for 2012. Few expect a reduction in sales volume (regardless of service sector), and roughly half expect to grow sales.

December 7, 2011

As you look into your crystal ball for 2012 to see what your customers will face and how their situation affects yours, you can't ignore the landscape market. For many equipment rental businesses, landscape contractors represent a significant portion of their customer base. As such, here's a look at how business is shaping up for this important market sector in the coming year.

Maintenance matters

For the third year in a row, landscape contractors had more success with their maintenance-related services than they did with installation. Furthermore, the continuation of relatively flat demand coupled with intense competition among contractors has created a market of clear “winners and losers” as contractors fight to steal market share in order to drive sales.

According to an October survey of Green Industry PRO readers, 45% said new landscape installation business was down this year, compared to only 18% who said maintenance business was down. On the other hand, 31% said new installations were up, while 46% said maintenance was up.

The overall outlook among landscape contractors is rather favorable for 2012. Few expect a reduction in sales volume (regardless of service sector), and roughly half expect to grow sales.

Haves and have nots

Although the majority of landscape contractors have held their own, 2011 has proven to be somewhat of a disappointment for some. Four times as many contractors (ranging from 20-45%) reported a sales decrease as those who forecasted one. Additionally, the number of contractors who forecasted a sales increase outweighs by 10-15% the number who actually reported a sales increase.

Intense competition continues to play a big role. Most contractors reported that acquiring and retaining customers became much more challenging in 2009-2010. For at least one out of five, this challenge became even more daunting in 2011. For example, 35% say retaining “small commercial accounts” has become harder than usual, while only 7% say it has become easier. The numbers are similar when asked about acquiring new customers.

Growth with specialty services

Contractors continue to diversify. According to the survey:

71% perform aerating services – 33% of them reported a sales increase, 18% a decrease
65% perform hardscaping services – 35% of them reported a sales increase, 34% a decrease
51% perform tree care services – 40% of them reported a sales increase, 15% a decrease
50% install water features – 22% of them reported a sales increase, 41% a decrease
46% install outdoor lighting – 22% of them reported a sales increase, 32% a decrease
43% perform pest control services – 35% of them reported a sales increase, 17% a decrease
28% perform hydroseeding – 31% of them reported a sales increase, 31% a decrease
23% perform holiday decorating – 36% of them reported a sales increase, 21% a decrease
13% install/maintain green roofs – 48% of them reported a sales increase, 12% a decrease

Contractors “getting a handle” on things

Despite the challenging and often unpredictable business conditions, most landscape contractors are gaining a pretty good handle on what they need to do to remain competitive, yet profitable. Just 10% said they will lose money this year. On the other hand, 35% said they’ll earn a profit of at least 10%.

Looking ahead to 2012, 55% of landscape contractors expect to become more profitable, while only 7% plan on making less money. The number of contractors planning to make more money is up 7% from one year ago, while the number planning to make less money is down 7%.

Opportunities abound

One thing you can never say about landscape contractors is that they lack confidence. And while the past three years don’t seem to have shaken their confidence, they have taught contractors to be a bit more thrifty and resourceful. Those who've survived the carnage and remain profitable are now feeling especially confident about their future prospects—along with what they need to do to accomplish their goals.

One way they might do this is through rental, but how much they rely on rental depends on the type of equipment, and more importantly, a given contractor’s service mix. "There are indications that core maintenance equipment - including mowers, trimmers, backpack blowers, etc. - are high on the priority list for new purchases," says Gregg Wartgow, editor-in-chief of Green Industry Pro magazine. "The maintenance business remains strong, so equipment is getting worn out at its regular pace. On the other hand, the construction market is still very uncertain - resulting in a bit of hesitation to outlay a bunch of money on an expensive piece of equipment that might not see a great deal of use. That said, rental continues to be a very viable option for contractors who are landing smaller design/build jobs such as backyard living spaces, patios, walkways, and so on. Rental is also a great option for maintenance contractors who have a particular client that wants them to, for instance, sweep their parking lot or trim trees."

Fleet management on the 'to-do' list

Survey respondents indicated that fleet management is on the top of landscape contractors' list of priorities. To that end, Wartgow says landscape contractors are seeing the benefits equipment rental can offer them when managing their fleets for maximum profitability.

"The bread-and-butter maintenance equipment that racks up several hundred hours of use each season is something most contractors are going to buy, but business conditions remain very competitive and unpredictable, which makes renting more attractive when it comes to construction-related equipment and specialty maintenance equipment," Wartgow says. "I just spoke with an Iowa lawn care contractor who’s trying hard to grow his snow plowing revenue. He landed a big account at a shopping center. The best tool for that type of application is a wheel loader with box plow. The contractor bought a box plow, but is going to rent the wheel loader for the winter since he has no need for a wheel loader during the summer."

He continues, "Something else is also happening here. Unless something changes soon, the Bush-era tax cuts are set to expire in 2011. Section 179 is nearing its end. So, if contractors can’t get a huge write-off when buying a new piece of equipment, more may look to renting in different situations, just like this contractor from Iowa has."

So what can rental businesses do to effectively serve and capture the landscape contractor market? Wartgow says it's about the equipment.

"You have to have the right products which contractors need," Wartgow advises rental professionals. "Talk to the landscapers in your market. What kind of services are they providing? What do they have an opportunity to provide? Then, which attachments and other tools can you provide them? There aren’t too many landscapers who have a huge backlog of work like they did in 2005-2007. When they get a lead, they need to pounce. Having a solid rental supplier they can count on makes a huge difference."

Graphics:

Top 10 Items Landscape Contractors Plan to Rent in 2012