What the 2014 Landscape Market Means to You

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 contractors said growth was less than 20%.

December 9, 2013

Overall, 2013 was a good year for landscape contractors. Based on a recent survey of those who read, Green Industry Pros, our sister publication, most landscape contractors 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.

Still, 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%.

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 landscaping contractors. 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.

Pricing is recovering

For most contractors, 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% indicate there's no way they can raise prices, 45% said they might be able to with a few clients, 16% said they could with half, 16% said they could with most, and 7% indicated they might be able to increase prices with all customers.
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

Expert closeup: Green Industry Pros Editor Gregg Wartgow talks about the role of equipment rental in the landscape market

Rental: What are the reasons behind the growth trend in the landscape market? Is it as simple as the general economy improving or are there more subtle forces at work?

Wartgow: Improvement in the general economy has definitely helped. That has led to improvements in the housing market and, in turn, home equity wealth. That's a big driver of investment in home remodeling, of which landscaping is a big part. The stock market has been on a roll, which also helps drive confidence in landscaping investments. Of course, many consumers are still cautious as they are just returning to pre-2008 401k values. So spending is picking up, but still has some room to grow over the next couple of years.

The weather, for the most part, has been cooperative. Landscape maintenance contractors have had decent cash flows as growing conditions have remained pretty solid.

Commercial construction has shown some improvement as well, creating opportunity for new landscape installation work and also new ongoing maintenance contracts.

Overall, the industry has "normalized" quite a bit. It's still competitive, but prices are returning to more normal levels as demand for services has grown. There has also been some culling of weaker companies, either due to mergers and acquisitions or flat-out business failures. Competition is still hot, but much more palatable than in recent years.

Rental: How has the way green industry professionals do business changed since the economic recovery began?

Wartgow: One thing hasn't changed: Landscaping is still an easy-entry business. These smaller guys looking for something to do often come in and out of business every season. So get paid upfront when they come looking to rent equipment.

For the real pros, the big thing that's changed is that they are more observant, often more cautious business managers. They're working harder than ever to find customers, retain customers and maintain profits. Both materials and overhead costs continue to rise. Pricing is not climbing at the same pace. So landscape contractors are still looking to do more with less, without having to go deep into debt. That's why renting certain pieces of equipment continues to be an attractive strategy for so many contractors.

Rental: What are the primary factors that determine how green industry pros choose a rental source?

Landscapers are looking to stretch their dollar as far as it will go. So for a rental center, that means having the right tools available when the landscaper needs them. For the landscaper, job scheduling is huge. When a project comes their way, they have a relatively short window of time to complete it. Rental centers that can help landscape contractors put labor-saving tools on jobsites, with minimal downtime and inconvenience, can create loyal landscape contractor customers in a heartbeat.

Rental centers should take steps to learn what their landscape customer might need. Talk to landscapers about the types of jobs they are doing - or the types of jobs they think they could start doing. Help landscapers match the right tools to those jobs. If a landscape contractor has confidence in his rental center to supply what he needs when he needs it, the contractor has more confidence in his own ability to get out there and start growing his business again.

Green industry 2014 buying intentions

There are quite a few products which more landscapers prefer to rent than buy in 2014, including: chippers, smaller excavators, compact tractors, compactors, hydroseeders, skid/track loaders, stump removers and trenchers, according to Gregg Wartgow, editor of Green Industry Pros magazine.

Although more landscapers tend to purchase the following pieces of equipment, Wartgow says they're also popular rental items for thousands of contractors: aerators and dethatchers, concrete saws and various implements.

"Several popular equipment types have shown a jump in rental interest among landscapers leading into 2014, including: smaller excavators, various implements, skid/track loaders and stump cutters," he says.

"Rental centers must understand the difference between a larger landscape company and the typical owner/operator," Wartgow says, noting that owner/operators often utilize renting as an equipment acquisition strategy more readily than larger landscaping contractors because they have more limited cash flow and credit, and due to the unpredictability of the type of jobs they do. "Owner/operators dominate the industry in terms of numbers; 75% of landscapers have no more than four employees."

According to an October survey of green industry pros:

Smaller excavators – larger companies are twice as likely to rent vs. buy in 2014; owner/operators are five times as likely to rent vs. buy

Skid/track loaders – larger companies are slightly more likely to buy rather than rent this year, while owner/operators are three times as likely to rent these machines vs. buy them.

Stump cutters – larger companies are slightly more likely to rent vs. buy, while owner/operators are four times as likely to rent these machines than buy them.

Trenchers – larger companies are seven times as likely to buy trenchers vs. rent them; owner/operators are nearly 20 times as likely to rent than buy this year.

Attachments – larger companies are slightly more likely to buy than rent, while owner/operators are actually twice as likely to buy than rent. "That's because smaller contractors often have a specialty which requires the repetitive use of certain equipment and attachment types," Wartgow says. "Thus, they'll tend to buy those items. So the key for rental centers is to promote unique attachments which landscapers could utilize on a more infrequent basis."