By Marisa Palmieri
The LM Industry Pulse report reveals 2014 was a win—with strong profits and an average growth rate of 17 percent.
The word is, clients can’t get landscape companies to return phone calls or show up to give estimates. To Philip Germann, owner of GreenLawn Specialists in Lewis Center, Ohio, that’s good news.
“In general, demand is stronger than supply in our area,” he says. His assessment fits the findings of the 2014 LM Industry Pulse research. The study reveals landscape and lawn care professionals are satisfied with their businesses in 2014 and feel positive about their prospects for 2015.
In fact, 80 percent of landscape professionals called the state of the market healthy and nearly nine out of 10 have an optimistic outlook for 2015.
“Just about every landscaper I’ve talked to is having his best year for profits and revenue since the recession,” Germann says.
According to research firm IBISWorld, the landscaping services industry is a $73 billion market with a 3.4 percent annual growth rate since 2009. Despite challenges over the last half decade, the research firm forecasts a prosperous next five years, due to a rapid construction sector recovery and steady disposable income growth.
To that point, the housing market continues its gradual march back to normal, according to the National Association of Home Builders Chief Economist David Crowe. In an October report, he attributes the continued housing market growth to historically low mortgage interest rates, steady job gains and significant pent up demand.
Lynn Tootle also has seen an uptick this year. He’s general manager of Gro-Masters, the Savannah, Ga.-based turf and ornamental care division of TideWater Landscape Management.
“In my market, it’s finally heading in a positive direction after the difficulties following the recession,” he says. “In 2011 we saw the bottom of the market; 2012 started in a good direction, but not aggressively; 2013 built on it; and this year we’ve seen a lot of positive signs—total revenue, profitability and new jobs coming down the pike.”
Gro-Masters will end 2014 with a 10 percent increase over 2013.
Mark Todd, owner of Todd Quality Landscape Services in Spring City, Pa., agrees. “More people are pulling the trigger on jobs I quoted a year ago, saying, ‘We’re ready to go. How soon can you do it?’” he says. Todd senses people are more comfortable with the economy. His full-service, mostly residential company is on track to do $550,000 in 2014, up about 30 percent over last year.
“Before, there was speculation about layoffs, and now (customers are) taking a deep breath and they’re going to be OK,” Todd says. “They’re happy with their home values and confident they’re not going to change. They’re looking to invest in their homes.”
On the commercial side, property managers are ready to reinvest, too, contractors report.
“Over the past four years they’ve tightened their budgets and the properties have suffered for it,” says Craig McBryde, owner of McBryde Landscape & Maintenance Solutions/Green Impact in Greenville, S.C. The primarily commercial maintenance company expects to do $1.5 million in 2014 revenue with 20 percent growth next year. “They (property managers) are trying to put money back into curb appeal.”
Some markets are soft, though. For example, consumers are uncertain in Vermont, says Aaron Smith, general manager for S&D Landscapes in Essex, Vt. He points to the state’s attempt to pass its own single-payer health care law and the buyout of a major employer in his area.
“We’ve had a number of projects get through with either a lot of negotiation to get it to come to fruition or (the customer) saying ‘We’ll wait until next year,’” he says. “Everybody’s got this wait-and-see attitude.”
Still, S&D will end 2014 with $450,000-plus in annual revenue—up from $427,000 in 2013. Its sights are set on $600,000 for 2015.
“We’ve had a good year, but it’s not how I thought we’d get there,” he says. “I was expecting install to be our shining star, but we’ve done less install revenue than last year, although we’ve done quite a bit more overall revenue than last year.”
Some trouble
Although green industry professionals are satisfied and are growing overall, challenges exist. At the top of the list is finding qualified workers.
Federal unemployment has declined gradually since its peak in 2009, eliminating some of the labor pool that migrated to the landscape and lawn care sectors during the recession and driving up labor costs.
“Our biggest challenge is the labor market,” Germann says. “It’s getting more expensive for a lower quality worker. We can’t get the quality we could even a couple of years ago.”
The rising costs of insurance are another concern.
Health insurance, for example, is “through the roof,” Tootle says. “We offer a small group plan through the company, but it’s extremely expensive, even with us paying a substantial portion for the employees.” Luckily, workers’ comp and liability insurance are staying fairly steady, although Tootle says the company invests a lot of time and effort into safety programs to ensure the rates don’t budge.
Mother Nature’s impact
Weather always has an impact on the landscape business, but overall Mother Nature didn’t deliver too much to complain about in 2014.
“It’s been a great weather year,” Smith says. “It was a great summer with consistent rainfall. We just got a little dry in the fall, so it made some of our aerating and overseeding not quite as effective as it could have been, but the grass was kept green by the dew.”
In Pennsylvania, Todd also was content with the weather this year.
“In our area, when July hits we’ll typically have three to four weeks where we don’t cut grass,” he says. “We didn’t have that. We didn’t have as many rainouts this year as normal. There were no issues with begging people to water plant installations. We didn’t have too many days of extreme heat. It made things a lot less stressful this year.”
Despite an active winter of 2013-2014 for operators who do snow removal, precipitation in 2014 was slightly above average through October at 26.04 inches—0.68 inches above the 20th century average, according to the National Oceanic & Atmospheric Administration (NOAA). Although, above-average precipitation dominated many northern states, where Wisconsin and Michigan each had one of their top 10 wet year-to-date periods through October. Below-average precipitation occurred in parts of the West and Southern Plains.
Average temperatures were 55.4 F, 0.5 F above average, through October. The West continued to be much warmer than average, where eight states had a top 10 warm year-to-date. California was record warm for January through October, with a temperature 4.2 F above its 20th century average. It’s likely 2014 will be California’s warmest year on record, NOAA reports. States in the Mississippi River Valley continued to be much below average. No state was record cold.
