Landscape Industry Financial Numbers: What Do They Tell Us?

[Note: This post is based on data from the Lawn and Landscapes State of the Industry report for 2015. I know the report for 2016 is available now, and I’ll probably do a new version of this in the future.]

I’m always fascinated by the results of various surveys and reports about the landscaping industry. Even though I keep up with these things, I’m often surprised when I see some of the data.

I’ve been a fan of Lawn and Landscape’s State of the Industry reports, so I thought I’d dig in and share my thoughts about a few of the statistics they reported. Here we go –

A typical landscape company in the US does around $217,000 in annual sales

At first glance, it’s a little surprising that this number isn’t higher, but it does make sense.

Somewhere between $200K and $300K is about the maximum a one-crew operation can produce in residential landscape maintenance, with a little bit of design/build mixed in.

This is a comfortable place to be. One crew can be easily managed by an owner/operator.

While some companies may make a decent living at this level of revenue, it’s risky to settle for that for the long term. When a service business relies so heavily on the owner for everything, anything that keeps the owner from work has a serious impact on the business.

Sick? Injured on the job? Want a vacation in April?

For a one-crew operation, forget it. The owner is working all April, every April, or they’re in trouble.

Too many small companies are satisfied at the one-crew level because it’s comfortable. But growing a business to the next level isn’t that hard, and it’s a much safer and more stable.

18% of landscape companies didn’t turn a profit in 2014

That’s scary! One hundred percent of service-based businesses should be turning a profit, always.

A landscape company does not have the same level of overhead that some other businesses have. You don’t have to pay high rent for a prime retail location. You don’t have to sink a lot of money into inventory that might not sell.

So why does it happen? Here are some of the factors:

  • Poor cash management
  • Failure to set and follow a smart, disciplined budget
  • Not negotiating the best prices on materials and equipment
  • Not properly pricing services

Here in the northeast, there’s one other big factor, but it’s one we can’t control. A mild winter.

I’ve met too many people in the landscape business who pin their hopes on a lot of snow.

But you can’t count on big snowy winters every year. Your business plan and spending needs to allow you to make a profit regardless of what happens during the winter.

Top business concerns of landscape company owners

The survey asked which issues business owners would rate as top concerns in the coming three years. Here are some of them.

  • Shortage of Quality Labor – 45%
  • Personal Stress – 43%
  • Lower Margins on Work – 41%
  • Difficulty Raising Prices for Work – 39%

These are completely valid concerns, but they are also things that a business owner has a lot of control over.

Can’t Find Quality Labor:

Coincidentally, the top concern of a lot of workers is the shortage of quality bosses.

This can be fixed. Business owners need to recognize that their employees are important and treat them that way. See our post, Three Tips for Finding and Keeping Good Employees.

Personal Stress:

In lower-revenue businesses, it’s very common for the owner to feel as though the business is running them, instead of the other way around.

Too many businesses don’t have plans for solid and sustainable growth, and they spend too much time REACTING instead of ACTING.

One of the most important things a business owner can do for his stress level is to stop thinking he must do everything himself. Instead, he should build a business where he can delegate to trusted employees.

If you’re running a one-crew operation, managing the business AND the field work yourself, it’s no wonder you’re stressed. Get out of the field!

Lower Margins on Work:

Margins on certain jobs are always going to be lower than others. Unless or until you build a reputation that lets you raise your prices, you probably need to be in the right ball park for the most competitive services.

But, here’s a secret – you don’t have to have the same margin on every service. More specialized and less competitive services can bear a higher margin.

Start SELLING those higher margin jobs. Identify the extra work you can do for each customer, and offer it to them!

As a business owner, you should know where each service ranks in gross margin. If you don’t… GET ON THAT!

Difficulty raising prices:

For this one, the answer is simple, even though fixing it might take a big change.

If you truly can’t raise your prices, it’s because your customers don’t value you enough to stick with you through an increase.

So, the answer is to make them value you. It’s not that hard, but you have to commit to it.

  • Do you answer your phone when customers call?
  • Do you effectively communicate so everybody’s on the same page?
  • Do you manage your customers’ expectations so they don’t get disappointed by silly things that you could have controlled?
  • Do you have clear policies and consistent practices?
  • Do you and your employees behave professionally in front of customers, 100% of the time?
  • Is your quality of work as good or better than your competitors?
  • Are you reliable?

If you answered yes to all of these questions, then you can safely raise prices and most of your customers will tolerate it.

If you answered no to one or two, figure out what you have to fix.

If you answered no to more than a couple, I guess you better hold off on raising prices, and maybe start printing some discount coupons.

39% of homeowners trust their landscape company

That is alarming!

Flip it around and that means that as many as 61% of landscape customers are probably up for grabs.

It’s shocking how many business owners fail to build trusting relationships with their clients, but that is also an amazing opportunity for you to swoop in and show clients that you’re worthy of their trust.

Two thirds of homeowners say they will hire a landscaper based on a referral from friends

This single stat proves my strong belief that residential landscaping is the place to be. Commercial accounts just don’t work this way.

Take good care of your customers, and their referrals will help build your business.

53% of homeowners say, if they could make one change in their landscaper, it would be to improve communication

Pretty clear, right?

Communication often becomes harder as businesses grow because they’re not prepared to handle the growth.

I tell all our employees and franchisees that the single most important thing in personal and business relationships is communication. Period.

There is nothing more important and nothing more powerful than effective, consistent communication. Your clients are begging for it, so just give it to them!

What do you think?

If you found this interesting, you might like to read the full report. I’d love to hear what you think and how you’d interpret some of the numbers.

Download the full report here

PS - If you’d like to learn more about doing things the Driven way, feel free to reach out to us!