Maintenance: A Growing Business in a Shrinking Market
|By ELIZABETH LEXAU|
Few green industry providers have been untouched by today’s recession, and landscape construction companies are among the hardest hit.
With fewer building projects in sight, companies are responding in different ways. Some are streamlining operations and putting their efforts into more creative advertising and marketing. Others are significantly changing their business plan.
Moving into the maintenance sector is one option. It isn’t easy—and it definitely isn’t for everyone—but for companies that have the personnel and personality to take on this challenging field, it can make all the difference.
There are compelling reasons to take a look at maintenance services.
“In 2009, construction sales were off from 30 to 50 percent,” says Jim Huston, green industry management consultant and owner of J.R.
Huston Enterprises. “But maintenance contractors pretty much held their own. Some are even up in sales.”
Unlike construction, maintenance isn’t considered discretionary spending. “The first thing to go in a recession is a construction project,” says Huston. “But people have to maintain their property.”
These trends have made a number of landscape construction companies take a hard look at adding maintenance. But it’s not a good fit for every company, Huston points out.
“A lot comes down to the personality of the contractor,” he says.
Contractors who are attracted to maintenance may have a strong aversion to the chaos of construction. Those who thrive on the creativity of building, on the other hand, may find the repetition and rules of the maintenance game unbearable.
Learning the maintenance rules
Rick Doesburg, president of Thornton Landscape, Maineville, Ohio, says adding maintenance was a critical move for his company.
“Two years ago, we were 100% design/build. Now we’re about 50- 50 (maintenance and construction). Two-thirds of our business was residential development. That just doesn’t exist anymore; it’s history and I think it will be for at least several years to come.”
While maintenance may not seem like a natural fit with Doesburg’s background, he’s not complaining. His company is here and it’s healthy.
“I’m a landscape architect,” says Doesburg. “That’s what I love. But I’m certainly very happy with maintenance now.”
He entered the market by purchasing another company. “I smelled this change coming back in 2007. I knew we needed to find other sources of business, so I purchased a small maintenance company. They had some equipment and a small number of jobs. That got us in the door.”
Since then, Thornton Landscape has shifted resources and moved personnel around to rise to this new challenge. “We’re still doing design/build—we’re doing some very nice projects,” says Doesburg, “but there just wasn’t enough out there. We had to replace a lot of that business with something, and we chose maintenance.”
Doesburg’s flexibility, and that of his staff, are helping with the transition. “It’s a different mindset than design/build,” he says. “In design/build, you’re selling a custom design and it’s about the value of the whole process. Maintenance is very, very competitive. It’s almost a commodity.”
The cost of customer satisfaction can be tricky. “In design/build, I’m used to making everyone happy,” says Doesburg. “That’s my goal. When a client has a problem, I fix it.”
Now, his maintenance clients are primarily commercial and include several Homeowner’s Associations (HOA). This means there are many more customers to please.
“When you have ninety homes in one community, you have ninety critics,” he says. With those numbers, even if the vast majority of home owners are extremely pleased, there will always be one who wants the lawn done a different way.
Doesburg still makes sure he does what he can to keep that one happy, but this can lead to unexpected labor, which means it’s critical to price jobs accordingly. “You have to be very careful on pricing, very careful on hours,” he says. “That’s what you’re really selling.”
Hiring a consultant was an important step in this process. “About the same time we got involved with maintenance, we requested help from Jim Paluch (president, J.P. Horizons, Concord, Ohio), to learn LEAN management,” says Doesburg. “This helped us hone in on our efficiencies. It helped us understand that there’s more than one way to cut grass in a community. You have to study the site and learn the most efficient way to do it. In some cases, two guys are better than three. In others, five may be better than three. It depends on the job.”
Prior experience also helped Doesburg ease into maintenance. Although Thornton Landscape hadn’t offered maintenance in recent years, the company had included a maintenance division before Doesburg purchased it.
“I had been working for the company for thirty years before I bought it,” he says. “They sold the maintenance division to another company, but I already knew that business to some degree.”
Another major factor in this successful change has been a dedicated staff. While most of the maintenance staff consists of new employees brought in specifically for that work, Doesburg says existing employees were eager to pitch in.
“This company is made up of a great team,” he says. “They all bought in to the fact that we needed to make changes, and they worked hard to make the transition.”
Not a quick fix
Buying another company, like Doesburg did, can be a smart way to move into the maintenance sector. “A lot of companies are for sale now, and this isn’t a bad time to buy one,” says Huston. “Then you have the revenue coming in and you can get some good crews and equipment. There are some real positives there.”
But it’s important to understand that it’s not a quick fix. “People getting into maintenance need to see it as a long-term commitment—not a flash in the pan,” says Huston. “It really changes the whole nature of your business. You have to have a team in place that understands it.”
It also takes some serious number crunching to come out ahead in a new venture like this.
“Make sure you understand your numbers and know what you need to generate per day, per month, per year in this maintenance subdivision,” Huston says. “Make sure you have some reference points and aren’t just winging it. A lot of people go out there and give away the farm. They don’t know what they’re doing and get into trouble.”
One option among many
Adding a new division is just one option among many strategies for surviving an economic storm. Many design/build contractors are sticking with their primary focus and making adjustments in other areas.
Wayside Landscape Services, Asheville, North Carolina, does approximately 70 percent of its business in design and construction and about 30 percent in maintenance—primarily for properties they’ve installed. So far, they haven’t felt a need to change that mix, despite the fact that Andy White, president, says this economic downturn feels different from previous ones.
“During past recessions, people would pull out the home projects they had on the back burner and do them,” says White. “They had some money to invest but didn’t want to put it into a volatile stock market. Investing it in their home was a good idea. Now, people are scared to do anything and are putting the big projects on hold.”
While this isn’t causing him to shift priorities away from building, it is giving him incentive to streamline operations. White is fortunate in that his company is debt-free and had a solid foundation going into this recession.
A few years ago, Wayside invested significant time into developing policies, procedures and systems to help increase efficiency and productivity. Now, they’re revisiting some of those efforts, making changes where they need to and using the groundwork they laid then to find ways to stay profitable now.
When it comes to his maintenance customers, today’s economy is giving White reason to sharpen his pencil.
“In this economy, you have to be willing to negotiate,” he says. “Some people are telling me they don’t have the budget to do certain things any more. I don’t have to be told that twice. You have to use open communication to see if you can work with them.”
But that doesn’t mean negotiating away profits simply to keep money flowing in and out the door. “Some potential customers come in and offer a set amount,” says White. “They want a quality job at a dollar amount I just can’t deliver. You have to be able to walk away from that.”
Huston agrees. “It’s a mistake to think you have to compete on price versus quality and service. Don’t get into a price war mentality.”
There are some desperate cards played in the marketplace, and it can be tempting to try to follow suit. But when you see a bid that’s dramatically lower than everyone elses, you can be pretty sure that company is not sustainable and you don’t want to follow it down that road.
“I call it the psychology of going broke,” says Huston. “Sometimes people who don’t have anything coming in the door are bidding on a project not to make a profit but only to get cash flow.”
Instead of simply increasing cash flow, cultivate a clientele that’s looking for quality and long-term viability, and give them the best price you can afford.
Of course, the ideal is to cultivate that clientele before the going gets rough. “You’ve got to guard against being complacent and over confident,” says White. “In the years before this recession, we were so busy—almost painfully so. It was easy to think it would last forever. You may not feel like focusing on advertising and marketing during those good times, but you have to. You need to do it then, even more than in the down times. By the time you’re down, it can be too late.”
For K.C. Lawn and Landscaping, Inc., Kansas City, Missouri, construction business has been good this year. “Our maintenance has actually been down some, but design/build has been up,” says Zach Hinkle, president.
He attributes the downturn in maintenance to increased competition from people laid off from other jobs. He attributes growth in design/build services to more strategic marketing.
“We’ve expanded our networking, advertising, and marketing,” says Hinkle. “We’ve gotten on Angie’s List and we’re also a Service Magic company. That’s bringing us more design/build work.”
He plans to push marketing on the maintenance side this spring through search engine optimization and Google AdWords. “We tried that this fall. We set a monthly budget and chose quite a few keywords. We picked up eight or ten contracts through that.”
Hinkle still thinks there are great opportunities in maintenance; it’s a matter of how you promote yourself and where you fit into the market. “It was troublesome this spring. It seemed like everyone I was bidding against was taking jobs so cheaply. It’s easy to put a lawn mower in the back of truck and call yourself a lawn care company.”
He’s hoping to take a different tack—one that doesn’t include bidding wars—in order to gain back any lost maintenance business and add more. His approach is to affirm his company’s reputation as a high service, high quality provider.
“You have to make sure you’re producing a quality product,” says Hinkle. “It may sound easy, but it’s not. We stay in constant contact with customers. We pay attention to the details, including the appearance of our crew and trucks. The crew has uniforms, the trucks are relatively new and all our equipment includes our name. If we pull up into a neighborhood and are working on someone’s house, you can always tell. We’ve gotten many referrals that way.”
Hinkle also thinks professional membership is very important. He maintains membership in PLANET, the Home Builders Association and several other organizations. He also seeks certification opportunities for himself and his staff.
“We’re not a fly-by-night company,” he says. “We’re here to stay.
Being part of these organizations and having certifications helps put buyers at ease. It tells them we’re here for good and we’ll do what we say we’re going to do.”