Navigating Your Financial Future - The Edge from the National Association of Landscape Professionals

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Navigating Your Financial Future

No one can ever be certain what the next year will bring for their business, but when you talk to landscape professionals about 2023, majority of them are cautiously optimistic. While they know they’ll deal with a number of challenges, such as labor, supply chain issues and looming concerns of a recession, business owners are still expecting to grow their businesses.

Preparing for 2023

Michael Hommel, owner of Designs By Sundown, based in Littleton, Colorado, says they are preparing for 2023 just like any other year by creating a budget. He says the Denver market has such a severe housing shortage even the recession is unlikely to halt homebuying demands.

“The leads are as strong as they’ve ever been right now,” Hommel says. “Even with this talk of possible recession interest rates rising, it’s not affecting us at all.”

Hommel says they have a contingency plan should sales or leads drop off. The company has had record years the past two years and 2022 will shatter another record. He estimates they will have a minimum of 10 percent, if not 15 percent, growth in design/build and maintenance. He says they are continuing to recruit new employees.

With pricing, they plan to raise their prices anywhere from 2 to 10 percent to combat inflation.

Cadre Landscape says they are financially prepared for a worst-case scenario in case there is another 2008 economic relapse. President Julio Lopez says they always raise their prices each year based on CPI and market prices but have 99.9 percent retention rates.

Joe Munie, president of Munie Greencare Professionals, based in Caseyville, Illinois, says they are communicating to their customers now that they expect to make significant price increases next year.

“We’re looking for ways to partner with them better if they have tight budgetary constraints and things we can do to value engineer our contracts,” Munie says. “The partnership is really important when you’ve got this type of cost pressure. We’re looking at lean processes, better ways to purchase.”

He adds that they’re working to identify waste and where they can improve operational efficiencies to reduce cost. From a labor standpoint, Munie says they’ve been working on improving their culture and workforce engagement. He says they are going to stay aggressive about building their team.

At TideWater Landscape Management, based in Savannah, Georgia, CEO Skip Thompson has been working on getting creative with their marketing and recruiting strategies to bring on new employees before the new year.

“Typically, a lot of businesses in our industry will decrease their staff in the fall,” Thompson says. “We’re not going to do that because we want to keep all the good people we have and grow on that.”

Thompson says they’ve had a lot of opportunities to grow this year as businesses exit the industry or are unable to meet their partnership requirements, either due to financial or labor issues. He says budgets will be tight with clients and does not plan to raise their prices after raising them this year by 10-15 percent.

“A lot of what we’re seeing is people keep cutting services, but thank goodness grass does not stop growing,” Thompson says. “They have to be mindful of that expense as well. We’re just seeing a very cautionary tale right now.”

Jack Moore, CEO of Grassperson Lawn Care & Landscape, based in Lewisville, Texas, says they are refining their target client profile to be more aligned with their strategic plan.

“We are preordering chemicals for 2023 now in order to lock in pricing and supply, and we are working to secure additional vehicles to support growth and life cycle issues,” Moore says. “We continue to work hard on our manpower plan, including our H-2B visa team members.”

Moore says they plan to maintain the same level of manpower for 2023 while increasing their actual revenue by 5 to 7 percent. He says they are looking for a 10 to 15 percent increase in revenue next year with raised pricing.

“We intend to increase pricing in early 2023 though it is too early to accurately forecast what will be needed,” Moore says. “Given our current profitability and understanding of variable costs, I believe we will need to increase pricing in the 5-8 percent range though it may need to be higher. While pricing is important, we are working to improve onsite and billable time while reducing non-billable time.”

Similarly, Chris Senske, CEO of Senske Services, based in Kennewick, Washington, says they are trying to determine their truck and equipment needs now due to the lack of availability. He expects to grow around 10 to 15 percent as well. They are increasing their hiring going into the fall as both their aeration/overseeding and holiday lighting business have been performing strongly.

He expects to raise their prices like they have every year but is uncertain by how much. Senske is also monitoring fuel and labor costs.

“The second that your hiring wage goes up, everybody else goes up too,” Senske says. “My COO says he’s approved more wage increases without question than he has ever in his roughly 20-year career in the lawn care industry.”

Jennifer Jorge, COO of King Green, based in Gainesville, Georgia, says they are projecting a strong year in sales and will evaluate their price chart to determine an increase based on each branch and their needs. She says they are always hiring and recently added a recruitment specialist to the team.

“Getting our managers back to onboarding, training, and retaining while bringing on someone to pre-screen and schedule our interviews to find the best people has added a big level of quality to our employees,” Jorge says.

Unlike some of the other owners, Gerry McCarthy, CEO of Mac’s Landscaping, based in Burlington, Massachusetts, expects a slowdown in the economy and only plans to bring on new hires to replace those who leave. He’s not sure if he’ll raise prices for next year, but says it is a scary time as everything costs significantly more.

Industry Expectations

As for their predictions on how the industry will do as a whole, Moore believes there will be some market growth but at a lower rate than the past two years.

“There will be continued pressure on filling manpower positions and continued movement towards electric equipment utilization and local regulation,” Moore says. “Based on the number of merger & acquisition inquiries we continue to receive, it looks like consolidation will continue in the industry though I assume that valuations may be declining.”

Senske says they are bullish on the lawn care market, but is concerned about the design/build side of things.

“If I were in the design/build business, I would be nervous, particularly on the commercial side,” Senske says. “Of course, housing is already slowing down a little bit. So, I think that side of the business is probably going to see a contraction.”

Hommel argues that with the residential market, even if things worsen, people are still going to spend money to maintain their investment and they’re always going to want to do projects. He says their business has been through three recessions in the past and they’ve just adjusted their spending and tightened up.

“Guys should not be pessimistic,” Hommel says. “I think they should plan for a minimum of five percent growth, if not 10 to 15 percent growth and be ready for it. But again, always have a contingency plan of how to take the plane down from 50,000 feet to 35,000 feet if needed. If there are signals out there that warrant things are getting rough up ahead. The market is slowing down. Discretionary income is dropping; people just are not spending money.”

Having experienced four other recessions, McCarthy expects another recession will bring things down and advises others to go into commercial maintenance. Munie says that when he started the business interest rates were at 18 percent and it’s been a while since people have had to deal with such heavy inflation. He expects these factors will impact the industry as a whole.

“It probably has maybe more conservative, during good times, but when your first loan’s 18 percent on a truck, you just have a different perspective and it’s always in the back of your mind that that type of thing can reoccur, so I do think it was helpful to start during difficult times.”

Thompson says he expects to see mergers and acquisitions continue as smaller companies struggle with the current business challenges.

“If I am looking out a few years, I also see a lot of new startups entering the market,” Jorge says. “Private equity companies are buying a lot of great companies. With that comes great people who see a vision and opportunity to start their own company.”

Predicted Challenges

As has been the case for a number of years, most expect labor to be their number one challenge, both recruiting and retaining. Moore expects that improving operational efficiencies and delivering better client and team member experiences will be their main challenges next year.

Jorge believes finding quality people might not be such a struggle next year. Lopez adds that the lack of quality personnel has forced companies to put people at a higher value, so there has been a shift from clients being number one to employees being number one.

“Not only have companies adopted new strategies when it comes to finding quality people to join their teams, they have also worked on their culture to make sure they keep people for longer,” she says.

Lopez says in California, they have to deal with traffic, heat, changing weather, and lots of regulations. They also had to adjust to all electric equipment, with limited repair shops and parts that the manufacturers haven’t been able to comprehend and facilitate for them.

“We try to control what is under our control, what we cannot control, we adapt and become as fluid as possible,” Lopez says. “The supply chain may become less of an issue. Whatever is happening in California, the rest of the country will eventually experience.”

Other predicted issues include sourcing supplies and the inflationary prices of products, but Moore is hoping fuel, lawn care chemicals and equipment pricing will calm down a bit.

“I hope that the suppliers and the manufacturers have learned a lot this year, as far as demands and being able for them to obtain parts and stuff needed to be able to produce, that they have a better grasp going into next year because I don’t think they were fully prepared for this year,” Thompson says.

Senske says he is keeping an eye on the regulatory environment from pesticide and fertilizer-related laws to minimum wage increases in Washington state. Hommel expects a more business-friendly climate in 2023. He also believes the continued mergers and acquisitions will only benefit the industry as whole as they improve professionalism across the board.

“I believe we will face a lot of competition when it comes to pricing,” Jorge says. “With many companies being bought out, it gives them the ability to have stronger, tighter routes and can lower their price to meet the same margins. The ability of our sales team to negotiate and show our customers the quality of our work is more important than ever.”

McCarthy does not expect any of the challenges from this year will improve by next year.
“The last couple of years has reminded us all that there will always be challenges, and by building and developing resilient companies, we will be able to meet any challenge that we encounter,” Moore says.

This article was published in the Nov/Dec issue of the magazine. To read more stories from The Edge magazine, click here to subscribe to the digital edition.

Jill Odom

Jill Odom is the senior content manager for NALP.