Residential Lawn Care, The Next 5 Years

Discussion in 'General Industry Discussions' started by xpnd, Jun 10, 2008.

  1. xpnd

    xpnd LawnSite Senior Member
    Posts: 378

    About a month ago I was watching a program on the Discovery channel. It had to do about a fisherman on the NE coast that harvested some sort of shellfish. Long story short, he was not having a problem harvesting his daily quota, he was not having a problem with labor availability and his problem was not the rising fuel prices nor was he having a problem selling his catch. His problem was that the value of his 2008 harvest had remained virtually unchanged from 2007. He could sell 100% catch at nearly identical prices too 2007, but had nearly 100% unsold at a fair 2008 price.

    To a great degree this is us. The perceived value of our services has stagnated at best to an early 1990's pricing model. While my gross continues to increase, my net is not increasing relative to my gross.

    The customer is getting squeezed just as we are. They are cutting back. I can already see it in the watering habits. The next step is a reduction in service level. 'Since I'm not watering as much, the lawn is not growing as much so I would like you to reduce our cost and service level to 1X every 2 weeks.' I don't know about anyone else but I find working twice as hard for half the amount of income to be an untenable situation.

    Where is residential lawn service headed for the next 5 years? I believe for the next 5 years, residential lawn service is going to 'tank'. I think it will take that long for wages to catch up and put the customer back on a level of having adequate discretionary funds to afford 'luxury' service providers be it maid, window or lawn service.

    I would appreciate some other thoughtful insight as to where out industry is headed.
     
  2. Carolina Cuts

    Carolina Cuts LawnSite Bronze Member
    Posts: 1,152

    the glass is half empty huh?:nono:

    I use to have days like that.... made me depressed. Started taking 1 day at a time.

    just work hard.... negative thinking = negative energy....
    no throwin' in the towel just yet.... sound like you're planning an exit strategy..... when you should be thinking.... 'future proofing':drinkup:
     
  3. CT18fireman

    CT18fireman LawnSite Senior Member
    Posts: 611

    I remember people saying the same thing back in the late 80's early 90's after Reagan and Bush. Then Clinton came along and the economy improved.

    I am not making a political statement. Only saying, you can't predict 1 year let alone 5. Grass will keep growing, there will be plenty of work. My family's business survived the Fuel crunch of the 70's and recession of the 80's. Changed and adapted but I am still working today.
     
  4. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    Different markets will fair differently in various economic cycles. High end residential service will not be effected.

    The lowballers don't have enough knowledge in my area to compete with me or the few companies providing similar services, especially once the clients have had us or similar to ours service their property. They get spoiled and it is difficult to go back to the hacks.

    Upper middle class will have to make a decision between lawn service-vacations and the like. They will make those calls and more times than not lawn care will go "in house" Besides its becoming very fashionable to "garden" these days and lets face it men just want to buy tools and this is a good excuse.

    So if you are a mow and blow provider it will be lean for a while. For me it is a great time to expand, the labor market is the best it has been in many years.
     
  5. xpnd

    xpnd LawnSite Senior Member
    Posts: 378

    Okay, here is my take. First I do not believe a business is a day to day operation. I think any business should have a rolling 1 year, 3 year and a 5 year plan. I am not thinking negatively, I am thinking realistically. Positive thinking, working hard and ignoring reality is not a recipe for keeping food on the table, a roof on our head and clothes on your kids.

    First look at your clients. My bread and butter IS the upper middle income. They live in a home valued on the tax rolls between 200-350K. They have 2 or more children, school aged, both parents work, there is one vehicle less than 3 years old and one greater than 3 sitting in the driveway and both are employed. They chose to use their discretionary income as a means to increase family time on the weekend. Like us they are dealing with increases fuel costs, utility costs, food costs and wages that are not connected to the rising fuel prices.

    Unlike us they are not dealing with fertilizer prices that have doubled. Also unlike us, they are employees not employers. Our employees are being faced with the same squeeze we are facing and our customers are facing. And ultimately; and sooner rather than later I think, our employees will be putting the squeeze on us

    There is only so much high end residential care available in any given area. I suspect there are more people living in high end homes than should be. A lot of these high enders are house rich and money poor. And I think this group greatly overshadow those that can and should be living the life. They put on a good show, but they have sheets hanging from the windows on the back of the house.

    Now I also have wild card in my hand. The North Texas Municipal Water District that provides water for over a dozen major cities, including metropolitan areas in my work area have no tangible plan, other than increasing water rates, to ensure water supplies meet not only the current demand but also short term (<10years out) demands. While talks are underway for creating new reservoirs, at best it will 25 years before they come on line.

    My wife is a registered nurse. Her annual raise was 3%. Not only was that raise inadequate to offset the increased expenditure for fuel alone to just go to and from work, it has caused us to realign how we have been spending our discretionary income. I won't say no one is getting pay increases adequate to offset the cost of fuel and allow them to not have to make changes in their discretionary spending, but I sure wouldn't want to hold my breath looking for them. I think my wife's experience is par for the course across corporate America.

    While high end res service has been mentioned as a viable alternative and that the low end service lacked the ability and knowledge to be able to meet the customers' expectations, how long will it be before the remaining services begin selling short. A high end customer is just as likely to release a current lawn service for a lower advertised price as anyone else. I believe more so. Thinking a customer has loyalty to your service because of your quality is being completely naive. A customer's loyalty begins and ends with the check they write us. There are not enough customers who value quality over cost to be able to survive on, least ways be adequately profitable.

    IMO the individuals that will be reaping the rewards of this current economy are not the owner of legit companies that carry insurance, licensed to make applications, pay sales tax if appropriate, and report their income to the IRS. I think we will take the hardest rolls on this.

    Am I actively planing an exit strategy, not at this time. Am I looking at how much of a reduced profit margin I am willing to work for, yes. Am I dusting off and reviewing 20 year old options, most definitely.

    I would love to have someone with more insight than I have take the time and put it into words. For the next 5 years, to survive means significant adaptation I believe. After doing this for 20 years, I'm questioning weather I have either the desire, energy and drive to adapt or just let it to the younger pups to figure out.
     
  6. RHill

    RHill LawnSite Member
    Posts: 89

    You are smart to start to plan your exit strategy. There will also be a need for lawn services, but I beleive it will be the upper income in the future. As water becomes more expensive and it short supply, the enviomentally concious people will start using more native landscapes which will use less water and in some cases, will not need mowing. Also the synthetic(astro turf) lawn will be more common, and the newer stuff looks almost as good as natural turf.

    After 20 years of mowing, i hope you have set aside some money and invested it towards your retirement, ie, mutual funds, IRA, etc. I mow part time to supplement my income as a police officer and have also diversified in a couple of other options, I do the Ignite business with electricity and have started to make a little money from that. I believe everyone should have a "fallback" plan.
     
  7. BillyRgn

    BillyRgn LawnSite Member
    Posts: 248

    i have to say i did the application for the public works department in my town, and am now on the list to be hired, after a few people retire soon, never would i have done or even thought about doing this two years ago.
     
  8. soloscaperman

    soloscaperman LawnSite Gold Member
    Posts: 3,045

    I know I really don't have a say because I have been in the green business for 4 years and 1 for my business and im 24. You have to understand that this may actually help us. Its gonna make the homeowners realize that I need a second job or do something else to make more money. What does that mean to us?? They have no time to do lawn stuff. Yet the fathers son Timmy will be mowing the lawn for mommy and daddy and he will get his allowance for $20.

    SHOULD WE WORRY? Well it depends on each home owner. What you provide as a service and what your price is.

    WEATHER IS THE PROBLEM!! The green industry is going to get harder not just money but droughts, and crazy storms. The weather changes rapidly and the economy changing rapidly doesn't work well for us.

    BACK UP PLAN. There will aways be viloence and sickness. Be a Police officer, male nurse, Doctor.
     
  9. xpnd

    xpnd LawnSite Senior Member
    Posts: 378

    I definitely agree! Lawn service will no longer be considered a commodity service but a luxury service. However the location of high end res lawn service on a bell curve is at the far right. The number of service providers available relative to those customer would place us at the highest part of the bell. The demand for service is low while the supply of service is high. Low demand with high supply translates to further depressed prices. Anyone that doesn't think a 'premium service' is not willing and capable to low ball prices as a last ditch survival tactic is ignorant or stupid or both. While the low baller may very well be taking shortcuts to quality to remain profitable or break even, in our current economy PRICE WILL SELL. Price sells well enough for the homeowners to PRIVATELY set aside any anti illegal immigration sentiments they may have if it is to their personal benefit. How many 'We will mow, trim shrubs, weed beds on a weekly basis starting at $30.00 a week and fertilize' fliers can be hung on your customers before they start to question why they are paying us $40.00 a week just to mow the lawn. NOT TOO FRICKING MANY when unleaded regular gas is selling for $3.95/gallon and their annual pay raise doesn't even cover the increased cost of fuel just to get to and from work. They won't care about insurance, legal labor, income reporting and sales tax collection. They now have a viable alternative option to have their needs taken care of AND recapture some of their discretionary income at the same time.

    If you don't think a 'premium' service is willing to low ball prices as a last ditch survival tactic, you kidding yourself. If you don't think your 'premium' service is willing to compete head on with low ball prices as a last ditch survival tactic, you need to take a better and longer look in the mirror. If you don't think a large number of high end customers won't take advantage of a low ballers price....Well how do you think they became high income to begin with?

    You want to see this today? Take a trip to Las Vegas. No turf installations, xeriscape landscape, drip irrigation, cactus, a lot of palm trees and a lot more groomed rocks. They are now seriously considering a ban on all grandfathered conventional irrigation systems because the average humidity is nearly twice what it was 20 years ago. This time what is going on in Vegas, isn't going to stay there. It is a glimpse of our future as water supplies become ever tighter.
     
  10. xpnd

    xpnd LawnSite Senior Member
    Posts: 378

    Perhaps I did not understand your intent however I am going to respond with my understanding. The customer could give a rat's arse about you, me or any other LCO. They don't give a %$#@ if your making enough, have 2 jobs or even three, weather you can make your rent/mortgage payment, if your kids have enough to eat or decent clothes to wear. If you can't do it, they probably have a flier from someone who says they can do it for .50cents or a buck less a week than you.

    The light you see in the tunnel is not the end of the tunnel
     

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