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The Landscape Conundrum
| Jennifer Polanz
>> Published Date: 12/27/2012
Landscape services appear to be a natural extension of the garden center and a new revenue stream for those who don’t offer it already. However, it’s far from a no-brainer, particularly when you’re talking about a hefty amount of start-up expenses (upwards of $75,000 to $100,000 for a two- to three-man crew, depending on the services offered—and that doesn’t include labor). But wait, don’t throw this magazine down just yet. We got the opinions of some industry veterans in the landscape business to see what they recommend. Even they don’t agree when it comes to whether or not it would be a solid investment for a retail operation. But, they did offer some great advice for what to think about before taking the plunge.
The Profit Potential
Why would you even consider it? An established landscape design/installation company can stay busy for the vast majority of the year—long past the months when a garden center business has peaked and packed up. Depending on the location, it could be year-round, and even in colder climates, the season extends to late November or early December and picks back up again in March. Some operations, too, have found winter activities like snow removal, holiday decorating, firewood delivery and other seasonal services are a lucrative way to keep crews busy.
Jobs can range from $500 to $40,000 and beyond, which makes that initial investment a little more palatable. And the natural extension of the garden center comes into play here. Retailers have a unique opportunity to showcase plant varieties, landscape designs and even hardscapes through display gardens and marketing material in the garden center. High-dollar items like statuary, patio furniture and garden accessories also tie in to the design/install business. John O’Reilly, vice president of operations for Otten Bros. in Long Lake, Minnesota, says many of their landscape clients start out as garden center customers.
“It’s a great referral business,” John says. “The garden center becomes a display place; they can come here and see the quality of work first-hand.”
Otten Bros. is a retail/landscape company that was born out of a landscape-only model that started 60 years ago, so it has a long-standing reputation within its community for quality services. English Gardens in Detroit, Michigan, also has been offering quality landscaping design and install services for decades, and Rick Vespa, president of the landscape company there, says the good-standing reputation of the brand and service from the retail store has to carry through to the landscape operation to be successful. Rick also is the vice president of English Gardens.
It seems more and more garden centers are jumping on the landscaping bandwagon, too. In our 2012 Green Profit Wages & Benefits Survey, 36% of those surveyed said they had a landscape division, which is up more than 10 percentage points from the last two years. Grower-retailers were more likely to have such a division.
The landscape industry as a whole, too, seems to be primed for recovery, as long as the all-important housing market continues to rebound. According to 2010 Global Industry Analysts Report, “the landscaping services market in the U.S. is expected to recover poise and reach $80.06 billion by 2015.”
What To Consider
Okay, so enough of the rainbows. There are serious concerns to address before jumping in. Honestly, the list is long and could probably fill a full magazine on its own. We’re going to hit the high points here and leave the intricate details to future issues. The good news, though, is this is not an all-or-none proposition. There are many levels of landscape service a garden center could offer at varying start-up costs, from basic planting and install services to yard maintenance, subcontracting a landscape crew to begin with, subcontracting hardscape and ponding installers and more. The key, according to all my sources, is to assess the need within your market. Are people asking for these services? Has a major firm gone out of business recently? What does the landscape services field look like in your market?
Rick advises first and foremost to have a clear idea of what you want to be. “The strategy of the [landscape] department needs to support the brand if it’s going to carry the same name.” This could mean a mission statement, but at the very least a clear understanding of the services to be provided and the overall goals. For example, if the goals of the retail side are quality service, selection and top-notch product, then the goals of the landscape operation shouldn’t be focused on price, unless it won’t be using the retail brand and name.
Once the strategy is set, consider how to measure success (or failure). “One advisor years ago told me to measure everything, and I think that’s very true,” Rick notes. “Set up reporting and accounting to measure all the important performance indicators of the business.”
Some measurements to consider include inventory control (are you going to share with the garden center or have separate inventory?), labor, equipment and maintenance costs, time on-site, lead conversions and where leads come from (are they coming from the garden center?).
Insurance is another consideration on the landscape side. “The insurance rates are higher for landscape versus retail,” points out Joe Schulte, co-owner of Southwood Nursery in Tulsa, Oklahoma, which has a full-service landscape design and installation division. “There is liability involved with having trucks on the road, but it also gets your name out in front of customers. Our landscape brings in about 15% of our revenue at Southwood.”
The necessities vary depending on the services offered. But to start up, a flatbed truck with a trailer, hand tools and an inventory management and labor-tracking system are key. Joe notes that an 18-ft. flatbed truck with gross vehicle weight (GVW) ratings less than 20,000 lbs.
doesn’t require a commercial driver’s license, which allows greater use (check your state’s CDL requirements).
For larger jobs, power tools could be required, as well as large equipment like loaders or skid steers. There are options to rent, as well. However, depending on use and how many months you need it, buying used or new might make sense. Just factor maintenance into the equation when buying.
Here we come back to services offered and those multiple options. If you’re going to offer hardscaping, brickwork or ponding, you’ll need more equipment. If you subcontract that out to a trusted source, you cut down on your initial investment.
This is a tricky one. Do you use garden center resources and inventory for a landscaping division when starting up? There’s no right answer, but you have to have processes in place if you’re going to start out that way. While all three operations I spoke with had separate companies for the retail and landscape, Joe notes that having the ability to choose live material from the retail sales floor is part of what makes the landscape division successful at Southwood. “Our designers frequently design from the products that are on hand,” he adds. “As customers walk through the garden center, they are inspired by what they see.”
For all three, material may be purchased from the garden center side, but that’s pretty much where the sharing ends. They both have separate resources and Rick even has the landscape division in a separate location because the dirt and traffic became too much to handle at one of the retail locations.
“We occasionally share labor; we have some landscape crews work in the garden center, but it’s billed out to the garden center to keep it separate and to know where the profit is coming from,” says John. “If you’re going to commit to doing it, you have to have those people, and in some cases, it is a specialized person.”
Rick agrees. “I believe when we finally made the decision to run it like a separate business, that’s when we really started to see more successes. Culturally everybody wanted to turn it into a retail mindset—open seven days a week, same hours as the stores,” he says. “You can’t manage a production facility that way. It’s not the same as a retail business where you open and close the doors. I think it’s very important that people realize that.”
Speaking of labor and culture, the recommendation from all sources is to make sure the right people are in place from the very beginning. The right people means not skimping on hiring—if you’re going to do landscape design, hire a qualified person. A typical landscape crew is one foreman and one or two laborers. And lest you think anyone can put a plant in the ground … well, they can’t. Landscape crews need to be trained on installation. If you’re considering offering more specialized options like hardscapes, pond installation and brickwork, you need trained experts in those fields.
So Is It Worth It?
Does the idea have potential for you on some level? Our experts are mixed in their emotions about starting up such a division right now, but overall the advice is to do your due diligence, plan for it and make the commitment. There’s a good chance it won’t turn a profit the first year, so you have to go in knowing it’s a long-term investment.
“I think it’s an excellent way of enhancing and supporting the brand. There are challenges and ways to look at the business differently that are important. But I think it’s a natural extension of the brand and brings a more complete package to the customer,” Rick says. “You need to be willing to invest in it to give it a proper chance. I don’t recommend just trying it. You have to decide the opportunity is there, see what’s going on in your marketplace, make the commitment and go for it.” GP
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