Successful landscape pros share their experiences, the good and the ugly, about adding new services to their companies
With new construction in the dumper, unemployment stuck at 9 percent and the economy showing the meekest signs of recovery, these past three years haven’t been kind to many green industry service companies. Who can blame them for looking to expand into new service areas, especially when they can see many other services they could conceivably deliver to their present customers?
Indeed, the reasons to diversify are enticing, and it might be easy to convince yourself of the many reasons for doing it – adding revenue or recouping lost revenue, keeping personnel and equipment working year-round, keeping competitors off clients’ properties and providing more convenience for customers by becoming a one-stop service provider.
But, as many reasons as there are to consider diversifying, there are at least as many challenges to doing it profitably. Risks are substantial, and adding new lines of business to your company shouldn’t be entered into lightly.
PHOTO COURTESY OF JASON CUPP.
Jason Cupp, CLP, sold Highland Outdoor in Olathe, Kan., two years ago and is now a Kolbe-certified growth consultant. Known for his high-end residential design/build services, Cupp says the company expanded its offerings because clients were requesting irrigation, fertilization and other ancillary services from the company. The downturn also played a key role.
“For the 15 years I was in the business we were known as an incredible design/build company. The economy certainly began to impact us. Our clients were no longer requesting $300,000 projects; they were requesting $20,000 projects,” says Cupp. “We had to move the needle to meet the financial and economic needs of the company.”
PHOTO COURTESY OF SNOW BUSINESS MAGAZINE.
Mike Rorie, who sold his Cincinnati-based GroundMasters business to The Brickman Group five years ago, believes that a more singular business focus long term is ultimately better for a company and its brand. He encourages caution before making any decision. At the time, GroundMasters, which specialized in commercial maintenance, was one of the largest landscape companies in Ohio.
“If companies don’t believe their market is going to return soon, they need to choose what their future is going to be and research it very carefully before jumping in,” says Rorie, who now co-owns GIS Dynamics, which specializes in online estimating tools for the green industry. “Misfires are very expensive.”
In other words, before deciding whether or not to branch out, decide if the services you’re considering complement your company’s current business strategy, the equipment owned and your personnel.
PHOTO COURTESY OF THE VISUALAB.
Richard Bare, CEO and president of Arbor-Nomics Turf, Inc., which has provided a full range of chemical lawn, shrub and pest control services in the metro Atlanta market since 1980, says finding the right synergy of services is essential. A lawn care business that doesn’t offer aerating and seeding or fertilization could easily add those services. But, just because you own a chain saw doesn’t make you a tree specialist, which Bare admits he learned the hard way.
In a strategic move to lower his overhead, Arbor-Nomics began offering tree services and “flushed money down the toilet” trying to offer a complementary service that really wasn’t.
“We ramped up in a hurry and were doing about $1 million a year,” he says. “But what we found was it wasn’t similar to lawn care at all. Lawn care is a route-driven, recurring business; a tree project might keep you on site for three days.”
Adding complementary services can be tricky, and it’s easy to make bad decisions if you’re focused solely on adding revenue.
PHOTO COURTESY OF KURT KLUZNIK.
Yardmaster Landscape Architects and Contractors, based in Painesville, Ohio, has been in business since 1971. President and CEO Kurt Kluznik, CCLP, has seen his share of economic ups and downs that provided the impetus for expansion and contraction of services over the past 40 years.
Driven to create as much year-round work as possible, Yardmaster has sometimes strayed from its core commercial design/build and lawn maintenance business – with mixed results. In the late 1970s, amid the energy crisis, Kluznik recalls Yardmaster decided to capitalize on its relationships with apartment complex clients and offer insulation services. What he thought was a “no-brainer” turned out to be anything but.
“I found out that guys who were great at spraying lawns and building landscapes weren’t necessarily great at getting into attics and pumping insulation. We had to hire a manager, a supervisor and new applicators to manage that business,” he says. “We were just trying to keep people busy and all of a sudden found ourselves in the insulation business.”
Similarly, the company began offering Christmas tree services and got involved in a completely different business model from what it was accustomed to. Over the years, the company has returned to its roots, because, Kluznik says, “It’s hard to dabble in everything and be successful.”
Key Points to Consider
1“Have you fully exhausted all avenues to sustain or grow your business in your core market?” – Mike Rorie, GIS Dynamics
2“Have a good understanding of the type of personnel you need to run the service offering. Not everyone is right for every job.” – Richard Bare, Arbor-Nomics Turf
3“Do your due diligence and do not make a hasty decision. It is crucially important in today’s economy to make sure the plan is well-thought-out, well-vetted and timed appropriately to ensure it is a good idea to proceed.” – Jason Cupp, growth consultant
4“Talk to your banker and your other advisors to let them know what you’re considering.” – Mike Rorie, GIS Dynamics
5“Learn first, then sell. If you’re considering adding patio installation, for example, partner with a company that installs patios and have them teach you, or hire them as a subcontractor and watch and learn. If there is a certification program that goes with the specialty, achieve it.” – Doug Freer, Lawn Lad
6“Thoroughly investigate other market potential and opportunities before heading into them. This includes evaluating your potential customers, competitors and suppliers, as well as your company’s competency to perform the work.” – Mike Rorie, GIS Dynamics
7“I am astonished when companies try to determine whether to add or delete a service but don’t know their margins. No decision should be made on expanding or adding/deleting a service without knowing your numbers.” – Jason Cupp, growth consultant
Other ways to diversify
When companies think about diversifying, adding services is often the first option that comes to mind, but other diversification opportunities may make more sense.
- Geography or clientele: Rather than expanding service lines, a company may generate new business by looking outside its current market or customer base. Evaluate your company’s capacity and see what might be feasible. This would allow you to drive sales while using the equipment and personnel you have.
“There are advantages and logic to that,” says Kluznik, who has expanded his business into Pennsylvania and Michigan. “If you can be good at a narrow list of service offerings, but do them in a wider geographical area, you have a better chance at being known as the best-in-class provider.”
- Affiliate network: While Cupp supplements his design/build business with some side services, he also was able to diversify by creating a network of affiliate relationships with smaller companies that could provide services his clients wanted without having to make the investment in overhead.
“Find a complementary business mix where you can create a unique relationship that has dollars with it,” suggests Cupp. “Just make sure you vet those relationships because their performance reflects directly on your company.”
- Upsell your current clients: Diversification possibilities might be closer than you think. Looking deeper into your existing customer base can often reap benefits. Take the time to communicate with customers, discover their needs, and find out whether someone else is providing services that your company might be able to do better.
Douglas Freer, CLP, owner of Lawn Lad in Cleveland, stresses the importance of upselling smartly – and that means choosing clients that are more likely to be attracted to whatever additional services you offer. “If you are selling to low-end customers who don’t buy much, there’s not much opportunity to expand the relationship. Get to know your customers, know what they’re buying and whether your customer base is large enough for the investment you will have to make if you’re going to add those services.”
Expanding into multiple profit centers requires a business plan, operating systems and core processes for each service line. Identify how the new business will impact every area of your core business – sales, equipment, job costing, personnel, operations, etc. – and whether your company is capable of handling the addition.
PHOTO COURTESY OF SNOW BUSINESS MAGAZINE.
“If a company is adding hardscapes, for example, you have to know the design process. There is a different sales cycle from a lawn care contract. How do you manage that?” says Freer. “Part of the challenge is we don’t know what we don’t know, and there are a lot of people who think they do and make mistakes.”
A case for specialization
Keeping your business offerings streamlined provides benefits that being a full-service provider often cannot.
- Economies of scale: In today’s economy, customers are often looking past quality to find the lowest-cost provider. Trying to be the best at a low cost is a challenge, especially if a company is too diversified.
“If you’re trying to do too many things, you cannot achieve the economies of scale that you need to be competitive. Narrowing your service offering will allow you to be more competitive,” says Kluznik.
Rorie agrees: “You have a steeper hurdle if you agree to provide more services. If you bid more work in your core area of expertise and run leaner, you are better positioned for success.”
- Build a “best-in-class” identity: For Joe Burns, his company’s name says it all: Color Burst. The Grayson, Ga.-based company has been known for 24 years for one thing only: the design and installation of commercial flower beds. He has capitalized on a portion of the green industry that was often an afterthought and has expanded his singular offering into multiple states. “The thing that made us successful was the specialization. Rather than try to add services with small market penetration, we believed we would be better served to expand our color offerings,” he says.
Protect your brand
When deciding whether to specialize or diversify, evaluate the impact that decision will have on the company’s most precious asset – brand recognition.
“Every company has a limited amount of resources. If a company is considering diversifying, it has to be confident that it can take that brand and image the company has worked so hard to create and build on it in those other lines,” says Burns. “Whatever you might get into, if you do a sorry job it reflects on everything else. Then your whole company is judged by the weakest link.”
Cheryl Higley is a freelance journalist based near Cleveland, Ohio, and is editorial director for Snow Business magazine, the official publication of the Snow & Ice Management Association. You can contact her at [email protected].