State of the Industry

For our annual State of the Industry report, we asked industry leaders to provide a look back at 2012 and their thoughts about what 2013 has in store.

Landscape and Irrigation: What were the biggest challenges in 2012, and how were those challenges met?

Norman Goldenberg, PLANET president and Landscape Industry Certified Technician: One of the biggest challenges I believe we faced in 2012 was the economy and the pullback effect from consumers and purchasing from within our industry. Water issues have also been a problem, not only from legislation and pollution issues, but also from shortages of water across the country. In many of the drought-affected areas, people have been dismayed about not seeing green in their landscapes so they did not want to spend the money.

Glenn Jacobsen, PLANET president-elect and Landscape Industry Certified Manager: The economic uncertainty has definitely been worrisome, so discretionary spending has been watched and evaluated, especially on landscape needs. There was also the distraction and uncertainty of the election as people followed that through the fall of last year, wondering who the president was going to be, which perhaps swayed some of the 2012 landscape spending decisions.

Deborah Hamlin, executive director, Irrigation Association: Drought conditions have bred a customer focus on short term cost savings, which come at the expense of long-term solutions aimed at saving both money and water. We at the Irrigation Association [IA] want to show that water-use efficiency can be more than a stop-gap, but rather an everyday practice. Additionally, we will continue to ensure our members are prepared to adapt to the technological curve through proper training and certification programs. Leveraging technical training, along with an approach that shows tangible cost savings to customers should lead to a brighter 2013 for landscape irrigation professionals.

We also saw landscape water restrictions as a serious issue in 2012. Partnering with our members, the Irrigation Association saw an opportunity through the drought to provide industry-specific knowledge to policy makers advocating for the interests of the landscape irrigation industry, avoiding harmful water-use bans. We will remain engaged as we move into 2013.

Charles A. McGrath, CAE, executive director, Interlocking Concrete Pavement Institute: Similar to last year, the biggest challenge we have seen for the hardscape/landscape industry in 2012 is the economy. The slow economy has pushed many companies to become extremely competitive, often times lowering their price so low that it is difficult to cover overhead costs. This causes underbidding and cutting corners on installation to recoup costs. Many of the contractors that underbid projects often do not have the proper knowledge or training to install concrete pavers according to ICPI [Interlocking Concrete Pavement Institute]-established guidelines. This ultimately results in costly call-backs and problems that the homeowner must deal with and pay for down the road.

This challenge is being met with an increased emphasis on educating contractors. ICPI has developed an installer development program that offers a long-term structure for the professional development of concrete paver installers. It also provides installers with a continuing path for advancing installation skills through education. Concrete paver installers begin with the Concrete Paver Installer Certification and then select a residential or commercial technician designation to build knowledge in the use of pavers in a specific market segment. Installers can acquire additional specialized skills by obtaining a specialist designation, such as the PICP Specialist. Each program requires minimum installation experience in the specific application area and the successful completion of an exam. Installers are required to maintain their certification through continuing education. We believe that an educated contractor will be more likely to survive through a slow economy because their work will sustain for the long term, and their customers will refer them to others.

Rich Arlington, CSP, CLP, founder and CEO, Rich Arlington & Associates: Dealing with a still struggling economy with customers consistently looking to reduce pricing that they pay for our services. We’re an easy industry to target for that. Clients ask us to mow every two weeks instead of every 10 days. People want to cut everything except weed control, and then they realize two years later that they have pest problems. Nobody understands the recourse of their actions. Most contractors have taken this in stride and worked with their clients to find cost reductions and retain the work.

Judson Griggs, ASLA, CLP, director of garden development at Lambert’s: The biggest challenge has been dealing with flat prices — or in some regions falling prices. This has forced to companies to find ways to become more efficient to be able to reduce costs. This has enabled companies to continue to grow their businesses, remain competitive in their markets and make a good profit. Technology is helping to meet that challenge. Both hardware and software improvements will allow more work to be done in the field. Time can be reported in the field, proposals given to clients on the spot, and changes can be approved immediately.

Rich Lahren, landscape division manager, Hebron Brick & Block: Our biggest challenge is finding and keeping skilled employees. We have been experiencing growth in our industry and the North Dakota job market can be competitive, we cannot take things to the next level if we don’t have the people. It seems like we take two steps forward and one step back every year with employees.

Landscape and Irrigation: How will the recent elections impact industry professionals?

Goldenberg: It’s a little too early to tell at this point. The administration has a lot of power at the regulatory level and at the White House has the power to issue executive orders. We need to be vigilant for changes that could impact our industry at the local, state, and national levels and on a number of fronts, including in labor, environmental protection, etc.

PLANET has been a big supporter of the H-2B process and has been somewhat successful in helping to provide a permanent fix, which is needed. This will be dependent on Congress creating comprehensive immigration reform. Both parties have seen messages sent through the election results, which will prompt them to be more likely to support immigration reform and make this beneficial to all.

Hamlin: The federal electoral landscape didn’t see a dramatic shift after the 2012 elections, so we don’t expect much change in Congress’ priorities. We will continue to monitor changes at the federal agency level, however, specifically at the EPA. With the appointments of a new administrator and permanent administrator for the Office of Water, our focus will remain on the WaterSense program. Changes to the single family new homes labeling program and the final “guidance” regarding the enforcement of the Clean Water Act are due to come out in 2013, making both appointments of great importance to our industry and ones that we are watching very closely.

McGrath: U.S. Treasury purchases of U.S. debt at near zero interest rates will continue fueling mortgage refinancing. For some contractors, this will free up funds from residential customers to do home improvements including landscaping and hardscaping.

Continued support of stormwater runoff regulations by the current administration will support sales of the permeable pavement to address such regulations. However, we may see tightening OSHA safety regulations promoted by the administration. Immigration reform continues to have little traction in Congress mostly due to more pressing issues such as the unresolved deficit reduction and continuing debate on tax increases versus spending cuts.

Arlington: It doesn’t matter who got elected. The theory we’re operating under with the deficit, the power lobbying groups have…has put small business in the middle. The current federal atmosphere seems to be entitlement. So with unemployment benefits getting extended again this will make people less likely to re-enter the workforce when they can get paid to stay home. With the new health care laws, this will consistently strain capitol out of our industry and make it harder for us to pass along the price increase. Even if you don’t have to provide healthcare, you’re still dealing with fees. There’s a huge amount of trickle-down effect and it’s all going to concentrate on small business. We will all feel the effects of Washington’s inability to make smart decisions.

Griggs: It seems as though the election has caused many of our clients to step back and assess how four more years of the Obama administration will impact them. They are trying to gauge how the new tax rates will impact them and how the health care reform act will impact their businesses. Clients are still hesitant to move forward on new projects for that reason.

Lahren: My company is fortunate to be in a growing economy in North Dakota. We have an oil industry growing on the Western part of the state and a strong agricultural economy in the Red River Valley on the eastern side of North Dakota. We continue to deal with more regulations from the federal level that could change things in the future. Our landscape design/build division works mostly with high-end residential customers, [and] when they get nervous we get nervous. It’s tough to make business decisions when our current administration and congress keep kicking the can down the road — possible business growth and capital improvements get put on hold.

Landscape and Irrigation: What do you think will be the industry’s biggest story in 2013?

Goldenberg: I think the biggest story will be the rebounding economy. It could have a springboard effect which in turn would bring up consumer spending.

Another big story will be H-2B relief ultimately allowing more workers for a rebounding economy.

Jacobsen: I hope with an improving economy and real estate prices beginning to climb back up that consumers will start to see the value in their landscape and put money into their properties. This will be a positive sign for landscape professionals.

PLANET recently formed a partnership with JP Horizons to help promote its Come Alive Outside initiative, which is a movement to inspire people in a variety of ways so that they may benefit from their local green spaces. Landscape companies can join this grassroots initiative and help people Come Alive Outside in their own communities by organizing and sponsoring community events, and by making local leaders aware of the benefits of encouraging their communities to use and enjoy the outdoors. This is a natural fit for the many landscape companies that already see the benefit of working alongside communities, parks and recreation groups, schools, etc. to help promote the green industry.

Hamlin: The growing importance of technical training for landscape irrigation professionals will be a top focus for the Irrigation Association. In 2013, IA is launching a new irrigation technician program to ensure that professionals have the foundational skills necessary to succeed. Drought will remain a significant issue, and will impact the entire industry. From a business planning standpoint, drought and weather extremes will continue to challenge the industry and impact irrigation sales, particularly if these conditions spur more watering restrictions like we saw in 2012.

McGrath: Like last year, environmental awareness is continuing to become more prominent. The EPA requires states and municipalities to reduce stormwater runoff and pollution with a selection of best management practices, including permeable interlocking concrete pavement (PICP). Additionally, ICPI succeeded in lobbying Congress to include the first-ever permeable pavements provisions. In doing so, a new law was created that established permeable pavements as a technology for use under the auspices of the U.S. Department of Transportation. With government programs being implemented such as MAP-21, continued pressure from the EPA on stormwater management regulations and a global “green movement,” we expect to see more projects specified with products that minimize the impact on the environment, reduce pollution and the carbon footprint.

Arlington: How to stay alive with even smaller margins. We’re going into the second term with the same political structure and our margins will continue to shrink.

Griggs: The three biggest stories will be 1. How much the Health Care reform act will cost small businesses; 2. How new immigration laws and resolution on H2B will impact labor availability; and 3. How lack of available water supply and continued drought will impact landscape work. All could be crippling to small businesses.

Landscape and Irrigation: What areas of advancement in the industry are you most pleased with? And what areas need to improve?

Goldenberg: I’m especially pleased with the advancements in technology that our industry has access to these days. Many of them were on display at the GIE+EXPO, which is held in conjunction with our annual Green Industry Conference in Louisville, Kentucky, each October. Small and large businesses are able to create consumer-oriented plans because of software improvements, improved routing software allows companies to be more efficient, and Google Earth now gives us the opportunity to see the big impact prior to even going on-site, etc. The list could go on.

Improvements should focus on continued efforts to raise the bar of professionalism within the industry and enhance the perception of our industry with consumers. There are always areas to improve, such as greater communication, as well as opportunities to enhance jobs by using the advances in technology and equipment we have available to us. PLANET continues to provide value with the many member benefits that we offer, especially when it comes to our educational offerings, such as our expanded PLANET Universe, the green industry’s portal for all information and resources pertaining to our industry, that’s available to all, as well as our extensive offering of webinars.

Jacobsen: To emphasize the need for raising the bar of professionalism within the industry and providing value-added benefits, PLANET continues to work closely with state associations, sharing resources and experiences to foster a stronger industry. During the past year, we’ve taken a step closer to forming a confederation of PLANET members, composed of state association members and PLANET members. This will be a big step for the National and State associations and its members.

Hamlin: Our industry continues to be at the cutting-edge of technology. From Smart controllers to products that increase the distribution uniformity of a system, innovation has mitigated the possibility of human error, but to a point. The need for a trained workforce continues to increase. In that regard, the value of an IA certification continues to grow. As the marketplace moves toward more sustainable initiatives, irrigation professionals need to be prepared for not just new products and technologies, but best practices as well. IA education and certification programs are a great source of excitement in 2013.

McGrath: We are most pleased with the increased use of permeable interlocking concrete pavements in hardscape projects. Permeable pavement sales have steadily increased over the last three years, growing from 3.8 percent in 2009 to 5.1 percent of total sales in 2011 representing just under 30 million sf. In 2011, 78.4 percent of permeable pavements sales were placed in commercial applications and 21.6 percent in residential. We expect the same or better results for 2012.

ICPI’s focus for improvement is to continue growing the industry’s industrial, municipal and commercial markets. For members to survive in the current economic climate, expansion into other markets is critical. A key initiative is delivering the why and how message to specifiers, designers, engineers and government officials to help make concrete pavers the pavement of choice. We continue to train our members’ sales staff, giving them the tools and knowledge to make calls in their regions and help us communicate that message.

With construction forecasts staying level or slightly up for the next two years, ICPI members continue to position segmental paving systems to see growth as the economy gains ground in the commercial and municipal sectors. We have committed to increasing members’ sales in the commercial market from 21 to 50 percent over the next seven years with special emphasis on continued education of members’ sales force. Growth in these markets will allow more consumers to become aware of the sustainability, durability and aesthetics of interlocking concrete pavers and permeable interlocking concrete pavements and encourage them to use them at home. As an industry, our goal is to continue to educate hardscape contractors on installation best practices and how they can expand and improve their businesses to become more profitable.

Arlington: I think we as an industry have done very well with financial decision making. There has been huge improvement in contractor knowledge from this area. In the ‘80s and ‘90s we were told “know your numbers.” The industry has done a fantastic job of helping people not only know their numbers, but what to do with them, and how to be in tune with how the business functions.

I still feel that estimating leaves a lot to be worked on, with the trend to get lean, and work with smaller profits companies still struggle with how to build in that environment.

Another area that needs to improve is teaching companies how to survive with smaller margins.

Griggs: As mentioned, technology is the area I am most pleased with. Those improvements will help companies who embrace the technology immensely. The area that needs to improve is finding more advancements in equipment to reduce the reliance on hand labor in construction operations. There have been some advancements in that arena, but more needs to be done.

Lahren: We design, sell and install hardscape products. We have seen so many new types of pavers from manufactures. Different shapes, sizes textures and borders that can make designing fun and interesting.

Landscape and Irrigation: What is your overall outlook for 2013?

Goldenberg: Based on the economy, our industry will continue to grow. Do-it-yourselfers will continue to buy products at the retail level, which is good for the applicator industry and for lean landscape companies. As consumers buy products and want to do something to enhance their yards and environment, they will start to see value in their landscape and likely want more that they can’t provide themselves. That is where our industry comes forth to offer those professional services.

Jacobsen: 2013 will be challenging year, but I believe the opportunities are there for companies looking for decisions. With the election over, there will be less uncertainty about the economy, and the landscape industry will continue to grow and be bright.

Hamlin: We’ve seen some good indicators for 2013. New home construction is at the highest rate in four years, which will hopefully bring more business to the industry. Our contractors will continue to harness new technologies to maximize water efficiency and stewardship. Our manufacturers will remain committed to bringing new technologies to the market. The association will remain engaged in the formation of standards, both at home and internationally, and will continue to see that our members are the best trained and most prepared to tackle the challenges to come.

McGrath: We see opportunities for growth with stabilized housing prices and construction growth. The improvement of economy, job market and consumer confidence will encourage consumers to upgrade their driveways and outdoor living areas to use interlocking concrete pavement systems.

Arlington: I believe in time we will be more regulated than we are today. I feel that within the next few years we will see more regulations on licensing, and certifications. Industries such as plumbing, building and electrical all have so much regulation and licensing. Inevitably, that’s going to happen to us. If you wait until the last minute to get certified, it’s going to be an awfully long line that you’re waiting in. I think this will move us into a professional category.

Griggs: Overall, I believe the outlook for 2013 will be similar to 2012. With the country coming out of the recession, we should be able to expect more growth in 2013. Unfortunately, I truly believe that the issues I pointed out [earlier] will have enough of a negative effect on the industry that they will counteract any potential for growth over 2012 levels.

Lahren: We are preparing for a somewhat same type of year as 2012. Maybe a little growth to the revenue but focusing on improving the bottom line through improving efficiency to labor and controlling operating costs.

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