Cover Story: One-armed bandits
1 Jul, 2008 By: Marty Whitford Landscape Management
PART I
It wasn't the best of times, but it sure wasn't the worst of times, either. It was summer 2006. The U.S. dollar was weakening, but still 25% stronger than today compared to the euro. The thought of equally exchanging U.S. and Canadian quarters in a poker game was still preposterous. Sales of existing and new homes were beginning to dip, but that was expected following five consecutive years of unprecedented growth, and home sale prices were still holding strong. Grocery store bills were still manageable: A dozen eggs cost 50% less than today, a gallon of whole milk 67 cents less.
 I wasn't the first and I won't be the last small landscape company to fall victim to these head-turning gas prices. — Keith Oetjen, lead designer/project manager, Berghoff Design Group |
Perhaps most notably on a daily basis to American consumers and business owners — particularly landscape professionals — regular unleaded gas cost $2.60 per gallon ($1.50/gal. less than today) and diesel was a bargain at $2.91/gal. ($1.80/gal. less than today).
"For years, I dreamed of starting a landscape design/build company," says Keith Oetjen. "I waited until June 2006 to partner with someone (Lane Manning) and take the leap. The economy was slowing, but was still strong. No one predicted all of this.
"The perfect storm wiped out our company, Manning Design LLC in Mesa, AZ," Oetjen says. "June 2006 marked the beginning of a two-year free fall in home sales. The gas pumps finished us off two years later. We were OK with $2 to $3 per gal., but not $4/gal."
No time for dreams
This May, Oetjen met with his former employer, Jeff Berghoff, president and CEO of Berghoff Design Group in Scottsdale, AZ. After a few weeks of discussions, Oetjen rejoined the $15.5 million-a-year landscape design/build company as a lead designer/project manager. Berghoff Design assumed one of the defunct company's truck leases and purchased some of its equipment, but Oetjen's still paying dearly for his pursuit of the American Dream.
"I'm still paying about $5,000 per month for some office equipment and one of the five trucks I couldn't sell, as well as for our office and yard leases," Oetjen says. "But I can finally sleep at night, knowing all of the burden doesn't fall on my shoulders.
"Berghoff Design can ride out this storm because of its years in business, name recognition, size and diversity of services — its 200 maintenance accounts help offset this design/build downturn," Oetjen adds. "I wasn't the first and I won't be the last small landscape company to fall victim to these head-turning gas prices. These are turbulent times, and small businesses are particularly vulnerable."
 It's been equally hard on our employees because their pay hasn't kept pace with our soaring gas and food prices. — Tom Fochtman, co-owner/vice president, CoCal Landscape |
Surviving the stranglehold of today's overbearing one-armed bandits (aka gas pumps) requires more than flexible, realistic budgeting and across-the-board cost controls. For 85% of landscape professionals, it mandates enacting fuel surcharges and/or raising rates — despite customers also falling victim to the gas bandits and suffering daily reductions in discretionary income and purchasing power.
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