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Kehoe’s take: State of the market

December 9, 2015 -  By

I did a video interview at the LM booth during GIE+EXPO last month. I was asked to comment on the state of the market. It felt like being asked for a two-minute solution to Middle Eastern politics. You don’t want to get it wrong, but two minutes doesn’t do the topic justice. That being said, here are my thoughts and recommendations.

The industry is good, not great. The rising economic tide seems to be floating most boats, but not enough are taking advantage of it from a cash-generation perspective. Yes, revenues are up, but profits in too many cases are not. Now is the time to harvest the cash bounty created by growth.

But it doesn’t seem to be happening. Remember 2003-2007? Companies grew in that economy, but for far too many, their costs grew even faster. The net result: Cash was consumed, debt accumulated and balance sheets weakened. So when the crash came, the crunch was terrible. You don’t want to do that again.

THE GOOD

The economy is better. But don’t fool yourself; it’s not great. It just looks great compared to how lousy it was. And when this pent-up demand gets spent and the buyers are tapped out, look out.
Consolidation is good. The ValleyCrest and Brickman merger is great. It means real capital is flowing into the industry. Witness all the investment companies looking to do deals. At the same time, there’s some exodus of talent from the merged entities. These are experienced
managers from two good companies.

THE BAD

Talent is scarce. Labor, foremen and account managers, especially, are in short supply and more expensive than ever. This singular constraint can result in outkicking your coverage and ruining your profits.
Supply is rising. Success breeds success—and more competition. This trend is good except when it comes to pricing. Though prices are no longer going down, they are not keeping pace with cost increases.

WHERE TO FOCUS

These threats and opportunities should drive your business planning and budgeting next year.

  • Recruiting. It’s an everyday job. Put someone in your company in charge of this important activity. Be prepared to pay a bit more to get and retain talent. Look for exodus talent from the ValleyCrest/Brickman merger.
  • Sales. Become more selective. In the simplest terms, you want customers that will pay a little more, appreciate your work, be lower maintenance and pay their bills on time.
  • Technology. Invest in mobile-integrated technologies. They can increase personal productivity, letting you leverage overhead expense, and reduce costly mistakes that result from poor communication and inaccurate reporting.

We’ll see the emergence of several larger local/regional companies in every market. You can be one of these guys. These guys are going to generate solid cash returns by applying the strategies outlined above. Or you can repeat history.

That’s it: My two-minute take on the state of the market. Act now and don’t repeat history.

Kevin Kehoe, the owner and manager of 3PG Consulting, is a columnist for Landscape Management. Reach him atkevinkehoe@me.com.

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