A New Year
Notes From Scott
News and Opinions from Scott Knowles,
President of the Wolf Creek Company
a supplier of Green Industry Systems since 1961.
(Irrigation, Lighting, Water Features, Drainage)
A new year and a new season are here! So what can we expect? Uncertainty is still with us. But recent political moves and what looks to be a sustained recovery have indicated a more predictable future.
2010 will be a lot easier to deal with than 2009, where we all went on a roller coaster ride into a dark tunnel not knowing when we would hit the bottom of the run. As for now, it appears we are in a recovery to the crash that was ’08-09.
Housing starts will be better this year, but nothing like three years ago. People will be spending more money on their homes, but in smaller chunks. And landscape related services will see increasing demand, but the dynamic for winning the work has changed.
This recovery will most likely be a slow climb over a few years. Not the “V” shaped recovery we are used to. Why? Because, according to some of the experts, once the data can be analyzed a few months from now the determination will be that we just lived through the first phase of a depression. Not a recession. There is a difference.
A depression follows a period of wild credit excesses. A recession is a correction to real GDP in the context of secular expansion. What precipitated the crash was an excess in credit. This has ramifications that take a few years to sort out.
A depression is all about deflating asset values and contracting private sector credit. Government monetary and fiscal policies will work and help cause a quick recovery during a recession. Not so for depressions. And that is exactly what we are seeing right now. The government cannot spend our way out of this and even at nearly a 0% interest the Fed cannot bounce us out.
We are in the early stages of a deleveraging period that will last a few years. Business objectives have shifted from maximizing profits to making a profit while reducing debt. The painful part, the quick deep cuts to asset value, seems to be over. The recovery won’t be fast, but it will be tolerable and you can plan for it.
The chart illustrates how much debt we have taken on over the past 20 years. Look at the timeframe after the Great Depression before debt levels were back in line. If that is the model, we have a 5 year adjustment period ahead of us.
Feliz Zulauf with UBS estimates that the American consumer needs to retire $4 trillion from their debt load. The real effect of that will be the removal of $4 trillion from the economy. If people saved 5% and invested in savings the money stays in the economy and that fuels growth. When people take 5% and apply it to pay down debt the money is removed from the economy. That’s why depression recovery takes longer.
Governmental actions can help and we will see some benefit from the stimulus spending and interest rate policies. Such moves tend to have short term effects and if the recovery stalls more actions may be implemented. The government will want to reverse their policies as soon as they can so once growth is above 4% watch for an increase to interest rates.
What if the experts I referenced are totally wrong and we bounce out of this thing like a rocket? If you plan for the long recovery and we get a bounce you will simply be making a lot more money. Not a bad thing. If you are planning for a bounce and we get the long recovery, it may not be pretty. Bottom line, plan carefully!
Future for the Green Industry
The landscape world was rocked by the collapse. No denying that, but now we have many opportunities ahead. First let me point out two factors that may impact your business.
- ONE: The day of waiting for the phone to ring with the next job lead, and having so many of those calls you couldn’t respond to all of them if you wanted to, is over! Now it will be up to you to create job leads. The bad news is you have to do it; the good news is you have total control over the job leads you create. Another benefit is the leads you create will have less competition.
When looking for new work the most lucrative place to search first is your customer list. These are people who know you and have seen your value before. Hopefully they liked what they saw and trust you. Go to them with offers for services and do it repeatedly. So many times I’ve heard dismay at the low number of responses returned when guys have done statement stuffers or letters to their customers. Accept that you are not going to be overwhelmed, but if you get any leads at all they will be the least cost leads you’ll ever have. Stick to a program of mining your customer base.
And you have a large pallet of services to offer. Were we to sit down I’ll bet we could come with 15-20 services you could take to your customers right now. Let me go one step further, we’d love to sit with you to help make that list. You see, we have to make work happen too! Why not do it together?
- TWO: your customers will resist buying on credit. This makes the sales process harder because you will be competing with many other uses they have for their cash. Here’s a tip; people are buying in chunks.
For example, you may be quoting a large water feature that will cost $40,000. Right now that may be a hard sell. However, if you broke the complete feature into components they may go with a base installation now and add to it over the next couple of years. Same can be done with irrigation, lighting, drainage, etc. Offer a stepped process to help your customer get what they want.
There are some trends you can tag along with too. A landscape group identified several trends its membership was making progress with in 2009. By the way, we have knowledge and products to help you serve these trends.
Grow your own. Vegetable gardens are back in style. Even the well-to-do are growing tomatoes in their backyards. Landscapers can help prepare, irrigate, and plant gardens.
Better outdoor living areas. Expensive vacations are out. More quality time at home with friends and family is in. People are improving their outdoor living areas. Landscapers are making money right now doing outdoor living environment improvements. Lighting and water features are requested most often.
Curb appeal. Home values are stressed. To increase the sale price of their homes people are improving the landscapes. It’s proven many times the right landscape improvements return 10% to the sale price of a home.
Going Green. The idea of saving energy and water has taken root. People are asking for such improvements. Rain water harvesting, rain gardens, LED lighting, and ET based irrigation systems are wanted by some of your customers. I say some because it is still a small number in our area. But they do exist! Find them in your customer base. We have a lot of stuff to help you answer the Green Thing. Ask us how we can help you.
Therapeutic gardening. People are moving back outside and doing gardening as a past time. You can offer the assistance to do the heavy work to help them build and maintain new garden areas.
Mother Nature’s AC. Tree planting is back in too. It’s a Green Thing that helps cool outdoor living areas and the home. People want trees again, go plant them.
Nostalgia is cool. Whenever there is uncertainty or an economic downturn a period of nostalgia follows. I suppose because people want to be reminded of the good old days. Bone up on old-school garden and landscape designs to help comfort people in this time of stress.
Light it up. People are home more and entertaining outside. They want that quality improved at night too. Lighting is selling because it makes an immediate and desired impact on their property. We can help you.
No Child Left Indoors. A new social movement is to throw the kids out of the house. Parents want kids out doing kid stuff instead of getting fat watching TV and playing video games. Play areas are a definite opportunity.
Good luck and have some fun!