As entrepreneurs almost always are, contractors everywhere are optimistic for the 2014 season. Many have told me their quoting and job sales activity has been above last year. A good sign.
Personally, I believe the traditional customer base for landscape contractors is now investing in their homes and offices at a higher rate. Indications are that such investment will continue. The Green Industry will enjoy growth over the next many years because of that.
People
Nothing is ever perfect. Finding good staff is a perennial problem plaguing the Green Industry for many years. Now is a little more difficult because better paying jobs are opening up in some areas drawing good younger workers out of the landscape trades.
All of the construction trades suffer the same issue. Even the good paying skilled trades such as licensed plumbers, carpenters, electricians struggle to get young folks to join in.  Concern for who will fill those jobs as the Boomer generation retires already has the construction industry worried.
The recession didn’t help by eliminating 1.34 million construction jobs out of the economy. By the way, construction unemployment still lingers higher than the general population in the 12% range.
Construction Trends
Growth will continue for the building trades, although it will be slow. Housing helped boost construction spending numbers in 2013 and will do so again in 2014. Upper income groups are building new homes. Presently housing is still 13 percent below the normal pre-recession levels.
Home sales hit a lull during the fall and winter dropping off the 2013 highs. Weather is being blamed, but some other factors also played a role;
- Availability- House inventories are tight for the homes in the price range first time home buyers are looking for. As a consequence prices are rising faster than normal demand would account for.
- Lending Requirements- Banks and government imposed tighter mortgage underwriting standards after the recession that locked out many first time buyers. Those standards now appear to be easing somewhat.
- Outstanding Debt-  20% of buyers under 33 years old have a debt problem that is hindering their ability to get a mortgage. They are renting until they can pay down their loans.
Publically funded projects continue a slow drop off. Where public money fueled the lackluster construction economy post-recession, now private projects are again taking over as the driver of construction spending. Year to date private spending is over 12% more than a year ago.
The Economy
The overall economy is projected to continue its slow growth. What you’ve seen the past couple is years is what you’ll see again this year. A few economists are calling for a slowdown, maybe towards the end of this year. Reasons are the combined effects of higher taxes, increases in healthcare costs, and a long list of new business regulations. However, those economists say the slowdown will be slight and short. Kind of a “catch your breath” timeout followed by an extended growth period.
Pricing
Prices are going up. The cost for fuel, healthcare, supplies, and labor are all increasing. Several contractors have said they bumped their bidding factors to protect their profits. In fact, nationally raising prices has been an active topic among building trade contractors since last fall.
Denne Goldstein, editor of Irrigation & Green Industry magazine, asked a great question in his recent editorial, “have you given any thought to how much more it is costing you to do business today?”
Denne’s point is one that must be asked every few months. Unfortunately the landscape trades have been deeply educated to focus on low price. So many from manufacturers, suppliers, contractors, etc focus on being the low price guy. By doing so our industry has also trained end users to expect continually lower prices.
It’s human nature. If the cost for materials goes down, so many contractors instantly drop their price to the end user thus giving up a huge margin enhancement. You never want to part of a deflating business environment. It means you have to sell twice as much to make the same dollars.
As for doing what everyone else is doing, Mark Twain said, “Whenever you find yourself on the side of the majority, it is time to pause and reflect.”  Twain does not say what the majority does is wrong, just that doing something a little different may be much better. Always more productive to chart your own way instead of copying what everyone else is doing.
Fight the urge! Now that costs are going up, street prices must elevate accordingly to maintain the financial health of the contractor base.  Contractors who know the secret have already done so and are making a lot more money on their bottom lines.
