$100B Problem - The landscaping industry is extraordinarily fragmented with the top 50 companies making only 15% of the industry’s revenue, therefore, company by company statistics vary considerably. The fragmentation, yet industry growth, suggests a very important idea about the industry: the landscaping market demand is being fulfilled by more companies entering the landscaping industry to serve the growing need, not by current business owners growing their market share - this is largely due to inadequate labor supply. [3,4]
Companies whose revenue is between $1-50M report net profit margins of 4-10%, increasing labor costs (liability insurance, health insurance, workers’ compensation, etc) continue to drive margins down. Landscape companies with $1-10M of revenue paid their suppliers and vendors in 22.13 days on average, over the past five years. Over the same time span, companies averaged $9,618 profit per employee. The largest capital expenditures are typically zero turn lawn mowers costing $8-10,000 with a life expectancy of 3-6 years. The number of zero turn lawn mowers typically scales linearly with every 2-3 employees added to a firm. These mowers are financed for 12-24 months. Leasing equipment is a growing trend in the industry with a 56% increase in companies considering leasing mowers in 2020 compared to 2019 [2]. Technology investment within landscaping businesses is low, $100-$500 a year in scheduling and management software - 26% of companies use these technologies [2]. [5]
The US landscaping market is comprised of approximately one million companies totaling $100B in revenue ($100B+ total addressable market) [1]. Commercial professional landscaping companies offer a wide array of services, the lawn maintenance sector, which the proposed product will impact, is the fastest growing at 33% [1]. Over the past five years, the lawn maintenance market has comprised roughly 50.2% of sales revenue ($50B+ serviceable available market). The industry can be segmented further by company size (2-4 maintenance crews, $1M+ revenue), geographic location (southeast US), maintenance focused (large commercial properties), and high labor turnover (50%+ turnover in a month), they represent a $5B market share ($5B+ immediate target market). Even without including international numbers, the landscaping industry is sizable and growing, but an industry wide labor shortage crisis threatens their success. [1]
The problem - Despite growing market opportunities, over 71% of landscaping companies struggle to stay in business because they can not recruit and retain the labor necessary to complete their work, without a solution, many landscaping small businesses may have to close operations [2].
The labor problem has been attributed to two sources: (1) the nature of the industry’s work is physically demanding - in severe heat; the job is temporary, seasonal and dependent on weather conditions; and the work includes repetitive unrewarding tasks. (2) Larger social changes, namely, growth in college educated workers, the “gig economy” (Uber, Lyft, Instacart, etc), and a new generation of workers more interested in technology-desk-based jobs, (3) the ability of companies to only recruit from a small geographical area (10 mile radius) due to low wages and required in-person nature of the work.
Problem validation via H2B Program - The landscaping labor shortage crisis has been acknowledged by several US government agencies. To address the problem, the US government provides approximately 66,000 H2B immigrant guest worker visas every year. For the past several years, the demand for workers has grown to a level that landscaping companies and associations have started to lobby legislators for more H2B immigrant worker visas. Congress authorized the Department of Homeland Security to double the immigrant worker quota (132,000+), The Department of Labor certified a bonafide need for an additional 10,000+ workers (148,000+); the landscaping industry has stated that even these numbers would not be enough. [7,8,9]
Due to political influences, the H2B immigrant worker quota has not exceeded 80,000 and has not come close to meeting the industry’s labor demand. Due to overwhelming demand for the immigrant worker program, in 2019, the US government introduced a lottery award system. ‘Todd Chambers of Brightview, the country’s largest landscape services provider, had this to say about the worker lottery system in an interview, “The government’s lottery granted 100 percent of requested visas to some companies and awarded others none, making the process completely unpredictable. Those who don’t receive the guest workers for which they were certified are often being forced to cancel contracts, cancel equipment orders and lay off American workers. In contrast, those businesses who do receive their workers, sometimes just down the street, are thriving. This arbitrary system is wrong and not the way American businesses should be treated.” [10]
Since 2017, the largest landscaping association in the US, the National Association of Landscaping Professionals, started an outreach program “The Industry Growth Incentive” to spur employee recruitment. The program is focused on targeted advertisements to appeal to individuals who may consider a career in landscaping, with a key focus on using technology to reach 17-22 year olds. This one program invests over $100,000 annually to improve the labor problem. After conducting interviews with the program’s leaders and attending national meetings, we consider our solution to be in line with their efforts and could garner support from the association [11].
A short note on COVID-19 - Landscapers report that their maintenance sales remain strong during the pandemic, but labor remains a problem [68]. Due to the nature of the work and social work preferences, the masses of American do not want to do this work - COVID-19 may increase the labor supply in the short-term, but is not a long-term solution. Amidst the pandemic, landscapers have cited that labor is still their number one concern. Potential workers can make more money on unemployment than the grueling work of landscaping; as with many small businesses, landscapers cannot compete [69]. Further, due to COVID, landscaping H2B workers have been placed on hold. Landscapers may experience a higher than usual labor shortage gap until COVID passes.
References intentionally omitted
More information on Hire Henry's research of the lawn care industry
A Study of Landscaping: A Millennial Perspective