In the past week I’ve received emails from two landscape companies eager to break into the commercial market.
Like I mentioned in my last article, this trend towards diversification comes up in almost every conversation I have with lawn and landscape companies.
In this article I’m going to throw some cold water on this idea, which hopefully discourages some of you from pursuing this market.
For others, this may be the validation you’re looking for.
As you’ll see, the consumer (B2C) and business (B2B) markets are two different worlds. You need to understand what makes each unique and determine on which side your culture aligns.
Seeing dollar signs
I get it. You look around and see some big companies making tons of money in commercial landscape maintenance.
These accounts can be six figures a year. It's predictable revenue month after month. It seems so much easier than constantly chasing new business and dealing with Mr. and Mrs. Homeowner.
Industry consultants (most with a B2B background, by the way) and peer groups perpetuate this idea.
It’s hard not to get excited, right? Especially with most of the industry cheerleading for diversification.
On the surface this strategy of casting your net in both markets might seem like a sound approach, however, the reality suggests otherwise: Maximizing growth and profitability on both sides is extremely rare.
In fact, I’ve never seen it done.
There are many successful (i.e.- profitable) companies who offer services to both consumer and business markets. What I would challenge is that their success is directly attributed to their balance. Typically one profit center carries the day with the other seen as the squeaky wheel of the operation.
There’s a very good reason for this…
The challenges crossing over
Successful residential design/build companies are built on creativity. Innovation is at your core. This is what your clients pay you for.
Creativity doesn’t allow for apples to apples comparisons when designing a customer’s backyard. Or the price tag you attach to it. Every customer is a blank slate of possibilities.
Creativity is profitable.
In contrast, you don’t make money on commercial maintenance work through creativity and innovation. You wring out profits through cost reduction, efficiency, and scale.
Profits must be achieved this way because commercial maintenance is treated as a commoditized service.
Procurement departments and purchasing agents are essentially buying units of what you offer: number of mowings, number of prunings, number of mulchings, square feet of seasonal color, etc. etc.
This is done without much care for who the service provider is.
You are seen by property managers and the like as being so undifferentiated that you become easily replaceable.
This is the game you play if you’re a productized business, which is exactly what commercial landscape contractors are.
If you have a culture of creativity, as most residential design/build companies do, you’re in for a long battle if you decide to cross over into commercial maintenance.
You'll be in an uncomfortable position you're not accustomed to, which includes:
- Being perceived as a commodity instead of an expert, which means…
- Instead of commanding a premium price for your creativity you'll be held to less flexible budgets and subjected to more negotiating which...
- Will put downward pressure on your pricing and lead to...
- Minimal profits on your bottom line.
As a creative myself, I’m getting a little queasy just writing this.
You can win with either a culture of production or a culture of creativity. You just can’t win at both.
Be intentional in choosing the right path for your business.
Between this article and the first, I hope I've added some perspective you haven't considered. If you find these insights helpful, please subscribe to our blog. We publish a new article each week. Just add your email address to the form below.