Transcript CON 280: Source Selection and the Administration of

CON 280: Source Selection and the
Administration of Service Contracts
Market Research Exhibit
Landscaping/Grounds Keeping
CON 280
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Market Research:
Landscaping/Grounds Keeping
Key Market Research
Topics
Data
Market Segmentation
• Largest services segments: Lawn maintenance (40.8%), Basic
Landscape Design and Installation (20.8%), and Lawn Care
(13.2%)
• Other smaller segments: Tree and Ornamental Care (7.1%),
Snow and Ice Removal (4.9%), Irrigation (4.2%), and Other (9%)
• NAICS code 561730
Market Size
• $59.2B market
Market Growth
• From 2006 to 2011: -0.6%
• Projected growth 2011-2016: 3.7%
Market Share
• Over 350,000 businesses provide this service
• The top 4 players account for 6.3% of the available market
Government Market
• Government and institutional clients make up 3.9% of the
market
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Source: IBIS World; Censeo Analysis
Market Research:
Landscaping/Grounds Keeping
Key Market Research
Topics
Data
Value Chain
• Basic services value chain, with inputs of Time, Knowledge,
Equipment, and Systems
Cost Structure
• Labor is the major cost component (34%)
• The purchase of lawn care equipment and materials is another
primary cost component.
Cost Drivers
• Local and job-specific wage rates
• Use of labor-saving equipment
Pricing
• During the recession, industry operators have relied on price
competition, leading to falling revenue
• Firm fixed price contracts
• Different response times and service levels are associated with
different price points (i.e., higher service levels cost more)
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Source: IBIS World; Censeo Analysis
Market Research:
Landscaping/Grounds Keeping
Key Market Research
Topics
Small Business
Data
• 86% of the businesses in this industry have fewer than 10
employees
Competitive Dynamics • Low barriers to entry
• Light regulation
• High level of competition
Market Trends
• Low levels of technology change
• Potential changes in regulations of chemicals used
Best Practices
• Use of labor-saving equipment
• Use of more eco-friendly chemicals
• Industry is moving away from “scheduling” requirements (e.g.,
mow the lawn twice a month) towards “outcome”
requirements (e.g., maintain the lawn to keep pathways clear)
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Source: IBIS World; Censeo Analysis
Market Research:
Landscaping/Grounds Keeping
Key Market Research
Topics
Performance Metrics
Data
• Generally based on:
• Response time
• Complaints threshold
• Examples:
• Response within 4 hours 90-95% of the time (examples
vary)
• No more than 0-2 complaints per quarter (examples vary)
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Source: IBIS World; Censeo Analysis
Market Research:
Landscaping/Grounds Keeping
Key Implications for the Acquisition
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In an industry with such a high percentage of small businesses,
there may be political issues if small businesses risk being
displaced by an IOSS contract
The industry is projected to be entering a period of recovery, so
key players may be hungry for additional business
There is a high level of competition in the industry, which is
generally good for potential buyers
If our required service levels are higher than average, we may be
a more expensive customer to serve and should therefore
consider changing our requirements to be better aligned with
Industry
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