How will the government cuts affect commercial horticulture?

The world stock markets have been in euphoric mood for the last eighteen months since their lows of March 2008 but I feel it's now extremely overdone and fundamentally, the United Kingdom cannot maintain its current valuation.

There is nervousness in the United States that a further credit crisis is unfolding and banking shares posted massive losses yesterday, as markets digested the implications for not only the banking sector but the economy as a whole.

The unprecedented fiscal stimulus of the last two years has kept western economies on a life support machine as money is intravenously administered but with governments are now running out of resources themselves and with little cash to continue the current course of treatments - hence the government cuts - coupled with the possibility that interest rates will have to rise, the economy can only head in one direction.

My talk of collapse and crash may sound as though I'm already defeated and I might be accused of talking the economy down but I feel we need to be honest with the situation and prepare ourselves for some pretty austere measures.

There are going to be a number of threats and opportunities for the small to medium sized company to come out of what happens next.

Overstretched commercial landscaping and grounds maintenance companies will find trading conditions the harshest as contracts are reduced or cancelled.

It's the additional work that local government and commercial contracts create that provides most of the profit, in what is otherwise a lean environment to make money anyway, and when this is withdraw, some commercial operations will have little choice but to lay off staff, sell equipment and re-evaluate their working procedures - those already financially and operationally overstretched will have no choice in the matter - the will fail.

The biggest threat is over competition in the mid-market as large business search for projects that they hope will keep them alive. There will inevitably be some pretty scarily low pricing valuations but bear in mind, it will initially be turnover, and not profit, that's being sought.

My advice would be to hold fire on price reductions (although you'd have to be sensible and evaluate each set of circumstances on their own merit) and work hard at tempering client expectation and convincing them of the need to deliver on value and not price.

Wait for this storm to play itself out, keep costs to a minimum, reduce travelling to a minimum and talk to your existing staff members now so that they are aware of the potential for the coming months. If everyone is aware of the need to pull together then you can help each other through an crisis as a single unit.

Please add your comments, concerns, aspirations and ambitions below.

Do you feel I'm being overly pessimistic or do you think it's wise to take a rational view of possibilities before (potentially) we are right in the middle of something that has little room for movement?

Hi John

I hope my thoughts above come over as an honest assessment of what I feel will happen shortly. It is also intended to be read as a caution but with a positive slant i.e. there are opportunities to come out of this.

There is more opportunity for the small to medium sized business to make a margin on commercial contracts due to the size of their operations.

I also feel, in the future, we might see some of the larger contracts broken up into smaller chunks so that the risk is spread, both for the contractor and the client.

I wouldn't even be surprised to see local councils and other establishments (such as the Ministry of Defence) start to take contracts in-house as was the case twenty years ago.

The Garden Co said:

philip , very disheartening but bye christ , you have hit the nail on the head ! i have voiced my opinions regarding such future operating conditions by being very negative which some have blown me out completly and i cannot at the present time talk about anything positive as it creates a false sense of security! i think the sistuation has not started yet , its going to get very tough and yes , this is my problem regarding contractual work , the basic work is there but theres no extra coming in which in previos years has generated most of the profit ! the basic annual contract value is not enough on its own and you plan on having the extras that it brings !many may say the turnover is high but do they drive bentlys ! no they dont the profit is dismall and will contiue to fall!!i dont believe all trades will be hit as hard as horticulter as i dont belive they will! interst rate will go up , they carnt go any lower ! i have always believed in , you need confidence and plenty of money circulating in the public sector to retain worthy while profits ! when it does all kick in , garden maint , having a patio built will not be on the household budget !i have always said this service apart from commercail is a big extra to domestic customers many people say everything is ok , yes it is not as bad as above at the moment but you deffo need to change the thinking to go forward ! phil im glad you have voiced your personal opinions as i share the same concern

Replies

PRO

Phil Voice October 15, 2010 at 11:30am

Listen to my views - Are the stock markets about to collapse?
David Cox October 15, 2010 at 12:13pm

To be honest imo we already have come through some awful trading times, but I think it may just continue as such - maybe abit worse, abit the same, and as such we should all continue with our careful management which has got us through this phase.
PRO

Gary RK October 15, 2010 at 5:30pm

Fraser, I share the same view

You can take appropiate, simple business planning & measures without being totally negative all the time.

I think there is a key sentence in Phil's post, it reads:

"There are going to be a number of threats and opportunities for the small to medium sized company to come out of what happens next."

So rather than concentrate on the threats (although one needs to be aware of them) we intend to concentrate on the opportunities.

If not, then its time to bale out, jump ship and do something different.

Just my oppionion...........................
PRO

Gary RK October 15, 2010 at 5:37pm

But continual wall to wall negativity just drags everyone & everything down.......

I guess it comes from the doom sayers of yesteryear

Oh, and I added a quote from Phil's original post in my post above to support my view - go read it
PRO

Gary RK October 15, 2010 at 6:02pm

Someone else who get's it ;-)

Andrew Bentley said:
Is this not a good thing for small businesses? Low overheads, small capital outlays, little or no staff costs surely means very competitive?? As authorities are forced to outsource more and more services, owners of small businesses are in a strong position to gain contracts.....

It just might mean that you need more customers on smaller contracts than before?
PRO

Gary RK October 15, 2010 at 6:05pm

Andrew, don't under-estimate yourself - by understanding that there are opportunities as well as threats you are well placed to take advantage of the situation.

It's when you can't see there are opportunities that a business slides into oblivion...
PRO

Phil Voice October 15, 2010 at 6:06pm

Absolutely.

If there is some kind of capitulation then it could create a lot of opportunity for many small to medium (2-20 people) businesses. When I referred to the large commercials, think Serco etc.

I think, if there is an acceptance that business might become a little tougher for the next 4-6 months then it's possible to plan for a positive outcome.

Andrew Bentley said:
Is this not a good thing for small businesses? Low overheads, small capital outlays, little or no staff costs surely means very competitive?? As authorities are forced to outsource more and more services, owners of small businesses are in a strong position to gain contracts.....

It just might mean that you need more customers on smaller contracts than before?
PRO

Phil Voice October 15, 2010 at 6:16pm

Hi John

I hope my thoughts above come over as an honest assessment of what I feel will happen shortly. It is also intended to be read as a caution but with a positive slant i.e. there are opportunities to come out of this.

There is more opportunity for the small to medium sized business to make a margin on commercial contracts due to the size of their operations.

I also feel, in the future, we might see some of the larger contracts broken up into smaller chunks so that the risk is spread, both for the contractor and the client.

I wouldn't even be surprised to see local councils and other establishments (such as the Ministry of Defence) start to take contracts in-house as was the case twenty years ago.

The Garden Co said:
philip , very disheartening but bye christ , you have hit the nail on the head ! i have voiced my opinions regarding such future operating conditions by being very negative which some have blown me out completly and i cannot at the present time talk about anything positive as it creates a false sense of security! i think the sistuation has not started yet , its going to get very tough and yes , this is my problem regarding contractual work , the basic work is there but theres no extra coming in which in previos years has generated most of the profit ! the basic annual contract value is not enough on its own and you plan on having the extras that it brings !many may say the turnover is high but do they drive bentlys ! no they dont the profit is dismall and will contiue to fall!!i dont believe all trades will be hit as hard as horticulter as i dont belive they will! interst rate will go up , they carnt go any lower ! i have always believed in , you need confidence and plenty of money circulating in the public sector to retain worthy while profits ! when it does all kick in , garden maint , having a patio built will not be on the household budget !i have always said this service apart from commercail is a big extra to domestic customers many people say everything is ok , yes it is not as bad as above at the moment but you deffo need to change the thinking to go forward ! phil im glad you have voiced your personal opinions as i share the same concern
Matt October 15, 2010 at 6:20pm

My dad said it in the last big recession and he reiterated it this time... never underestimate the populations ability to talk themselves into a deeper recession.
PRO

Phil Voice October 15, 2010 at 6:28pm

Hi Matt

I do think that negative talk does contribute but there is no arguing with the fundamentals or getting away from the fact that the world is broke (western economies at least).

One of the reasons the banks and governments are in this mess is because they continued to talk things up while ignoring facts and misappropriating funds.

The fiscal crisis isn't down to the all down to the consumer but unfortunately, the consumer will still pay a certain price.

Matt said:
My dad said it in the last big recession and he reiterated it this time... never underestimate the populations ability to talk themselves into a deeper recession.