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Growth Results From Capital Idea

Operating leases help increase bonding capacity by 16 times.

Waste is a dirty word at Ed Castro Landscape. From the use of fuel-efficient vehicles to site integration strategies that decrease environmental impact, the company strives to make the most of its resources.

Efficiency extends to fleet management, as well. The design, installation and maintenance firm leases three Cat 257B Series 3 Skid Steer Loaders and a 303.5C CR Mini Hydraulic Excavator to provide operators with top quality equipment at budget rates.

“Leasing options in today’s economic climate are favorable,” said Ed Castro, BLA, ASLA and president of the Roswell, Georgia, company. “Low interest rates are built into the leases.”

Leasing enables Castro to budget equipment costs for the long haul (machines are leased on three- and four-year leases). Because the machines are returned when leases expire, the  landscaper’s staff is always operating relatively new equipment.

“We’re using machines that are best in class, and have the latest technology. Employee morale is high because they’re working on good machines, and uptime is excellent,” Castro stated.

Cat equipment has been acquired using operating leases, rather than capital purchase or a capital lease. “That way, we’re able to leverage our working capital for our bonding. That’s the main reason we do it, instead of buying machines outright,” said Castro.

Six years ago, Ed Castro Landscape was bonded at $300,000 to $600,000. Today, the company is bonded at $5 million to $10 million, qualifying the firm for much larger projects.

The equipment

After renting the hydraulic excavator to dig footers and complete drainage work, a decision was made to sign a long-term lease. “We have found the machine to be a real time saver and labor saver,” said Rick Olson, operations manager. “We quickly realized that with the work that we’re doing, the 303.5C CR was super productive.”

Operators were vocal in their support of the Cat machines, specifically citing excellent speed without sacrificing power.

“The machines have plenty of capacity to lift trees, loaded pallets, sod and bulk materials. At the same time, we need machines with agility to work easily on residential lots,” Olson explained. “Maneuverability, grading ability and horsepower were big factors. The skid steer loaders are easy to maneuver, but have the power to move materials, grade and efficiently operate the attachments.”

Ed Castro owns power rakes, augers, trenchers and a material handling arm, and rents brushcutters and hammers to greatly increase versatility.

The operating familiarity that comes with leasing machines produced by the same manufacturer improves safety and performance. “Even if an operator works on a different machine, he’s immediately familiar with the controls,” Castro noted.

And the machines are reliable performers. “In the six years that we’ve operated Cat equipment, I’ve never heard one guy complain about the machines,” said Castro.

Dealer support is also an important factor in the decision to lease. Castro considers Yancey Brothers a partner in his business, just as he views Castro Landscape as a partner with his company’s clients.

“Our Cat dealer understands our needs, just as we want to understand our customers’ needs, goals and objectives, Castro said. “We align all our energy toward meeting those objectives. Yancey Brothers works the same way with us.”

The dealership provides information, advice and training on new models and changing technologies that could benefit the company.

“They show us how to properly operate and maintain the machines, and provide us with tips for improved performance,” Olson said. “These machines are built to run the attachments at low throttle, but provide the same amount of power as running at high throttle. They’ve trained the operator to do that, so they’re using less fuel than they had been.”

Great opportunities

Castro believes that the economic downturn of the past several years has provided him with opportunities to build relationships, and to better understand the changing needs of his clients.

“Our clients are changing how they operate, and who they are. Their business models have changed. We try to stay in front of that and be a partner for them,” Castro emphasized. “We’re not adding different services. We’ve become more vertical in what we do, and we’re trying to do it better.”

Government contracts have helped the company weather the recession. While Castro has been in the market for years, the size of the jobs has increased.

“It’s not a market you just jump into,” he said. You need to have the required bonding, and meet all the other requirements to be qualified. To land a $5 million contract, you need experience.”

And Castro’s experience leasing Cat machines has helped increase the firm’s bonding capacity, as well as its ability to complete the work on time and within budget.

Recession provides expansion opportunities

Streetscapes weren’t typically a project that Ed Castro Landscape worked as a prime contractor before the recent economic downturn.

But with the recession, electricians, grading contractors and other construction companies have idle workers and equipment in need of work, so Castro is hiring former rivals as subcontractors to land jobs that would be impossible to complete solo.

“Small paving companies don’t have as many parking lots to pave anymore, so they’re willing to consider working as subcontractors for us. That equipment is just sitting there sometimes, so they’re willing to heat up some asphalt for us,” said Ed Castro, BLA, ASLA, and president of the Roswell, Georgia, firm.

Castro is drawing on the underused capacity of other contractors to increase his firm’s capabilities without adding to the its overhead.

“There are companies that have expertise and equipment that we don’t have,” he said. They’re willing to talk to us because we’re taking the risk and securing the jobs for them. We’re doing their sales and business development for them. That’s created a huge opportunity.”

Contractors that had been too busy to talk about partnering now have time to listen to Castro’s proposals. “People are willing to look at things in a different way. Some companies may not have sufficient bonding capacity, so they’re more apt to partner with somebody. We’re pooling resources.”

This collaborative approach is enabling Castro to expand into new markets. “We’re becoming more of a regionally focused company,” Castro reported. “There are subcontractors and suppliers that are willing to work for us in other markets. That enables us to take our team to other areas.”

This resourceful teamwork approach has paid dividends for Castro’s operation, and could be a successful strategy for others.

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Categories: Landscaping,Mini Excavators