Lawn and Garden — hand tools
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Slow growth for gardening hand tools

Long-handled tools are expected to lead the category, according to report.

BY HBSDealer Staff

Gardening hand tool sales are expected to reach $738 million in 2022, according to a recent report from market research firm The Freedonia Group.

Looking back, growth in the category grew only 0.6% annually between 2012 and 2017. Long-handled tools alone accounted for nearly half of total sales in 2017; combined with cutting tools, the two segments represented three-quarters of the total.

Also from The Freedonia Group’s report, “Lawn & Garden Hand Tools & Wheeled Implements in the U.S.,” the company expects demand for tools to increase 2.4% per year to $738 billion in 2022. Growth rates are relatively the same for all products, as hand tool sales tend to occur in lockstep. Consumers tend to purchase these products when needed — e.g., after moving into a new residence, when starting a new project or when an item breaks or is lost. Growth going forward will be reliant on an improving economy and weather across the United States.

Demand for long-handled tools is forecast to increase 2.3% per year to $349 million in 2022. Shovels and rakes generate the majority of category sales. Among other products, hoes account for a large portion of demand. Growth rates will be similar for all long-handled products, as shovels and rakes in particular are necessities for people with lawns and gardens. There is relatively little innovation in the segment, with most products seen as commodities by consumers.

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Generac looks ahead to hurricane season

After a wind-damaged 2017, Hurricane Preparedness week is upon us.

BY HBSDealer Staff

With the 2018 hurricane season knocking on the door — and the extremely active 2017 season still fresh in mind — Generac Power Systems is urging homeowners to use Hurricane Preparedness week, May 6 to 12, to begin preparing before facing the specter of a tropical storm or hurricane.

“Preparation before storms arrive is absolutely critical,” said Russ Minick, chief marketing officer for Generac. “Once a storm is en route, the last thing you should have to worry about is how you will deal with a long-term power outage. Hurricane Preparedness Week is a good time to begin exploring your emergency power options, so you can invest in the system that best suits your needs in time to be ready for a storm.”

The 2017 hurricane season was the costliest on record, eclipsing more than $200 billion in damage. This isn’t surprising, because for the first time, three Category 4 hurricanes made landfall in United States territories. Hurricanes Harvey, Irma and Maria caused massive flooding, power outages and infrastructure damage. For 2018, the Department of Atmospheric Science at Colorado State University currently projects a slightly above-average season, with 14 named storms, seven hurricanes and three major (Category 3 or above) hurricanes.

In its most recent quarter, Generac posted a net sales gain of 20.3% to $397.6 million. Domestic segment sales increased 21.5% to $300.2 million.

“The fundamental demand environment for home standby and portable generators continues to be robust, benefitting from increased power outage activity in recent quarters contributing to excellent growth in both in-home consultations and end-user activations,” president and CEO Aaron Jagdfeld said.

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In praise of the small business

A financial advisor examines the rewards of business ownership.

BY Gary Pittsford

Each year, when I think about the national recognition of small business owners (this year, National Small Business Week was April 29 to May 5), I stop and think not only about our firm’s hundreds of clients in all 50 states, but also about the huge economic engine made up of the 28 million closely held family businesses across the nation.

These thoughts lead me to consider two important facts: Every time 10 people are hired in this country, six of them go to work for small businesses; and, together, those 28 million small businesses generate more than 50% of our nation’s GDP.

Speaking at several national conventions each year allows me to meet thousands of these business owners, and I often like to take that opportunity to ask them three questions: Why should someone want to be a small business owner? Why should an owner’s children or employees consider buying this business? Do the financial benefits of small-business ownership offset the hard work and sacrifices?

Gary Pittsford

Gary Pittsford

Let’s look at the last two questions first. At Castle Wealth Advisors, LLC, our Castle Valuation Group has prepared more than 400 business valuations in the last 18 years. Out of those valuations, we picked a cross section of 186 companies and averaged their results. We discovered some interesting facts:

  1. The average business valuation is $1,109,000;
  2. The average gross margin is 40.5%;
  3. The weighted average adjusted EBITDA is $273,000;
  4. The average stockholder’s equity is $917,000; and
  5. The adjusted EBITDA to appraised value is 24.14%.

Those numbers offer perspective on my questions. After all, being able to earn 24% per year on appraised value is an excellent reason to own your own company rather than work for a large corporation where they keep the profits. It’s also a good incentive for the next generation in the owner’s family — or perhaps one or two key employees — to purchase the business when the owner is ready to retire.

Sure, the next generation could go to work for a large company and hope for salary increases and job promotions that match the earning potential of small-business ownership. However, for someone with an entrepreneurial spirit, acquiring an existing business and growing that business is an excellent challenge.

It’s also a venture that pays benefits beyond the cash register. It has been proven many times that when a customer shops at a locally owned store rather than a national chain, approximately 30% of the cash being spent will remain in the local community.

So, is it a good idea for that next-gen entrepreneur to consider buying the business? Well, he or she will get the chance to take control of a business with an established customer base, excellent cash flow, well-trained employees and an important role in the local community, all with a chance to earn 24% a year on the business’s value. Seems like a good idea to me.

It’s also an idea that is becoming increasingly important for baby-boomer business owners between the ages of 60 and 70 who have children interested in buying the business. Of course, for such a transition to succeed, an owner needs to be a good coach and the next-gen entrepreneurs need to be good listeners, and the business needs a sound succession plan to address the many legal, financial and operational matters required for the transition. However, if the transition is designed well, the next generation will have a great chance of being successful.

That brings me back to the first question I like to ask those owners: Why should someone want to be a small business owner?

Certainly for the financial rewards, but also simply for the pleasure of entrepreneurial endeavors. And, yes, for the gratification that comes from knowing you’ve contributed to your community and the lives of the people who work for you. But also for the knowledge that you have created something that will continue to contribute to the community and to people’s lives for years to come. Who needs a better reason than that?

Gary Pittsford, CFP, is president and CEO of Castle Wealth Advisors, LLC. For more information, visit www.Castle3.com, or email Gary directly at [email protected].

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