Author: Samantha Masters

A Critically Important Metric – Revenue and Profit per Truck

by David R. Powelson

From what we all read and hear, route density is the most important driver of low cost in the shredding industry. However, this is not true. While route density is important, what matters far more is your “Revenue and Profit per Truck.” Revenue per truck in the shredding industry ranges from under $100,000 to more than $250,000. Wherever your operation is along this continuum, driving for extra “revenue and profit per truck” belongs at the top of your to do list. 

Measuring these variables is easy. You should calculate these metrics by month. If your graph looks like the Sawtooth Mountains, it’s a clear sign of an unmanaged metric. If your graph shows steady progress, congratulations. 

Here’s a checklist of factors and strategies to consider:

Is Every Truck a Profit Center in Your Financial Reporting?

Dean Buntrock, a founder of Waste Management, developed a bedrock business principle: “Every truck is a profit center”. Today Waste Management sales exceed $14 billion.

In a related matter, Buntrock built on the concept that “at the center of every truck is a driver.” Rewarding drivers based on performance and safety makes economic sense, since it’s impossible to have an efficient transportation system without them. Because drivers are the face of your company for all of your customers they are, in addition, in a unique position to create great customer relationships and boost sales.

Having extra security bins or consoles with each outbound truck gives drivers just one additional way they can boost sales. Just don’t forget the basic principle: What gets recognized and rewarded, is what gets done. If you want to get drivers to drive sales as well as trucks, then provide incentives for a new bin placement to compensation. You’ll also improve your chances of getting the paperwork done right. 

Pricing Varies Widely in The Shredding Industry

It’s almost unbelievable that national shredding companies charge minimum rates per stop of approximately $150 while many independent companies struggle to get $89. At seven stops per day at $150 minimum, revenue is $1,050 per day or $273,000 per year, but at $89, those same 7 stops per day produce annual revenue of $162,000. More than $100,000 difference over the course of a year.

Who’s priced right? Now is always a good time to check out the competition. Sam Walton, for example, was highly disciplined about checking his competition. The person with the lowest revenue per truck may be the person you see in the mirror. Low revenue per truck may simply reflect that you don’t charge enough. 

Distance Between Stops Matters

Clearly a route with 1 mile between stops is preferable to one with 10 miles between stops. Making 3 pickups in the same building is even better. It’s why route density is a key metric in generating profit.

A focused sales effort creates route density – every office in a building, every business in a business park, etc. Just don’t forget the basics – what gets recognized and rewarded, is what gets done. Even a $5 “proximity reward” will get results and boost revenue per truck, and don’t forget to include drivers.

Using marketing services that create referrals for specific zip codes (i.e. Shred Nations) can help significantly in creating route density. Feel free to ask us how. 

Concentration of Routes Based on Focused Strategies

Build your business near your center of operations/ in your local neighborhood. This also helps avoid the major irritation of seeing your competitor’s trucks out of your office window.

1. Build your business along transportation corridors your trucks routinely use.
2. Build your business in clusters/ around frequently visited areas – which may be far or near

Use marketing services that create referrals with a geographical focus – such as using Shred Nations, a service that connects buyers of shredding services to shredding companies based on specific zip codes (i.e. service area).

Service Time per Stop

For the most part revenue is produced at stops. Arrange to create efficiency and sufficient revenue to earn adequate daily revenue for the truck.

If practical, have customers bring materials for shredding to the truck dock on the day of pick-up. Yet, if the customer is willing to pay the right price, you can go in the opposite direction and offer to take boxes out of the storage racks under the direction and supervision of customer. Either strategy can add to revenue per truck. 

Creating Service Zones, Route Selection, Scheduling, and Timing

Create concentric circles on a map from your center of operations at 5 miles, 10, miles and 20 miles. Then divide the areas along transportation corridors. Schedule areas for different days of the week and then slot new customers into their appropriate pick-up day. 

Based on traffic and timing it typically makes sense to go to the most distant stops first to avoid the morning rush hour. Then by working each route back towards the center of operations, cost is minimized. Whether on purpose or because a customer underestimated the load, a truck must return to “base” at midday, it reduces cost. As the day goes on break-downs of one sort or another may occur and being nearer to base allows greater flexibility. 

Truck Selection

Decisions . . . decisions. Using profitability information from the “profitability by truck” report is very helpful in deciding what drives profit in your business. Don’t forget to evaluate used trucks where you often can buy two used ones for the price of a new one. Engines, transmissions and wear parts, while expensive, wear out in both new and used trucks at about the same rate. For many “wear parts” new and used trucks require the same frequency of repairs. 

Shred Nations’ mission is to help independent shredding companies succeed. Our customers range from single shred-truck operators to regional shredding companies with professional, highly sophisticated managers. Shred Nations is, hands-down, the most effective, low cost way to get a direct flow of new customers.  

If you have any questions, please call our Membership Hotline today at (800) 747-3365, or click here to fill out our form. 

While many shredding companies dismiss the residential market, it is a significant source of growth and profit. In our analysis of the shredding industry in 2015, residential shredding is one of only two market segments that are growing at more than 20 percent.  What’s even more important is that there is little competition and proven profit-producing strategies.

What’s Driving Growth in Residential Shredding?

More than 9,000,000 home-based businesses, about 1/3 of the total number of businesses in the United States drive the growth of the residential shredding market.  Other growth factors include:

• Technology and the internet can eliminate the need to rent an office. They also leverage what one individual can achieve.
• Large companies commonly encourage working from home.
• The well-publicized need for confidentiality and protecting identities has made shredding a generally accepted necessity including for home-based businesses.
• Often the person requesting a residential shredding service is not spending their own money and hence the price for a shredding service is not the obstacle it once was.
• Following a death in the family, out-of-town relatives frequently have only one weekend to move the property of the deceased. Old files and records create needs for a shredding service often during a Saturday or Sunday. This is a recurring circumstance that can produce extra fees.

Creating a Profit Center in Residential Shredding

Residential shredding involves small quantities typically under 10 boxes. As an economic opportunity, this market must be approached carefully because homes are spread over a wide geographic area.  The residential opportunity offers both rewards and perils. With adequate planning and control it offers a high payoff.

Minimum Pricing

Focus should be fixed on residential markets that tie-in with routing efficiency. Consideration should be given to prime service areas located near the company’s facility, along heavily traveled corridors, near existing stops, and where there are clusters of existing customers. Cost leadership in the right geographical areas, can result in competitive pricing, with high profit. Residential customers are price-sensitive, making it important to strike a balance between their need for an affordable price and the business’s need for profit.

We recommend “Good neighbor minimum pricing” where your cost of service is lowest and “distance-based pricing” when your customer is outside your lowest cost area.  Minimum pricing can be related to concentric circles that radiate out from a center of operations.  You should develop differing minimums that reflect distance and drive time.

Surge Pricing

Uber, the world’s biggest taxi firm, has made surge pricing a part of their business and so should you. When there’s a snowstorm, Uber’s taxi fare to the local airport goes up.  Uber needs high surge prices to encourage a sufficient number of drivers with SUVs to leave safe and warm places and drive in storm conditions.  Some customers complain when taxi fare that is normally $50 becomes $400.  Uber explains that in the end it’s the consumer’s choice between having taxi’s available or to go without a ride.

In shredding we regularly encounter surge pricing opportunities when there’s a need for emergency service.  Often delivering emergency service requires changing trucking schedules and overtime. These costs can be offset with surge pricing.

Saturday and Sunday Pricing

Residential shredders encounter situations that involve shredding on a Saturday or Sunday.  One such example involves out-of-town relatives attending a funeral. Often they must move the deceased person’s household contents (including old files and records) over a weekend because they must return to a job on Monday.  It makes sense to quote high prices to disrupt a standard Monday to Friday work week.  A pricing example might be a minimum of four truck hours plus a premium. The customer can always choose not to pay the price.

Overage Pricing

On a daily basis, it’s not unusual to encounter customers who undercount the number of boxes for shredding.   Preparing customers about the importance of accurate box counts will alert them to the extra charges that can occur when everyone in the office learns “the shredding truck is coming.”  Extra boxes for shredding can materialize from every office.

Sometimes the overage charge is at the same rate as was quoted for the job.  Sometimes it’s a higher price to include rerouting of the truck and possibly overtime.

Collect the Money

The transaction is not complete until the money is in the bank.  Applications exist to allow phones to accept credit cards. Drivers can “cashier” at the end of each shredding assignment.  Riskier alternatives exist in recording credit card numbers and accepting checks, but it’s a poor use of time to chase a deadbeat who will never use your service again.

Delighting the Residential Customer

Your role is to help the residential customer write a personal story about the great customer service your company delivered.  You’ll create the word of mouth that becomes a foundation of success for great companies.  It’s simple. Just follow a three step process:

• Be a good communicator – Adopt the speaking style of a country preacher: Tell them you’re going tell them, tell them, and then tell them you told them.
  • For example, “You’ve made a great choice, our company will strive to delight you with our people and our shredding service.
  • Next when your driver pulls up, he provides a friendly greeting and introduces himself with his name and with pride he provides some of his qualifications and a business card.
  • When your driver is preparing to leave he says, “Thanks. I enjoyed being of service.  Please don’t forget name of company. If you are satisfied, please tell your friends and neighbors about us.”
  • Finally, a salesperson will call to follow-up.  “Were you happy with our service?  Can we do anything else for you? Would you mind recommending us (name of company) to your friends and maybe to someone you know in business.  Again, thanks for doing business with (the name of the company). 
• Deliver great service – Great service is setting expectations and then performing up to those expectations.  If, for example, you’ll miss your appointment, call as far in advance as possible and reset the customer’s expectation.
• Project that you care – Since your customer can shred up to 9 boxes, if they are short some boxes, encourage them to invite friends and neighbors for coffee and a shredding party.
  • Assure the customer you’ll address any fears about their documents. Show them their shredded paper and tell them it will be reduced to pulp in a recycling process.
  • Impress the customer that you care about the environment and highlight your company’s recycling efforts.

Make Residential Shredding Work for You

The residential market segment offers high growth, opportunities to delight a large number of customers with relative ease and high profitability based on reasonable pricing strategies based on distance from your center of operations.

To learn more about shredding opportunities or how to get a steady stream of vetted customers, call our Membership Hotline today at (800) 747-3365, or click here to fill out our form.