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Shredding

Challenges and Opportunities for Shredding Companies

By David R. Powelson
challenges and opportunities

There is no denying that there are giants roaming in the shredding industry. How we choose to compete against these giants could mean choosing between success or failure.

This article explains some of the challenges that are being presented to independent shredding companies, and some opportunities on how to come out on top.

CHALLENGES:

Reduced Paper Usage: Moody’s 2016 Paper Industry Outlook indicted “paper demand in mature North American markets is expected to continue to fall by approximately 5% per year for the next several years. This decline is driven by individuals and businesses increasingly turning to digital alternatives, such as tablets and e-readers.”

If correct, five consecutive years of 5 percent decreases is a one-third reduction in paper demand.  This will negatively impact long term purge business and the daily accumulation of paper in offices.

Consolidation of the Shredding Industry:

Market Analysis (includes estimates)

CompanySales ($ millions)Percentage
Stericycle/Shred-it$79046%
Iron Mountain (IM)23814%
Recall (to be acquired by IM)965%
Subtotal$1,12465%
Up to 1,500 Shredders60035%
Total$1,724100%

The market size of vended shredding companies is not authoritatively known. The table assumes 1,500 smaller shredding companies average $400,000 in annual sales.  Most local shredding companies operate only 1 to 2 trucks.

It’s very unusual for the top two companies of an industry to have a 65% market share- especially in a low capital-entry business.   The reason for this is grounded in economics.  As market dominant firms add their last groups of customers, operating costs grow exponentially.   For this reason and to satisfy their Wall Street and investor stakeholders, prices must be high.

This is precisely where local shredders make inroads and an equilibrium point is established – often this equilibrium is at 50% market share.  If smaller companies keep their operating costs down and their prices for shredding services low, it may become economically impractical for the top companies to maintain their current market share.

OPPORTUNITIES FOR INDEPENDENT SHREDDING COMPANIES

Untapped Markets 

Nationwide there are more than 5 million companies with fewer than 100 employees that employ over 40 million people – about 40% of the total U.S. work force.   There are also more than 9 million home businesses.

None of these markets are in the direct path of the two dominant companies.  It will require highly efficient routes to earn profits in this growing segment of the market. In this setting the term “local service area” has real economic importance for the smaller operator.

Competing with Dominant Shredding Companies

It seems that the bigger a company gets, the less trust it places on its sales people.  Almost no one in a dominant company will be given authority to deviate from a price list.  Also, it becomes harder to get special services for a good customer.

When a small company empowers its salespeople to be flexible and make decisions, it’s easy to out-perform a dominant company in both price and service.

Why Disneyland is known as “the magic kingdom” is that it’s a big company that actually delivers great personalized service.  Most big companies lose their magic in a bureaucracy of operating procedures and rules.  The “magic trick” is make sure your company never stops enthusiastically delighting its customers.

A Zero-Sum Contest

Zero Sum Game

A Zero-sum contest is a situation in game theory in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero.  For example, if one company wins a customer, the second company loses the opportunity to service that same customer. No increased benefit results – it simply changes hands.

In practice neither a small or dominant company can afford losses, but a small company can achieve lower operating costs and in many cases “win” business with a bid that is lower than a big company is willing to go.

People do business with people, and business also can be won or lost based on personalities and sales skills.  Following-up and being “local” often counts but often not as much as a “competitive price.”

In summary the big opportunities are:

  • New Markets – focusing on businesses with fewer than 100 employees.
  • Focusing on route efficiency
  • Preparing for rapid growth
  • Offering competitive pricing and service where it makes sense.

To learn more about shredding opportunities or how to get a steady stream of vetted customers, call our Membership Hotline today at (303) 962-5572, or click here to fill out our form

Categories
Shredding

Growing with Relative Ease

How to Grow Your Shredding Business with Relative Ease

By David R. Powelson

Re-thinking how your shredding business can grow in our current industry climate can be one of the most profitable uses of your time.  Because there are essentially two schools of thought, you can:

Growing with Relative Ease
  • Make it easy for customers to buy from you – This method is in alignment with what customers prefer.  They prefer to be “in control.”  It’s also in perfect alignment with what small companies can afford.
  • Develop a comprehensive market and selling program – This includes various methods focused on convincing prospects to buy from your company when their timing compels them to make a purchase decision.

This method “fights the current” and is unnatural because customers are typically suspicious of sellers. They fear being manipulated and making a wrong decision- thus “buyer’s remorse” is something they dread.   Proponents of this school of thought are quick to point out that a great sales program overcomes these objections.  It’s an uphill battle, hugely expensive and, in fact, the outcome is uncertain. In addition, tracking your costs vs. rewards can be challenging.

The bottom line for small companies is that successful expenditures must provide an immediate return.  It’s why being easy to buy from makes sense.  In contrast, big companies who can afford extremely large advertising budgets (blimp advertising) and other image producing methods can afford to “roll the dice” and wait to see what method works best.

Big companies advertise and conduct public relations programs to develop their brand.   Eventually a customer wants their product or service and makes a connection to the “blimp” and heads to their “branded” store to make a purchase.    Big companies also are eager to finance “face-to face” prospecting with highly paid salespeople.   Their investment in building a relationship is easily measured in the thousands of dollars.   There are no guaranteed results.   Why? Because a paradigm shift has occurred.

  • Today, 90% of buyers turn to the internet first.   When it’s time to buy, buyers prefer the internet since it gives them unbiased information and a level playing field. Customers want to be in control of their decisions.  They perceive sales techniques as “manipulative.”   The role of conventional marketing, advertising and direct selling are, by design, a way to change perceptions.

Buying versus Marketing & Sales – an Economist’s View

In the buying method, an economist views the cost for information for an “immediate buyer” as a finder’s fee. We here at Shred Nations like this method because the majority of our partners are local, independently owned document destruction providers. Because 80% closing rates are common with Shred Nations, the actual financing source of the finder’s fee is the buyer – not from the cash flow reserves of the business itself.    If accountants and economists could agree they would classify the finder’s fee as a “cost of sales.”   Both do agree the cash flow advantage from using the buying method is superior.

The timing of when an operating expense is taken is the major distinction between a “finder’s fee” and marketing and sales costs.   Finder’s fees are incurred concurrent with the sales transaction.  Marketing and sales costs are front-end loaded, more expensive and slower in producing quantifiable results.  For example, the costs of the “blimp” or prospecting with high-priced sales people occurs months or even years before any economic benefit is received.  The cash flow drain is normally huge for an extended “sales process” of this nature. If you are a big enough organization, these costs are expected and planned for annually.

Hence, this way of advertising suits a big business – but it is potentially disastrous to a small business’s cash flow.  The reason is simple: the playing field is not level when it comes to available resources.  It also explains why big businesses are fond of starting out a contractual relationship with a customer with extremely attractive terms, essentially losing money in the early months – to create the illusion of a lower overall price. Direct marketing and inexpensive referral services can drastically alter the playing field for the smaller business. Shred Nations can be a great resource for this.

About Shred Nations

Shred Nations is, hands-down, the best continuing source of real-time information about immediate buyers for shredding services.  Shred Nations does not provide sales leads.  We supply something far better.   We supply “sales-ready” referrals which include the name, contact information, and type of shredding service needed by a buyer with an immediate need for a shredding service in your specific company’s service area.

Prices start at $10.99 for sales-ready referrals. Average shredding service providers invest about $200 per month. The average return on investment is 4 to 1.  Referrals can be focused around your base of operations, along transportation corridors or in clusters to help augment profit by creating route density.  After becoming a network member you may drop our service without cost at any time, and you are entitled to a free replacement of any defective “sales-ready” referral.    Your key to business success is your willingness and ability to be “extremely responsive” to the needs of every immediate buyer. There is no better time to join this network.

If you would like more information, give us a call on our Membership Hotline today at (303) 962-5572, or click here to fill out our form

Categories
Shredding

Winning Against Giants

David and Goliath is an old story about how an ordinary man overcame the odds and won against the awesome image and might of a giant. In the Bible story the Philistine giant expected a match-up with another warrior outfitted with body armor, a shield, a javelin, a short spear and a sword.

Goliath looked down at the shepherd boy and took his appearance on the field of battle as a personal insult. Yet minutes later he was stricken in the forehead from a great distance by one of five smooth stones. Shortly thereafter Goliath’s head rolled in the dirt. In today’s terms this was an asymmetrical contest.

How to proceed against giants hasn’t changed over the years. They have giant strengths, for sure, but they also have giant weaknesses. Yet the greatest truth of all is that underdogs, armed with courage and confidence, possess awesome strength too.

Lets talk about how independently owned shredding companies can win in a shredding industry now dominated by Iron Mountain and Shred-it. Shred Nations’ mission is to help independent shredders be strong and successful in this new era.

Choose to be great (not BIG)

Success and greatness are a choice. Long term and daily goals are essential to being great.   It’s easier to build around core values. However you chose to do it, being great means “unified and focused.” Here’s an example:

Core Values of Shred Nations

  • Unity of effort is built on respecting fellow employees and all other people we encounter, earning trust, demonstrating integrity in what we say and do, and on communicating effectively.
  • We delight our customers thereby creating loyal advocates for our business.
  • We project enthusiasm, fun and passion as we go about performing our job responsibilities.
  • We are committed to continuous improvement and provide visibility to key metrics through a formal reporting system.
  • We are committed to building the best place to work for the best people.

Giants need rule books and policies, contracts and lawyers. They have hierarchies and layers of people. They become bureaucracies. In the end their bureaucracy kills discretionary effort of front-line employees. Gradually, overhead takes over. This requires higher and higher prices. Caring about customers becomes less and less important. Contracts become a substitute for great service and personal contact is lost. Yesterday’s contacts move on.  GIANTS can’t build successful personal relationships.

No matter how bad a GIANT’s service gets or how many conflicts over agreements, you can count on a public relations image that they are “service oriented” and operate with “integrity.” It makes sense to maintain a file of a giant’s public relations foibles.

The quick eat the slow.  The big think they eat the small.

Choose to act fast with every customer opportunity. There’s absolutely no way a big company can care about customers like an entrepreneur. Speed and responsiveness, saying thank you, and telling your customers how much you value their business is key.

People do business with people.  A GIANT relies on “Image”

Small business and giant businesses alike have a need to spread a message about their business.  Giants spend millions, and small shredding businesses must rely on word of mouth.

Refine your elevator speech:  “So what do you do?” a stranger says.

“My company, ABC Shredding, is the friendliest and best shredding company in the entire region.  We help businesses and individuals protect the confidentiality of their records by shredding paper in our mobile truck at their location.  We deliver personalized service.  Our professional drivers are key to our success.  Our customers can be assured of the opportunity to witness the destruction of their records.  Our drivers make certain our customers are delighted and they always thank our customer for their business.   Later we routinely send a written Certificate of Destruction. We’d sure like to add you to our list of happy customers.  Is there a good time we can meet?   Thanks for talking to me, here’s my card.”

Drivers are key.  They meet people every day and can even drop-in at the office next door while servicing a neighboring business.  They should become expert in delivering the company’s elevator speech, can hand out business cards and can become good-will ambassadors.

GIANTS’ advertisements costing millions of dollars telling readers they protect treasures and are trusted to store huge volumes of records for Fortune 500 companies.  The impression they create can’t measure up to the effectiveness of a personal message delivered by an authentic spokesperson.

Don’t be a sheep, you’ll get eaten by wolves

The courage and confidence of running a successful business is unbeatable.  If that’s not you, fake it until it’s true.  Sheep get eaten.   Your personal positive attitude is completely under your control. But back it up with performance.

Growth, Cost leadership, and Profitability will one day help you leave your business having achieved your financial goals. On a personal level this requires iron-willed, effective leadership.

Growth

The average business loses 15% of its customers per year.  This implies to grow at 10%, requires huge amounts of new customers.   The best internal method of obtaining referrals is referrals from existing customers. Organic growth is another winning strategy. Some successful companies routinely put extra security containers in each truck. Others have their drivers stay alert for new opportunities during each visit. Friendly drivers who consistently thank customers, are key. Their bond with customers can be priceless.

If these methods don’t provide sufficient growth, you’ll have to go outside.  Here, Shred Nations is hands-down the best and most effective, low cost external way to get a direct flow of new customers.  Access to customers with an immediate need for shredding in your market area cost from $10.99 to $42.99. Shred Nations calls these “sales-ready referrals.”

In comparison, to achieve growth through conventional sales programs costs from $700 to $1,000 for each new customer.   This includes advertising, customer relationship management, systems costs, and a sales force.

Cost Leadership through route density

The key to low cost trucking is route density.   Best results come from building routes in your own neighborhood, building along transportation corridors, and building in clusters.  Your drivers are your best sales force, Shred Nations can help pinpoint where referrals come from, and concentrating sales effort in prime areas work – either apart or as a coordinated program.

Profitability

When every customer is a profit center, every route a profit center, and every truck a profit center you’ve arrived. Nothing like this happens by accident, it is a result of planning and intentional effort.

Use of Contracts

You can be sure giants will make long term contracts a centerpiece of their marketing effort.  It allows them to cut back on service, raise prices while keeping a hand-hold onto their customer’s revenue.

Small companies should learn from this. They should have friendly “letters of agreement” detailing each party’s responsibilities. The term of agreement should also be a number of years, and if agreeable they should be automatically renewable.   This serves to protect your customer base.   Liberal use of the legal term “interference with contractual relations” should discourage GIANTS from poaching your accounts.

Summary

Like Goliath, a business giant will be insulted when you compete for business effectively and win.

Shred Nations is like a precisely-guided smooth stone and belongs in your marketing program. We supply independent shredding companies a flow of new customers.  Our sales-ready referrals are like a perfect pitch in baseball.  There’s no guarantee you’ll hit every sales-ready referral out of the park but the batting average of network partners as a group is .810.

We’re here to help, call our Membership Hotline today at (303) 962-5572, or click here to fill out our form

Categories
Shredding

Optimizing Your Revenue per Truck

A Critically Important Metric – Revenue and Profit per Truck

by David R. Powelson
mobile-shredding-truck

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. 

revenue per truck illustration

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

route density

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

route density

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 (303) 962-5572, or click here to fill out our form

Categories
Shredding

Residential Shredding: A Source of Profit

increase sales

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

route density

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

Shred Truck

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

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

on demand marketing

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 (303) 962-5572, or click here to fill out our form