One of the most common challenges independent haulers face is managing the financial side of their business. Over the course of my many years in the banking and waste industries, I’ve seen countless small businesses and independent haulers struggle financially.
While many independent haulers run profitable businesses and are successful, a significant number of others are not. In my experience as a banker, most haulers that struggle do so for similar reasons. They simply don’t manage and understand their financials well enough to maximize profitability.
Below, I have listed seven of the most common reasons haulers struggle financially:
- The owners are great at working “in” their businesses rather than working “on” them.
- They do not have a defined strategic plan.
- They do not prepare annual budgets.
- They don’t review their financials until it’s time to meet with their tax preparer.
- They don’t know which customers are profitable versus those who are not.
- They don’t analyze the relationship between revenue versus costs.
- They do not use a disciplined pricing strategy.
As the co-founder of an independent, family-owned waste hauler, I’ve experienced, firsthand, the benefits of not only utilizing these seven points but also the pain of not doing so.
It is easy to fall into the trap of being so focused on running the day-to-day business that we don’t allow any time for planning or strategizing. Those who operate this way are destined to struggle on a regular basis.
I call these owners firefighters. They show up for work every day and simply fight whatever fire is in front of them at the moment. They don’t realize how much stress and frustration could be eliminated if they would only begin working “on” their business rather than in it.
Creating a strategic plan would provide them, and all of their employees, a roadmap for the future of their company. Developing annual budgets, and reviewing them no less than monthly, would provide a financial benchmark to determine how the business is doing.
Once owners develop their strategic plan and budget, the next step is understanding the numbers of the business. It’s not enough to simply know total sales and if you are making money or not. You really need to know what drives the bottom line.
What are your largest expenses? How can you manage those expenses? Who are your largest clients? Do any clients represent a significant percentage of your revenue? If so, what percentage?
After understanding your income and expenses, you need to know which customers are profitable and which are not. Doing so requires understanding your operating costs and having a disciplined pricing strategy.
How do you price your services? By the yard? By weight? By time or distance? By undercutting your lowest competitor? By a combination of each of them? All of these can impact the profitability of a client and your business. However, it is critical that you understand your costs to service each client in order to ultimately determine their profitability to your business.
Most business owners do a very poor job in this area. They rarely know, with certainty, who their most profitable clients are. In cases where they simply price below the competition, they often take on money losing clients just to beat the competition.
I see this on a regular basis—especially when bidding on larger accounts. Contrary to popular opinion, the largest revenue clients are not always the most profitable. In some cases, they are actually losers.
Our largest clients tend to be called on the most by our competitors and are often the most demanding and price sensitive. Therefore, I think it is critical to pursue clients more interested in non-price driven relationships than those who only care about pricing.
If you want to find the “Cash in your Trash” business, I encourage you to embrace the seven points outlined above.
Bill White has worked and served the banking industry for more than 30 years. He founded a bank holding company at age 33, and later, after selling that company, become president and CEO of another financial institution. White and his family have served the waste and environmental industries for many years. They started Estes Waste Solutions in Jeffersonville, Ind., in 2014, which they recently sold, and they currently serve both the Louisville, Ky., and Southern Indiana markets. As a speaker, White has presented at numerous events and to many organizations and groups around the country, including WasteExpo, the Indiana Bankers Association, the Kentucky Bankers Association, Bank Director Magazine, Keefe Bruyette & Woods and many others.