I grew up in the waste industry, working in the family business my dad started when I was in high school. I worked in the business all the way through undergraduate and graduate school, and my schedule had me working during the day and going to school at night. My dad started with 2 or 3 trucks, and when we eventually sold the business we had 40 trucks and 50 employees.
Route Value – Goodwill Assets in the Waste Industry
Many business owners in the waste industry are building their company for an eventual profitable sale. If this is your goal, it’s important to understand early on that there are three main components that determine the value of the company. These are: cash flow, equipment equity, and goodwill. Goodwill, commonly known as route value in the waste industry, can be a large factor in determining how much your company is worth. So, focusing on route value is an important business strategy to consider. Here I’ll provide six steps you can take to increase the route value of your business and recognize when opportunity knocks.
Important Business Tactics for Optimal Route & Goodwill Value
- Make sure all your containers and carts are serialized and tracked to a particular customer or location. Each can should have a serial number stamped on it, and you should have a software system for tracking this. When placing orders for new containers, make sure you request that serial numbers be stamped on them.
- Maintain records of proof of ownership for your containers (save your purchase receipts). This should include both invoices from where you purchased the containers, and the date of purchase.
- Be prepared for a tuck-in acquisition. If there is a competitor who drives past your stops on its route, it will view your stops as pure profit and very desirable due to the additional route density. So, keep in mind, even if your company is not highly profitable, it could be very desirable to a competitor.
- Understand the value of feeding the landfill. Another factor that can motivate a competitor to purchase your business is the value of the waste stream when it comes to filling up the landfill. They may want your routes so they can ensure a higher volume of waste tipped in their landfill on a regular basis.
- Strive for diversified locations. Make sure you take advantage of the opportunity to serve all types of customers along your routes, both residential and commercial. This means you must have the ability to handle all types of containers, from residential to front load and roll off commercial.
- Keep an eye on the markets and municipalities you serve. Stay up to date with knowing when all local contracts expire, because these are the opportunities competitors use to bid on contracts that you may currently have. For you, this could mean an opportunity to sell. Or perhaps this is a signal that you should fortify defenses for your business. This also means an opportunity to develop your relationships with town managers.
Commercial Credit Group, Inc. (CCG) maintains an active lending position in the waste industry, financing both equipment and containers. With our experience, we can talk with you about the goals for your waste business and present options you might not realize are available. Feel free to call us at 866-304-4367 to discuss how we can put our experience to work for you.