RFP Superheroes and How the Waste Industry Makes Their Money On Bad Management
It’s true that “there’s money in garbage”. Most waste and recycling accounts are picked up by national haulers that are publicly traded corporations. All you need to do is look at their published earnings and you see their profitability as clear as day. The independent haulers also fair well for themselves, usually making their windfall when they sell their business to the nationals. The hauler’s healthy margins come directly from the services they provide to you. It’s your money that’s lining their pockets.
There is no rocket science involved in getting low prices for your waste and recycling services. Typically, you get three quotes, then lie to the company that gave you the lowest quote and tells them that some other company gave you a price 10% less. When they agree to match your fictional pricing, you sign their agreement and voila you’ve saved yourself a bundle and have become a purchasing hero within your company. So why when you look at your bill are your prices so high? Why are other haulers and brokers promising that to save you money?
Myth or fact: Brokers get better pricing that businesses?
It’s without question that a good broker should be able to obtain better prices than an individual businesses or organizations. Brokers have an intimate knowledge of the industry and have put forth tremendous effort toward building strategic relationships. Considering the volume of business that brokers provide to the haulers it’s very reasonable to assume that a broker will get a highly discounted “wholesale” price. There are circumstances that deeply impact the amount of that discount. For instance, in a “franchise city”, that discount will be zero as the price for waste service is dictated by the municipality. Ideally, if this broker discount is significant enough, the client saves money, the broker makes some money and the hauler is a little less fat and happy. However, in the case where a significant discount cannot be found it is reasonable to assume that the brokers pricing may match or exceed the price that your superhero persona may have been able to negotiate from your hauler. What’s the point in managed service then? Read on, because it’s all about “the creep”.
So, you’ve put on your cape, beat up those nasty companies that were overcharging you, talked to your brokers and have come to the realization that nobody is beating the prices that you’ve obtained. Now it’s important to understand how your waste expenses got so out-of-control in the first place.
The waste industry members are a creative bunch that has spent the last couple of decades figuring out deceptive ways of padding your monthly invoices. In addition to regular price increases, it is common practice to add fuel surcharges, administration fee and a host of other junk fees (See my blog on “when to accept junk fees”). Once these have been added to your bill it’s almost impossible to remove them, due to the small print language in the contract that you signed. A typical $100 invoice can easily grow to $145 in the first few months of a waste contract term. From thereon you can expect that little things will continue to contribute to an ongoing upward creep. Usually never large enough to catch your attention or justify picking up the phone and raising cane.
Bad Management or Setting proper priorities?
I’m sorry to point out your faults, especially after your superpowers are now being recognized by those around you, but it’s very likely that the reason your waste bill got out of control in the first place is your fault. You or someone you entrusted with this responsibility failed at the management of this expense. This one line-item on your profit and loss statement is often a very negligible amount (usually under 1% of total expense). How much time should you be devoting to managing waste, when you have a boatload of other responsibility that must take priority? This is a question that only you can answer.
For those who don’t want to see their productive time sucked out by dealing with problematic trash issues, an Outsource Management company is the answer to avoiding junk fees, avoiding creep and overall lower bills. A strategic decision could keep you in that superhero cape for years to come.
Need more value out of your waste program?
Marshall Staiman, LEED Green Associate
President at Talismark
The author is an owner at Talismark, a national waste and recycling outsource management company that services retail and commercial businesses throughout the United States. He is Harvard Business School case study participant and lecturer, he’s been featured in Forbes magazine, and has placed on Inc. 500/5000 list of fastest growing companies two years running.
Talismark is a Waste Solutions Management Company that custom designs waste management programs to champion sustainability and compliance with measurable results. Creating a customer experience that captures value, reduces cost, and saves resources!