22 Factors that cause hauling companies to lose money and miss budgets

No matter how difficult your business is at times to manage, fundamentally, the waste business is really very simple. When you compare it to other businesses, our variables for success and failure are a relative small universe.  Consider a company like Apple Computer.  Not only do they have to market a superior product that works as expected, they also have to be on the leading edge of technological improvement.  Then there are the service issues and the army of customer and technical service representatives.  Don’t forget the ever-changing customer tastes.  There is a myriad of other factors that management must consider: foreign governments, currency exchange rates, security, activist groups and their investors, to name a few.

In a waste hauling business, when you look at our revenues and expenses, we have fewer factors to manage: labor, trucks, containers and overhead. If your keep an eye on the major expense areas and use meaningful metrics, you should move from the larger crowd to a smaller, more elite group.  It has been my experience that the reasons most waste companies lose money or miss their budgets are readily identifiable and, with proper analysis and a corrective action plan, can be turned around.  Below are some of the primary factors that lead to financial underperformance.

Revenue

1. Rates are underpriced for the services provided to the customer
2. Rates do not accurately reflect the SG&A expense or the minimum acceptable profit
3. No or ineffective fuel recovery fee

Truck Labor

1. Drivers missed their units/hour target
2. Excessive maintenance downtime
3. Driver and helper turnover is excessive
4. Insufficient number of reserve drivers
5. Overtime exceeding the norm
6. No performance-based incentive pay plan

Truck Variable

1. Poor preventive maintenance program
2. Poor tire management program
3. Vehicles in operation beyond their useful service life

Truck Fixed

1. Too many vehicles for the volume of service rendered
2. Extraordinarily high insurance because of accidents and injuries

Disposal

1. Heavy-weight customers that exceed the budgeted pounds/unit
2. Rates not accurately reflecting disposal expense

Container Variable

1. No proactive and scheduled container maintenance program

Container Fixed

1. Too many unused containers for the current level of business

Sales, General & Administration (Overhead)

1. Typically too many office and sales employees for the current level of business
2. Excessive spending on non-operating expenses

Profit

1. No determination on acceptable profit for the asset base
2. One or more of the above

While the above points are overly simple, it captures a plurality of revenue and expense issues faced by most waste haulers. If you are a hauler who faces financial and operational underperformance, you must first recognize your cost structure with metrics, asset base and their relationship to pricing and return on assets. Next you need to develop a recovery plan that drills deeply for the root causes before your company can obtain the operational performance and profitability that distinguish it from the rest of your competitors. Then you can receive an adequate return on your assets and the risk that you undertake to provide quality service to your customers.

I hope this is useful to you.