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The Hauling Industry's Rapid Rise: Insights Into Its Sudden Growth

Ever since the shutdown a slew of new competition has entered the fold and no territory is safe.

junk removal company open sign

I don't know about you, but my hauling company had two incredible years during the 2020 and 2021 shutdown. Thankfully, I saved all the additional (windfall-ish) earnings we made for a rainy day. I just didn't know the rainy day was going to come so soon and that the rain was rampant inflation. All of a sudden the entire landscape of the junk and dumpster industry had changed, negatively.

Let's dive into what happened, what's different now, why the hauling industry is experience this kind of growth, and what we can do to separate from the rest of the pack.

What Happened?

Most of the country shutdown early 2020 and nobody knew what kind of impact it would have on their business. Is my company an essential business? Do I give a damn? Oh right, I don't... But if my customers do, that will certainly have just as bad of an impact on my business. Luckily for the hauling industry, we were considered essential and it was business as usual. Only one positive caveat, in just a few weeks business was actually busier than before. People staying and working from home were inspired to do home renovation projects to make their space more comfortable. Tons of people started working from home for the first time and started new cleaning, and DIY projects.

Who are all of you people?!

The shutdown also inspired many individuals to try their hand in the junk removal biz. Their main job was either put on hold, or they found themselves with more time and access to a van or pick up truck and gave it a whirl. Before I knew it, there were 5 new small time competitors in my own town. The math is simple, even if these new competitors only took a small share of the available jobs, it wouldn't take long for the bigger players to start to feel it. And we felt it!

It was very frustrating. These new companies drove down the cost of service because customers now had more choices of providers to get rid of their junk. They were also doing anything they could do win jobs, even if that meant bidding really lowly. A common misconception about this business is how easy it is to make money. When you're just starting out and it's only you working (for the most part) and you're using your personal pick up truck, maybe you bought a trailer, and you're doing jobs making a couple hundred dollars per booking, you really think money is sweet and you're rolling in the dough. It's only later if you're able to create scale in the business and legitimize your operation that you begin to understand that the way you were running the company before is impossible to continue to do and that your expenses are beginning to pile up and you can no longer charge these unrealistically low prices.

The reality of the situation was that you were never really making the money you thought you were. It's an illusion that happens when you don't understand the value of your time. Take for example someone in this position and lay out how much they made and how much time they spent in their business, from the admin role to the actual laborious work being done. I could almost guarantee you that they're working more than full time and earning less than minimum wage.

If this is you, don't stress! It's okay to be one of these guys and I would suggest you try and get out of this constant hustle and grind as soon as possible. To devote your entire existence and time in to building something that will eventually give you that time back, and then some, is okay. But if you're working this way with no plan in sight for changing and getting yourself out of the daily operation so you can work on the business, that's going to be your challenge down the road when you want to spend more time with your family, or worse, you get injured and can't work on the job sites any longer. Then what do you think is going to happen to your business?

In addition to these new junk companies popping up came the contractors. Contractors from all different trades started to get in on the junk removal fun as well and started offering junk removal to their very own clients. It became an add on service for their clients to use while they already working on the house. It's honestly not a bad idea, but it does hurt our hauling industry and takes away even more customers from the pool of opportunities. All of a sudden you're now seeing landscaping trucks with junk in the back instead of lawn moving equipment, masonry trucks with decals on the side that say they haul junk as one of their services, and so on. These guys used to call someone in the hauling industry if their customer needed junk removal assistance. Now they put forth they extra effort and do it themselves because times are getting tough and the dollar doesn't go as far as it used to.

"According to IBIS World: About 11,000 firms are currently active in the U.S. within the junk removal industry, providing direct employment opportunities for over 200,000 people." (Not including companies adding junk removal to their service offerings.)

Why does it feel like it's coming from every angle?

Well that's because it is...

Let's break it down. The forces of business are coming down upon thee from every possible angle internally and externally.

  • Increased competition: Customers have more negotiating power due to more choices of providers.

  • Decrease in purchasing power: Customers have less disposable income compared to just a few short years ago.

  • Insurance policy increases across the board: General liability, auto, workers compensation, etc.

  • Fuel costs increased.

  • Dumping fees increased: From landfills, to incinerators, to material recovery facilities, all fees have gone up. My company experienced an increase in fees of about 20%.

  • Payroll costs increased: The power has shifted back to the worker. due to an incredibly tight labor market, especially drivers. Employees have never had more choices of available employers and can command a higher wage doing the same job. At my company we always paid much more than minimum wage for good, hard working people. After inflation started to take effect we decided to increase wages for everyone by more than 10%. We did this for two reasons: we wanted to help them combat inflation, and we wanted to keep the poaching at bay from some of local competitors.

  • Poaching from competitors has increased due to a tight labor market.

  • Interest rates increased: Loans, lines of credit, balance transfers, and other forms of borrowing has become more expensive.

  • New equipment prices increased: Trucks and dumpsters have become more expensive for a litany of reasons. One of the main issues is the cost of steel and the limited availability of it making these assets more expensive. For example, a dumpster cost my company $3,300 in 2019 and in 2023 it cost us to buy the same dumpster $5,700.

What we can do to win?

Firs thing I would suggest is to examine your margins... CLOSELY! You'll want to look at your service margins and make sure you're still making enough profit to cover all of these increased expenses, and then some! Remember, we're in business to make a profit, otherwise we'd be a charity, or worse, bankrupt. It's not possible for a company to face headwinds of increased expenses and make the same amount of profit without changing their pricing structure. This is the kind of thing that will sneak up on you really quickly if you're not in tune with your numbers. I speak with a lot of owner-operators who are in the truck all day busting their humps, getting home exhausted and don't have the energy to dive into their numbers. The next morning comes and they hit the road and repeat the cycle. They're doing the same amount of jobs and making the same amount of top line revenue, but the bottomline is being cannibalized. Most of the time they don't realize it until their bank account is one tough week away from overdrawing.

Stay ahead of things by knowing your numbers like the back of your hand and be quick to act and implement changes. For example at my company, once we noticed the drop in profit margin we took the time to take dive deep into the service offerings and financials. We noticed all of our expenses rising and our service prices remaining unchanged. We saw the writing on the wall. So in our main division, dumpster rentals, we adjusted the offering to include less for the customer but we kept the price the same. This increased our margin on the service and covered the additional costs we were faced with. We still sold just as many dumpsters as the year before, we didn't lose any customers, or at least we didn't notice any impact, and we actually made the most revenue in our company's 9 year history.

All while this was going on we ended up acquiring a business in the town directly below us because they couldn't keep up any longer. It was a small outfit and the owner simply couldn't achieve the scale required to grow the business and cover his bills. We were able to make this acquisition because of the changes we quickly put forth. Even during difficult times we had the capital to make it happen.

In addition to this you've got to keep delivering top of the line, white glove service to your clients. Over-deliver and really WOW them with your communication and service transparency. Keep delivering more and more value and stay steady.

Difficult Times Create Tough People

Tough times don't last forever. A lot of winners are made out of these challenging periods and prosper later on when the economy turns around. Keep plugging away, be resilient, be creative, and stay motivated!

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