How to get a Higher Price for your Waste Management Business
These simple steps can help you increase the value of your waste management company.
As society strives to make greener choices and preserve our environment, the waste management industry continues to grow and evolve. Covering everything from waste disposal to remediation services to site decontamination, the waste management industry is responsible for over $86 billion dollars in revenue annually. With over 24,000 firms in the general waste management services sector, experts are predicting a 5% growth rate per year through 2018, making the next 3 years the perfect time to begin preparing your waste management for the next step. While this may feel counter-intuitive, the best time to sell a business is when it is trending upwards financially and the industry is projected for growth. This type of security attracts buyers and makes your business a low-risk business endeavor, helping you get a higher sales price for your company.
Within the past 20 years, America has placed a higher value on preserving our planet and this has drastically changed the way we dispose of our waste. After decades of simply packing our trash into landfills, industry leaders and environmentalists realized that we could not continue on this path forever and needed to restructure the way we handle our garbage. Greener initiatives have opened up the waste management industry to new niche markets and endless growth possibilities, all with relatively low overhead costs and easy-to-manage safety practices. If you own a business in the waste management sector, someday, you will think about selling your company. To get an idea of what factors are taken into account when valuing a waste management business, see the formulas below. Please remember that only a professional business broker can tell you the true value of your business and that these numbers are only to serve as a guide.
- 3x SDE, 5x EBIT or 4x EBITDA
If you are still unsure of when you will be ready to sell your business, there are several things you can do to prepare your business for sale by raising its value, ultimately getting you a higher sales price than you would have gotten otherwise.
America manufactures 251 million tons of solid waste every year, and about 87 million of that gets recycled. This is a huge step forward since 1980, when only about 10% of our solid waste was recycled (currently at 34%). Recycling has become a household initiative and nationwide responsibility. Companies who do not offer recycling services are severely limiting themselves and missing out on a generous stream of income. One of the main benefits in offering recycling services is that not only do clients pay for pickup, but your business can turn the recyclables in for additional cash. If you are considering adding recycling services, single stream recycling is a great option. Initial costs include vehicles, carts and upgrading your processing plant but the advantages are reduced accidents, reduced collection costs and greater fleet flexibility.
Nothing attracts a buyer quite like a multi-year contract and in this industry, municipal contracts are king. Municipal contracts lock your business in for several years of guaranteed revenue and a steady monthly cash flow to help your financials. Contracting with a municipality guarantees a large and 100% reliable client base, stability, and generally, not much client fluctuation since the city contracts for the residents. The only downside to municipal contracts is that they can be difficult to break into. If you are not currently contracted with a municipality, try offering upgraded services in addition to standard services during the next bid. Adding a service such as electronics recycling or bulk waste pickup can set your company apart and help you win the bid.
The internal organization of your business is crucial and having the proper framework can help you face common industry challenges. First and foremost, building a team of outside sales representatives will help drive up your sales and keep a consistent cash flow (especially if they secure multi-year contracts). Even just one or two sales representatives can make a difference, and take tasks off your plate so that you can focus on running the business and planning ahead. Another department to focus on developing would be route management. The most common reason for lost business is due to route mistakes, so having a team of route managers to enforce timeliness, accuracy and coordination can help you retain the business you have worked hard to get and build a positive reputation in the community. Finally, one of the biggest challenges faced in the waste management industry is driver retention. Like the logistics industry, waste management businesses need drivers more than drivers need them so it is important to find ways to retain these valuable team members. Good wages and benefits are a surefire way to retain your drivers. Another option is to design and implement a driver retention incentive program. Reward your drivers with bonuses or incentives for milestones such as 100th route, 5 year anniversary with the company or even hire date anniversaries. Every employee wants to feel valued and appreciated and these small perks can help keep them with you for the long run.
In an industry that covers such a vast need, waste management has infinite niche markets a small business could break into. Upfront costs, such as equipment, can be hefty but overtime, your business can take advantage of a market that may currently only have 1 or two providers and a large need. One particular niche that is gaining traction in this field is food waste management. Food waste has become a major issue in the waste management sector with every human in America contributing about 475 pounds of waste per year! This equates to about 70 million tons of food waste annually, making food the 3rd largest component by weight in our landfills. Offering food waste services such as composting, can not only help reduce our landfills and CO2 emissions, but can help your company emerge as an industry leader and increase your revenue stream immensely. Very few waste management companies offer composting services but it is definitely something that clients are interested in, especially as our society moves towards global preservation and the industry searches for landfill alternatives. Being recognized as a green company and securing another steady revenue stream is something that buyers look for in waste management businesses.
One of the best ways to increase the value of your waste management business is to make safety a priority. The industry is trending towards new safety initiatives and automating equipment to reduce overhead and accidents. Commonly used equipment, such as sorting machines or single strain machines, are now available in automated form so that business owners can reduce the risk of accidents, save money on overhead and increase productivity. Programs rewarding employees for accident free periods are also effective. Consider rewarding employees with a luncheon or an early release day for 90, 120 or 365 accident free days. Hang signage throughout your plant reminding employees of safety practices and ensure that all employees are properly trained and licensed before operating machinery. Having good safety measures in place shows buyers that your business is organized and accidents are one less risk they have to worry about.
If you have thought about how to increase the value of your waste management business prior to selling, we hope these 5 tips have helped you. The economy in the Southeast is booming right now, and buyers are looking at Charlotte as a hotspot for acquisitions. If you are thinking about selling your business, the first step is finding out how much it is worth and we can tell you with a no-cost, no-obligation valuation. Even if you are 6 months to a year away from selling, taking these steps now can help you increase the sales price for when the time is right for you.