Growth Patterns

Many document destruction companies have received their start built upon this same premise. Although a fully outfitted mobile shredding truck costs a good deal more than an empty panel truck, the principal is similar.

A 2005 survey of secure shredding companies conducted by SDB magazine reaffirmed the entrepreneurial roots of the industry, with 54 percent of the more than 90 respondents indicating that they started their businesses with $99,000 or less.

ON THE ROAD

With self-employed entrepreneurs creating so many of the start-ups, a decision usually has to be made early on whether to buy a mobile shredding truck or a stationary shredder and lease plant space.

Among start-ups, an exception to this situation can be a recycling company or a moving and storage company that has some floor space to devote to a secure plant. Such companies can almost certainly benefit from using existing trucks to pick up documents and using existing floor space to locate a stationary shredder.

But another class of start-ups are attracted to the "Two Men and a Truck" idea of low overhead combined with a commitment to serve customers at their location.

Mark McKenna of Shred-Tech, Cambridge, Ontario, Canada, has helped that company develop a sales and marketing program specifically targeting start-up companies and prospective customers considering entering the secure shredding business.

McKenna, who works from an office in Durham, N.C., says individuals researching the business should be aware of the different business models. "We tell our customers that there is more than one way to skin a cat," says McKenna. "It’s a sales-driven business, so the key is successfully selling your service to the market."

Even so, Shred-Tech has found that most start-ups gravitate toward the mobile shredding model as a starting point, often for the reason spelled out in the SDB survey. "Part of that decision is their financial strength when they get into the business," he notes.

Such start-ups can even be hard-pressed to buy a new shredding truck, which is why manufacturers can offer trade-in models and also offer help securing leases or financing.

Overcoming the lack of capital barriers through financing assistance and by offering pre-owned models has been part of a Shred-Tech program that, according to McKenna, helped the manufacturer put 26 start-up companies into the industry in 2005.

That program also includes a start-up guidebook and Sample Business Plan that helps spell out the advantages of the on-site mobile shredding model. "On-site shredding offers clients the peace of mind of knowing sensitive information has been totally destroyed in their presence," a portion of the guidebook reads. "The shredded material is compacted and mixed with other data, making it virtually unidentifiable. The combination of security containers and on-site shredding provides an unbroken chain of custody until the material is destroyed."

Secure shredding firms that start with either exclusively a plant-based or a mobile truck-based business model will certainly be tempted to "negative sell" against the other business model as they seek to gain customers and build market share.

But an increasingly well-established pattern is demonstrating that a growing company is almost certain to offer both types of shredding services as they expand geographically or just within their own market region.

Such a pattern would seem to indicate that start-up companies may be wise to rein in negative selling tactics in order to cut down on the awkwardness that may occur when they diversify their businesses in the future.

RAISING THE ROOF

The 2005 SDB survey revealed that more than one-third of respondents offered both plant-based and mobile shredding services. Additionally, some 57 percent of respondents planned on adding stationary shredding equipment and a nearly equal number—56 percent—planned on adding mobile shredding trucks. Almost certainly, some of this planned buying involved companies "crossing the divide" to add one business model to the other.

For companies that start using mobile trucks only, expanding to add plant-based services can seem a little daunting. The new capital outlays combined with a new layer of monthly costs can be considerable.

On the capital side, an in-plant system can include the obvious additions of renting or buying space combined with capital equipment that includes a shredder, a baler, conveyors and material handling equipment.

But the monthly budget will carry a lot more than just these fixed assets. Additional line items will include electricity, personnel, security costs, baling wire and other maintenance and operations costs.

Commonly, a company that started out by operating mobile shredding trucks will have to be confident in its ability to keep growing and convert clients to a plant-based model if it is going to offer plant-based shredding.

Additionally, such business owners will have to recognize the other advantages that can be accrued by adding in-plant operations. "A plant allows you to bale your own paper and get good re-sale value on the paper," notes McKenna, who adds, "But it does certainly open up other opportunities."

Among those opportunities are doing greater volumes of work with fewer drivers who are simply picking up documents rather than spending the time to shred them on site.

Another opportunity is product and electronic storage media destruction. "The mobile units can certainly destroy such things, but from our standpoint we recommend not contaminating paper with small amounts of such material," says McKenna.

The plant based system may also increase a company’s ability to invoice and bill a job promptly and accurately. Working from an office located near the plant can help by simply providing a "home base" for billing and invoicing that can be lacking in a mobile operation. Additionally, it provides a place where route drivers who have questions can call in for answers.

This can be a helpful contrast versus mobile-based operations that try to bill on the spot at job sites. While this sometimes can go smoothly, at other times it can lead to problems if a glitch or unanswered question at a job site delays the issuing of an invoice. This can be followed by a hectic schedule the next day that allows the entire matter to quickly be forgotten.

Whether in-plant systems bring added hassles or solve existing ones, they become a necessity for many companies who have built a critical mass of business that becomes increasingly difficult to service on-site.

Typically, clients who are happy with a company’s service can be convinced that the same company can be trusted to unlock their containers off site and shred them at a secure plant. However, the clients may wish to take a tour of the secure site or to view the shredding of their own files via a closed-circuit television system or other Web-based video system or even at a plant viewing room.

A survey conducted by the National Association for Information Destruction (NAID), Phoenix, Ariz., in 2003 also found that a majority of its respondents (74 percent) conducted both mobile and plant-based operations

According to a presentation of those survey results made by NAID Executive Director Bob Johnson at the 2004 NAID Annual Conference, the survey also showed that the "fastest-growing companies offer both plant-based and mobile shredding services."

Most companies find that offering both options keeps them "in the game" for a variety of business opportunities, ranging from small on-site purges through to serving national accounts as part of a co-operative network.