Targeted Growth

The growth of your business always depends on the strategies and the actions that you take to make it happen. Sometimes, growth is easy to come by. Other times, it may be 200 miles away in Lubbock, Texas. Planning and implementing a growth strategy to expand your shredding business into a new market before you are even close to reaching the limits of your current market takes courage. In this industry, courage has made many people wealthy.

Some of the best opportunities for growth in the document destruction industry reside in tier-three markets—remote, small cities and suburban areas with populations of less than 200,000. These markets have not yet become a part of the landgrab by the major industry players, whose primary focus has been on developing and growing in the top 100 markets. Tier-three markets can be less competitive, less expensive to operate and easier to grow than a major metropolitan market.

An excellent way to tap into these opportunities without bearing all of the expenses and risks associated with a business start-up is to locate a tier-three market reasonably close to your current business, study its potential and open a satellite operation. Parking a shredding truck and hiring a local employee is the easy part. Managing and growing this fledgling business from a distance brings a new level of complexity to your established business. When implemented correctly, a market expansion will accelerate the growth of your company, increase your profitability and increase the value of your business.

Take the time to thoroughly research the potential of the market. Better yet, take the time to research several markets and pick the best one. Ideally, you are looking for a niche market, a piece of geography with low competitive pressures that you can apply your experience to and conquer in a short time. There are more than 160 tier-three markets in the United States that have populations raging from 100,000 to 200,000 people.

Take advantage of the complimentary services a list broker has to offer to determine how many business prospects are in the target area. When looking at new markets, we look for the total number of businesses with 10 or more employees (excluding eating and drinking establishments) within a 50-mile radius of the city center. List brokers often will provide you with this data for free and may even provide additional detail, such as business counts by industry segments. This is where having a good relationship with your list broker pays off (we have an outstanding relationship with ours; e-mail us if you need a referral). Knowing how many hospitals, health care facilities, law offices and accounting firms are in your new target market will give you a better feel for its potential.

If you are satisfied with the market potential, now is the time to make contact with key customer prospects to gather market information. As an example, you may contact the environmental services director at each hospital for the sole purpose of getting their insights on the local document destruction industry. You can also ask them when their contracts for services will go out for bid.

Develop a database of key prospects in the target area early, so you do not miss out on any important opportunities, regardless of how far off they may be.

Next, it’s time to determine if you can compete successfully in this market. Study the competitive climate carefully. Check the local yellow pages listings and search the Internet for competitive advertisements. Too much shredding capacity in a small market, indicated by the presence of several young document destruction companies, may make this market unattractive to you because pricing pressures could be present. Remember, you are looking for a market you can grow from afar with less resistance than a big-city market.

Consider whether you can you start servicing your new market with limited service from your existing facility. I know of a New York metropolitan document destruction company that provides on-site service to Syracuse, N.Y., which is about 200 miles away, once every two weeks. Working a route through Binghamton, N.Y., on their way north, the company’s crew overnights in a motel that is directly billed to the company. After eight hours of rest as required by the U.S. Department of Transportation (DOT), the crew works a second route through Albany, N.Y., and back to New York City. For little more than the cost of a motel room and added fuel, this shredding company has gained a foothold into the under-vended Upstate New York market. Overnight routes are an excellent way to extend your service area on a limited basis while you test the viability of a new market.

In the document destruction industry, satellite operations are commonly used to expand service into a new city. An on-site shredding truck is parked in a secure self-storage yard and staffed by a local driver with a company cell phone. A small console and bin inventory is often stored in a self-storage unit. Some arrangements are made with vendors for fuel, maintenance and recycling. Sometimes, a recycler will provide free secure parking for your truck as part of a recycling relationship.

The cost advantages to a satellite operation are significant. By using your existing sales, customer service and administrative resources, you are entering a new market with a lower cost structure than a start-up or stand-alone company. Prepare your support staff in advance by coordinating the flow of service tickets, billing information, new customer activations, labor hours and DOT paperwork.

The selection of employees for a satellite office is critical because these employees need to be self-sufficient, trustworthy and reliable. They will have more autonomy than any of your other employees because you will not be there every day to make certain they are in uniform with a freshly charged cell phone and a pen that works. In addition, you are depending on them to relay critical billing information back to your home office. Because of the lack of direct supervision, you will be much better off hiring someone with the traits of a supervisor.

At times, even the most self-sufficient of employees can begin to feel isolated and left out. Allocate time for face-to-face meetings with your satellite employees and make certain they are receiving the support they deserve. Drill them on the basics of the business—safety, security and outstanding customer service.

I love how business is conducted in smaller cities. People are much more helpful and responsive. Business seems to get done faster, and you always know where you stand. Sometimes you may need to adjust your selling techniques to take on a more local look and feel.

Get a local telephone number. Companies such as FreedomVoice Systems (www.freedomvoice.com) offer economical virtual office programs and call routing, allowing you to present a local image with remote support.

For free publicity, contact local news crews and issue press releases. Attracting media attention in smaller towns is less competitive than in big cities.

Not long ago, there were more than 20 regional document destruction companies operating in the United States. Almost all have been acquired, not because they had to sell, but because they were enticed to sell. This industry is ready for the re-birth of the regional document destruction company. Some companies and business owners are already well on their way. Are you?

The author is president of Shotgun Capital Advisors LLC of Southlake, Texas. He can be contacted at jim.mcguire@shotguncapital.com.