Maximizing Revenue by Reassessing Business Goals

A belated Happy New Year to one and all. 2010 has started out with a bang as both shredded steel and copper continue to push toward levels the industry last saw in 2008. As with every previous New Year, many of us feel compelled to create resolutions to improve in any one of a variety of areas; personal health, family time, professional growth and in many cases, make more money. Our focus for the first part of this year will be built around this last resolution . . . how to help each shredder operating company increase revenue (make more money) in 2010.

2009 was, for most within our industry, a memorable if not forgettable year. While most organizations scrambled to make difficult decisions concerning how to keep their company alive, which resulted in layoffs, cutbacks and reductions in production, a handful of others saw the economic crisis as an opportunity to grow; to regroup after what had been the most amazing 18-month ride in history; to revisit and critically analyze their business strategy, and to reinvest and prepare to capitalize on the next round of market increases. Not a single processor we spoke with in 2009 doubted the markets would rebound, but none could say when.

Our industry (and your business) is all about choices: the choices you make every day while running your business. You choose when and where to do business along with whom you wish to conduct it. You choose the price you will pay for feedstock and selling price for the products you create. You decide when to shred and when to perform maintenance; whom to hire and/or fire; and select what vendors you want supporting your day-to-day operation. And with each of these choices, the goal is to improve the organization and grow your company’s bottom line.

In selling, there are only two ways to increase revenue. You either increase the number of buyers for your product or you sell more products to existing buyers. In the scrap metal recycling industry a similar statement can be made. To increase revenue you either shred more material or generate more revenue from the material you shred. If we take this thought one step farther we find that there are two main sources of revenue for a shredding operation – shredded steel and the nonferrous metallics recovered through automobile shredder residue (ASR) processing.

In keeping with my resolution, we must first understand where this revenue opportunity lies and the significance it offers, so let’s begin with two basic facts. First, shredded steel is the most abundant commodity produced by a shredding facility. Second, while ferrous production has been the lifeblood of every operation for decades, it is a distant second in value. The greatest value (and greatest opportunity for revenue growth) lies within the nonferrous side of the business.

As of this writing, the market value for shred is a shade under $300/ton, and the value for a high grade Zorba or Zurik product exceeds $ .50 per pound or $1,000 per ton. That makes either one more than 300 percent more valuable than shred! The market value for insulated copper wire (ICW) is more than double that of Zorba, and copper has been more than $3.00/lb for months. Yet there are many shredding facilities, both large and small, that have chosen not to capitalize on these opportunities! Instead they send material to a recovery facility or landfill. In either case, these companies have chosen to throw money away. My question is why?

Why, especially following the year our industry struggled through when generating any revenue was exceedingly difficult? Why, when the technology required to increase revenue is readily available? Why, when it is becoming more difficult to compete in many geographic areas, driving costs up and profits down. Why, when many of the recoverable nonferrous metals appear to be headed towards striking distance of 2008 levels? Why, when there are companies that can provide the answers, assistance or equipment that is needed?

The answer to each of these questions is simple -- choice. Companies have chosen to throw money away; a choice which I simply cannot understand. Perhaps it is not done intentionally or more likely without realizing just how significant (and valuable) one percent can be. Either way, it is lost revenue. 
 
As I stated earlier, in 2010 my resolution is to help every shredder operator generate more revenue. What is your 2010 resolution? For this year, I encourage you to think; to reassess your business goals and objectives. Your role is to make a choice; to determine how much additional revenue you would like to add to your bottom line this year. How much more would you like this year 1 percent, 2 percent or maybe even 5 percent? The choice is yours. Mark Ridall