Will You be the Warren (Buffett) of Waste?
Finance your Growth via the ‘Float’
In the chaotic world of waste management, where every dollar counts and the smell of overcharges lingers like rotten fish, waste brokers emerge as the unsung heroes. They hustle, diving into the dumpster of market prices, finding the best deals with a keen eye for a bargain, and a sharper tongue for negotiation.
“Who does what now?” you say. If you, like me, were today years old when you heard of the ‘trash broker’ industry — sit back and and prepare to learn about these ginsu knife wielding, cost-cutting titans of trash who consolidate contracts, optimize disposal practices, and scrutinize invoices; all in an attempt to keep more green in your pocket and our planet a little cleaner.
Let’s back up a second. I’ve gone down the entrepreneurship through acquisition (ETA) rabbithole. To learn more about ETA, I went straight to the source: “HBR Guide to Buying a Small Business” by Richard Ruback and Royce Yudkoff. Not only is the book a roadmap for ETA, as luck would have it, both were interviewed by Patrick O’Shaughnessy on his Invest Like the Best Podcast.
In the interview, Patrick mentioned Warren Buffett’s career switch to an emphasis on ‘float finance’ business models, and asked the professors about recurring revenue businesses, like subscriptions, which is a type of front-loaded recurring revenue. In effect, you finance your growth via the ‘float’. Of course, this really caught my attention. Professor Ruback says there are those businesses out there that are engineered to not require working capital; and the one that continually intrigues him are ‘trash brokers’.
“So you own a shopping center, you’ve got a dumpster in the back. You get that dumped with your local dumpster company and you don’t even think about it. These guys knock on your door and they say, “How would you like to pay 15% less?” You say that sounds pretty good. That sounds really good. They have a network of trash haulers and they know what the prices are. They do it every day, you’ve never done it before … They have the task of monitoring it, you pay, you the shopping center owner will pay in advance. So they’re like a negative working capital business.” says Professor Ruback.
It’s the closest thing to Warren’s insurance float you or I will ever get in the small business world.
Yet, like anything that sounds too good to be true, there’s a catch. The waste industry is a sprawling, uneven terrain of costs and services that doesn’t play nice with the one-size-fits-all approach. Here, the national haulers don’t always bring the best game, often outpriced by local hotshots who know the alleys and backstreets of waste disposal like the back of their grimy hands. Brokers stitch together a patchwork of local services, presenting a smorgasbord of options to the big players, the national chains, the high rollers of refuse. But beware, in this world of whispers and handshakes, transparency is as scarce. The temptation of the broker’s way, with its siren call of convenience, is hard to resist. It’s a world where interests collide and your savings might be the broker’s loss, or vice versa.
