Likely you’ve heard those discouraging figures about how many businesses fail in their first few years of operation. It’s a jungle out there, and the Bureau of Labor Statistics (BLS) has the data to prove it. One 10-year study tracked businesses that started in 2013.
Of those businesses, less than 50 percent were still in business after 5 years (in 2018). After 10 years (in 2023) only about a third (34.7 percent) were still operating (See Figure 1). When it comes to business survival, solid waste businesses are not too different from any other business. If anything, they are slightly worse.
Here are the hard numbers. According to the BLS, only 34.7 percent of all businesses survive 10 years. For companies in the waste services category, that 10-year survival rate is slightly lower at 34.2 percent.
Keep in mind that we’re talking about new businesses—startups. But that includes virtually all businesses. Even the biggest players in the solid waste industry were, at some point, a small startup. And clearly, those that are still in business must be doing something right. We’ll be looking at what those “right” things are.
Let me pause for a moment and clarify the term “business.” The BLS data refers specifically to private, commercial businesses. However, I believe the same factors that lead to success or failure in the private business world are at play in every part of the waste industry. In the context of this discussion, I’m including any organization, facility or operation that handles waste or recyclables under the heading of business. This includes private companies, city and county operations and any other government organization that handles waste or recyclables.
Yes, over the years I’ve heard the argument that municipalities are not businesses. Municipalities don’t compete, they don’t seek a profit and they are purely focused on providing a public service. Seriously?
Are there any municipal operations that haven’t felt some form of competition? If not from surrounding waste organizations, then perhaps competition with the road department or parks and rec for a budget increase? Are they not competing to balance the economics between disposal and diversion?
Similarly, even if municipalities don’t call it profit, are they not building an equipment replacement fund, a closure/post-closure fund, or simply a rainy-day fund? It may not be profit in the sense that you can take the money home, but certainly every organization needs to make enough revenue to fund current and future operations. We may, in some cases, call it surplus revenue, but the concept is still very much in line with making sure more money is coming in than going out.
The reality is that all organizations must follow basic business principles, or they will fail.
So, what is it that allows some businesses (including some municipal operations) to survive, even thrive, while others don’t?
It’s not as complicated as you might think. The best businesses in the waste industry, whether private companies or municipal operations, are doing the same things. They are following basic principles that consistently lead to success.
Business success principles
These three principles are so important that they might better be termed laws—like the law of gravity, or the law of supply and demand.
Face the facts
Facing the facts means looking at things in the full light of day. It means facing the truth about your operation, your system, your market—even yourself and your management style.
In every aspect of your business, can you identify what’s working and what isn’t? Perhaps more importantly, can you communicate those things to the appropriate people?
While many people might see the reality of a situation, most are unable to consistently call strikes or balls. They are afraid of conflict, they want to be seen as nice, or they are trying to maintain the status quo for some reason. Few can articulate an issue and place it clearly on the table for discussion. However, the leaders of successful businesses do this consistently day in and day out.
Action Item: Set aside some time to make a list of things within your organization that are not working well. To the extent you can, drill down to the root issues rather than focusing on symptoms. For example, instead of listing all the equipment maintenance issues that aren’t getting done, maybe you’d write down, “need to hire another mechanic,” or “we have a poor preventive maintenance program.”
Once you’ve completed this reality list of issues, share it with the appropriate stakeholders with the intent of solving those issues.
Tell the truth
Universally, successful businesses are led by people who tell the truth.
The best managers recognize that no business operates in a vacuum. Every business must work with regulators, customers, businesses, employees, neighbors and a massive network of other stakeholders.
People like working with businesses they can depend on. They like working with managers who say what they mean and mean what they say. This doesn’t mean that everyone always agrees—often they will not. But honesty allows everyone to know where they stand and what the issues are.
We’ve all seen people who try to manipulate their way into position by bending the truth a little here or a little there. That’s called lying. What those folks don’t understand is that despite society’s reliance on contracts, agreements and letters of intent, in the end, those documents are only as reliable as the person in charge. At some point, that “get rich quick” approach of letting the end justify the means will fail—which means the business will fail.
In the professional world of business, nobody wants to work with someone they don’t trust.
Action Item: When you communicate with stakeholders, let them know what you see and what you think. You don’t need to be rude, but neither should you beat around the bush. Everyone’s time is important. Don’t waste it by making small talk while dodging the real issues.
Here’s an example: A landfill had overspent on a posh entrance and too many new machines. There was not enough money—or credit—to construct the next phase of landfill liner. The ship was headed for an operational iceberg, but nobody wanted to take the steps necessary to avoid it. Fortunately, a new manager was able to articulate the problem, present some painful cost-cutting measures and move things into a sustainable path. This was a critical financial issue and it required an immediate and direct response.
Manage the money
They say money makes the world go round. That is not a statement of greed. It’s a simple matter of fact that it takes money to maintain any operation. Without adequate funding, the system will fail—or it will require a steady stream of support.
Here’s the question: Does your operation require financial support from other profitable divisions within your organization? Is it being subsidized by the general fund? Are you borrowing against the future by not maintaining equipment, buildings and other capital assets? If yes, then your business is failing.
Action Item: Review your budget. This may start with your own private review but should advance to a more comprehensive and transparent review with your money team, including the finance department, CFO, etc. This financial review should address current financial status and future financial challenges. As part of this analysis, keep in mind that there are four basic ways to improve the financial status of your business. (1) Increase your fees, (2) get more customers, (3) reduce your costs, or (4) increase productivity. Typically, a business applies a combination of these things to solve financial problems.
Application
Historically, many solid waste organizations have struggled to avoid becoming a “failed” business. Some hang on by simply subsidizing the operation. But many have been turned around by getting down to the basics outlined here. Those managers may sometimes be considered abrupt, insensitive or worse. But the bottom line is that running a successful solid waste operation requires the application of basic business principles—and sometimes that means making hard decisions.
Certainly, there is more to leading a successful business than knowing the facts, telling the truth and managing the money, but these three things are critical to the success or failure of every business. It has been my experience that every successful business is doing these things well—and businesses that fail are also failing in one or more of these areas. These things are foundational to business success.
