Chris Dear, managing director of Network Waste explains how suppliers can reap the benefits of working with established brokers.
Waste management brokerage is a multi-million pound business in the UK, yet it still puzzles me why some waste operators are reluctant to claim a slice of this lucrative market. Network Waste was founded ten years ago. This year, we will spend some £10 million within the UK waste industry.
We value our suppliers and enjoy the fact that as we have grown so has the money we spend with them. Effectively, success for us means success for our suppliers. Yet in the industry, generally, waste brokers have gained an unwarranted reputation.
This has been caused in the main by fly-by-night start-ups, operating from a bedroom or garage, with little capital and even less control over their costs. These cowboys have tarnished the reputation of the rest of the industry.
They think the job is easy and forget that they are the middlemen. From day one they fail to recognise the importance of their suppliers. They borrow too much and then fail to pay their suppliers on time when customers are late on invoices. Very soon the cash runs out. The business then goes under leaving a trail of unpaid bills.
Rather than use an overdraft from a bank, they should take advantage of the banks' factoring facilities whereby they will lend a set amount on the invoices raised. If customers don't pay within 30 days, the broker still has cash to support the supply chain.
Invoice discounting, as the company grows, provides a further opportunity to control costs as it gives greater control over borrowing. It releases money from the bank when needed, rather than on every invoice raised. This allows costs to be controlled while retaining security.
Controlling costs is absolutely essential and overheads must not run above gross profits - an easy mistake to make. It is also important not to take too many risks and to avoid debt. Conducting credit checks on new customers can help avoid bad debt.
I would also highlight the importance of growing the business steadily. The key is controlled, organic growth.
It is also important for a local operator to select their waste management broker carefully. Speaking with others in the industry can help - reputations are hard won and easily lost.
In addition, the directors of waste management brokers should not work from ivory towers. Make sure the directors are available to provide an insight into their business model. If the above boxes are ticked, and the price and service is right, then the reputable broker can provide a strong revenue stream.
Established waste management brokerages represent huge opportunities. Work that would ordinarily be handled solely by national vehicle operations filters down through to the broker and local independents.
The national client gets what they desire from a national deal and the smaller waste operators benefit as the broker farms the work out locally. It's a win-win situation for everyone.
Chris Dear is managing director of King's Lynn based waste management firm Network Waste.
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