Security Shredding and Storage - a shredding industry publication
by Jim McGuire

At the end of 2007, we invited 765 independently owned document destruction companies to participate in our Document Destruction Industry Benchmark Study. Participants completed our 63 question online survey on subjects including company history, experience, financial performance, operations, sales, marketing, employees, customer satisfaction, and their thoughts on the future of the document destruction industry.

Participation in the survey was purely voluntary, and no incentives were offered to participants other than a complimentary report of our findings. We were extremely pleased to find that of the 765 invitees, 184 participated in our study, yielding an impressive 24% participation rate and a strong pool of data for our Study.

Our entire participant pool represents nearly $120 million in annual sales, 180 million tons of paper, 336 trucks, and 108,000 consoles and bins.

Table 1: Summary Findings
Average annual revenue $640,000
Average initial investment $167,000
Revenue growth rate (from 2006-2007) 31%
Tons of paper generated (annually) 961
Average # of containers installed 1,055
% of annual revenue spent on marketing 8.3%
Top 20 customers, as % of total revenue 21.7%
Source: Shotgun Capital Advisors, LLC
2007 Document Destruction Industry Benchmark Study


In Table 1, we show the profile for a typical document destruction company based on information provided by the 184 participants. Average revenue for 2007 was $640K, powering up 31% over the previous year, and average annual paper tonnage was 961 tons, up 21% from 2006 reports. The average document destruction company has 1,055 containers installed in customer locations, spends 8.3% of revenue on marketing, and has a well diversified customer base.

A majority of document destruction companies have a strong mix of owner experience and education. In our study, 70% report to have a Bachelors Degree or higher; 62% have owned other businesses; and 35% had prior professional experience in executive or general management. Only 6% report to have worked for another document destruction company prior to starting their business.

2005 had the highest number of document destruction company start-ups in the past 5 years. Since then, there has been a noticeable year-over-year decline in document destruction start-ups. This decline is encouraging, as one of our concerns for the industry is added capacity in the form of trucks and equipment, will increase pricing pressures unless customer demand grows in-line with available shredding capacity.

We notice a steep drop in companies in the 6 to 10 year age category. This “age gap” can be identified as being the remnants of once fertile hunting grounds for acquisition activities.

Table 2: Year Established


The U.S. document destruction industry today resembles a barbell – with five large participants on one end, a large number of small companies on the other, and few companies in between. This barbell shape is driven by active consolidation efforts by the large participants who have harvested the middle-market sized companies (revenues >$1 million) to a point of near extinction, and by a steady stream of new entrants attracted to the industry by its strong growth, margins, and relatively low cost of entry.

Table 3: Respondents Annual Sales


In Table 3, we grouped our respondents into eight revenue categories, ranging from startup to generating revenues over $2.5 million and tracked them for three years. An important trend to notice is the drop in companies with less than $100K in revenue. Over a three year period, this segment has shrunk from 47% to 20%. This data indicates that the slowing of new entrants will allow the market time to absorb available shredding capacity.

Reported revenue growth for 2007 was a very strong 31%, a portion of which we expect is tied to the increased paper prices over the same period. As further evidence that 2007 was an exceptional year, our participants reported a 21% increase in paper tonnage.

We found no surprises with the mixture of marketing techniques used by industry participants. We do see an increasing focus on internet marketing, including website development, search engine optimization, and sponsored-search campaigns. Table 4 shows the marketing techniques used in order of popularity.

Table 4: Marketing Techniques


The three most effective marketing methods identified by respondents were internet (36%), yellow pages (20%), and direct mail (13%). Internet advertising seemed to have a fan base divided over the use of Google AdWords® and other paid-search campaigns. Some respondents were highly favorable of paid search campaigns, while others ranked it very poorly. Paid search is very competitive within the industry, requiring the right mixture of financial commitment, technical knowledge, campaign management, and policing of fraudulent clicks to be effective.

Table 5: Commercial Driver Hourly Wages


Commercial driver hourly wages (Table 5) shows a well-rounded bell curve with a majority offering between $12.01 and $14.00 per hour. There was a stronger than expected response (17%) over $16.01 per hour. The high cost of mobile shredding equipment combined with the need for customer-focused employees justifies wages in this range.

There did seem to be a weak spot in the area of employee training and development. Of the 39 reported work related injuries, 9 respondents experienced more than one in the past year. A separate survey showed that 45% of respondents had an employee injured by needle-stick from improperly discarded medical waste, while only 36% of respondents provide their service employees with blood borne pathogens training.

One in four respondents commented that their sales staff was inadequately trained. Overall sales performance was rated at 3.4 out of a possible 5, showing room for improvement.

One of the appealing traits of the industry is its diverse, often loyal customer base which generates a predictable recurring stream of revenue. We found that on average, top-20 customers combined will account for just fewer than 22% of total revenue. 90% of respondents report a customer retention rate in excess of 96%. Over half conduct customer satisfaction surveys or care calls on a regular basis.

Respondents reported a strong but gradually decreasing rating of confidence in their ability to maintain growth rates and profit margins over the next 5 years. Most foresee making additional investments in employees, marketing, equipment, and facilities in 2008.

Our comprehensive report will be available on our website at www.shotguncapital.com, and customized reports can be created based on certain selection criteria.

Jim McGuire is President of Shotgun Capital Advisors, LLC. Shotgun Capital Advisors, LLC provides merger and acquisition advisory services to businesses in the business and security services industry sectors. For additional information, call Jim McGuire at 817-421-5940 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

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