ToiletTalk Episode 12: Diversification Strategies that Boost Profits

For this ToiletTalk, we are joined by John Saenz, the operations manager at South Point Rentals and Damon Powell, the founder of FMC Advisors. The topic of this episode is diversifying your services for greater profit potential.

Transcript:

Wendy: This episode is going to be about diversifying your portable sanitation business for higher profits. We have two amazing guests with us today, John Saenz from South Point Rentals. He’s the operations manager there. South Point has diversified into portable toilets and roll-off.

And then Damon Powell from FMC Advisors is joining us as well with all of his knowledge and consulting ability that he has done across our industries to help folks who are buying and selling their businesses. So let’s get this started.

All right. Well, welcome to this episode of ToiletTalk. Diversifying your portable sanitation business for higher profits. Today I am joined by Damon Powell who is with FMC Advisors and has a ton of experience. There is his banner, ton of experience working with companies in our industry as far as if they’re looking to buy or sell. So tons of knowledge there. Damon, thank you for joining us.

And then we also have John Saenz from South Point Rentals out of Texas and he is the operations manager there. And South Point is one of the companies in the industry that does portables and roll. So two great guys to get this conversation rolling here.

So when we talk about diversifying your portable sanitation business for higher profits, it’s a strategic move to expand revenue streams, reduce dependency on, you know, just one single market or service. But what does that really mean? Where do, where do we start, Damon? What kinds of conversations do you end up having with folks?

Damon: Yeah, thanks for having us, Wendy. Wendy and I appreciate talking about it. I know you’ve got a wealth of knowledge in this, in this space too. What I see from my 20 years in the industry, both solid waste and liquid waste is that companies that are most profitable and have the most growth opportunities have looked at diversifying their product and service stream outside of just traditional portable sanitation. And I know we’ll talk deeper about that a little later in, in the conversation. But you know, it can be roll-off containers, it can be temporary fence, it can be septic, street sweeping, storage containers. A lot of that. But what I think the important piece is that it’s the value proposition that they want to offer to their clients. Why use my company versus competitor B? And what a lot of studies have found is if you offer more than one service or product to a client, you can kind of be that one-stop shop. Save them some time, save them some energy, and really become more valuable to them. And in doing so, you may be able to have a higher price, higher profits because you’re more valuable to them. So just from a very quick overarching standpoint, you can be more profitable because you’re more valuable to your potential clients.

Wendy: Perfect. Thank you. So John, let’s hear from you on on exactly what Damon just shared. What what led you and South Point to make that decision to add more than one specific vertical within your operation?

John: Yeah, so just a quick back story on this. We originally started just as a means to our parent company, be able to supply them with toilets because at the time that area that they were working at, they didn’t provide toilets to that area and if they did, it was a long time to get them out there. So South Point was born. And since then, we’ve kind of filled in on those spots where in these rural areas that people don’t necessarily have companies that are willing to go out that far, we do. And then from moving that from that point forward and actually being out and doing toilets for other people, we recently branched into doing roll-off dumpsters and trash trailers and so that actually helped us get a whole lot more. It’s just like Damon said, it allows them to call us and they don’t just need the toilet. Now they need a dumpster. they might need a trailer for whatever reason, but now they’re calling us for both instead of having to call another company.

Wendy: So out of need and necessity comes opportunity, correct? When you first got into diversifying like this and adding that, what other research did you need to do? There was a need identified, but what research also went into making the right choices.

John: So once we found the need and we saw that, you know, customers were asking for this and demanding that, we went to see what’s the operating cost for the vehicle, for the equipment that we’re gonna need. Once we do have all that and then the employee that we’re gonna need to be able to handle that specific area. Once we got all that info gathered down, then we had a sort of outline or guideline if you will to kind of show us where we need to go to achieve the diversification, which is bringing on that roll-off or the dumpster site. And then once we found that, we laid it all out, kind of planned everything and ended up taking off a little bit late for us. We did have equipment that sat for a few months before it went out and there were odd jobs in between. But once we did get that, it did help us and benefit us a lot.

Wendy: Great Damon. Share your thoughts on what John just shared with all of that. It sounds pretty on point.

Damon: It it does. And I love hearing that and that’s what I like like about our industries is the entrepreneurial spirit that the phone rang. Someone says, hey, I need this. I’m not, I’m not finding anyone to get water delivery, whatever it is and the entrepreneurial spirit saying I might be on to something here and there. Again, there’s two schools of thought there. What John and his team did, was a kind of a detailed cash flow analysis. I mean, maybe I’m getting a little too deep here but you have some entrepreneurs that just say, you know what sounds like a good idea. I’m gonna throw caution to the wind, I’m gonna go buy X amount of this and we see that work. But then we also see, hey, there’s got to be, you know, the CPA CFO-ish person asking the questions. Well, you know, what’s our payback period here? So there’s a pendulum that, you know, typically we’re somewhere in between there. But John, I think you and your team did it great. And again, it may take a while to get off the ground. But again, what I like about this industry is it got you hungry. If you got 10 dumpsters in the yard, you’re thinking I gotta get those dumpsters out. So it makes you hungry to make the phone calls go to the job sites and say, hey, you know what, we’d love to help you with your roll-off dumpster service.

John: Yeah. And that, that, that’s how it started. I mean, it was something, Jonathan wanted to, go after and at the time, I mean, it was, you know, it’s a big cost to, to just put out there like you said, entrepreneurs, some of them just wanna throw it all and just say, hey, let’s see if it works and if it doesn’t, they sell it and don’t worry about it. Well, in this case, we kind of wanted to make sure that it was gonna take off. And so we did have questions from our CFO and I mean, that’s their job, that’s what they’re, they’re there to do. So we did get checked and once everything got on board and in line, I mean, it couldn’t be better to us. I mean, it could and it will be.

Wendy: So let’s talk a bit here about some of those risks and challenges that went into this. Sounds like you had, you know, great vision, great execution. You know, people were on board, you had all the right folks around the table discussing this. But what are some of the risks and challenges when you are, are diversifying?

John: So a lot of those risks are gonna be the upfront cost. I mean, going to get that vehicle or going to get the equipment. Sometimes, while the money might be sitting there in the bank, sometimes you don’t wanna touch it because that could be for, you know, if a truck goes down or if you have to buy one of your trucks that you already have now and have to replace it, you wanna be able to take care of that right then and there. So one of the big things was the financial part.

And then after the financial part, we had to discuss, you know, how are we gonna be able to operate? Is this something we can handle? Do we need to bring in more people for that? What are the key factors that we need to address before we start pulling the trigger on, you know, this particular diversification so that we can be successful in the future with it?

Wendy: Oh, for sure. Damon, please share what you also see when working with your clients about some of these risks and challenges.

Damon: Of course, and what I hear from potential clients is when we diversify the services or products we’re offering to our clients, let’s say we offer temp, temp fence, roll-off and portables. What if one of those services does not live up to the client’s expectation? Do we risk losing all their business? That’s a real concern. But what I think, I always believe that that the risk of doing that outweighs not doing it because if you’re the entrepreneurial spirit, you’ve got a customer service attitude, you’ve got a quality standard that you’re gonna live up to in each of those. So even though it is a thought that you should probably should. And it sounds like John did say, hey, can we do this? Can we get the personnel to make sure that goes well? It’s one thing that does need to be addressed, you know, the potential to lose that client if one of the services doesn’t live up to expectations.

But back in my waste management days, they did a survey, a massive survey that talked about if a client had a problem or a customer service interruption. And what they found is the customers that had a problem that was resolved satisfactorily were more likely to stick around for a longer time than those that never had a problem. I’ll say that again, customers that had a problem that was resolved were stickier than ones that never had a problem.

Wendy: That’s a really good point. I like that and I, you know, in this discussion right now, I have a question. So when we’re talking about, you know, do we have the personnel, do you have personnel that stay strictly within the lines of what you’re offering or do you have some, staff that are going in between roll-off or toilets? You know, are they backing things up? Are they able to jump in if needed or do you really try and keep everyone in their lane?

John: So that right there is actually, that’s a must, I mean, you wanna have all your employees on board with you, to be able to get that growth and to get to that goal, when you add something like roll-offs or temporary fencing in because if they don’t understand where you’re trying to go with it and what you’re trying to do and they can’t help you, they’re only gonna do their job and to them, their job is what they’re initially hired for. But as you start growing and adding these, roll-offs or temporary fencing or equipment rooms, whatever it might be, you let them know and now they see the same goal as you. So now everybody is on that same track.

Wendy: Excellent point, excellent point. So some of those risks and challenges, what if you don’t have buy-in from some of the staff? What if you know, did you face something like that where they’re like, hey, I was hired for this. I don’t, I don’t think I can do that or I don’t know if I want to. How do you handle that?

John: So that is something that we also did, come across, and, and when that does happen you can express to them that there’s more opportunity to grow within the company. There’s more for financial stability for them if that’s what they’re asking for. And with that comes other types of responsibilities and perks that may come with it, but it all comes with growth. I mean, you’re gonna have to step up and if you can’t, you have to find somebody that is willing to step up. And if nobody in your team is, then you admit defeat there and you find somebody outside and bring them in, they may be the missing key. Once that person comes in, they might be the one to help you get everything back online or get everything moving the way it needs to be.

Wendy: Excellent point. Either there’s a seat on the bus for you or this might be your stop and we’ll pick up other passengers. Damon your thoughts on that as well. Valid points by John.

Damon: No, it all valid points. And you know, from my time in the field, it’s the same, this industry is, is an all hands on deck industry that I’ve found and you can throw the titles out the window when it comes time that there’s a special event or there’s a big project, it doesn’t matter what seats you sit in. We may need a hand delivering units, cleaning units, you know, picking up after project delivering containers. And again, another great thing about this industry and what I see the most successful companies in our industry doing is just that, that whether it’s the owner, the president, the regional vice president, when something needs to be done, they’re pitching in. And when you lead by example, like that, like John said, hey, we need you cross-trained because there might not be 40 50 hours of work for you in this line. But there will always be work for you in a growing company, and I would much rather have growing pains as a company than the opposite. Meaning, hey, we got six route drivers. We only need five. Who’s the odd one out? No, we don’t like that. We like growing pains. So pick your poison.

Wendy: Yeah, excellent point. So what about some of the fine, you know, we talked briefly earlier about some of the, you know, it comes down to the finances, but what about some of the financial challenges or, you know, the financial plan to attack this properly when you want to expand into other verticals? What all really has to go into that?

John: Well, you don’t want to overshoot your price to future clients or your current clients. You also don’t want to be too cheap where you’re not making any return on investments, nothing relatively, and you have to find that midpoint that works with your budget and fit it in there. And if you can fit it then your service and everything else falls into, falls into play on that part because now you can go and address your current customers or potential customers and let them know that you can fix this if they do have an issue or you can fix that if they had an issue. And that’s something that, that’ll, that’ll help also along the way.

Wendy: Damon, what about your thoughts on the math of all of that?

Damon: Yeah, I think first and foremost, be very good and profitable at what you’re doing right now. And if you prove you can do that and you’re cash flow positive and you have additional cash for an investment and you believe that you can bring on the manpower. Then I think, yeah, you can look at what is, what is right for me. There are some additional services that are less capital-intensive. You know, John picked roll-off, which is probably the most capital-intensive. You know, trucks are anywhere between 100 and $300, containers are 4 to $8000, versus portable sanitation industry where trucks are, you know, 100 to 140. Our portals are 800 bucks. So maybe you’re gonna look at storage containers, office trailers, temp fence is another one.

So I think you have to look at what fits into our budget from what we want to and will that make a big enough, can we buy into that product or service enough to make it, make sense to our customer sees it as a benefit. You know, if I buy a used truck and five roll-offs and then all my five roll-offs are out, am I going to commit to buying more because the phone will keep ringing?

So I think that’s important to look at and then just like John said, talk to your CPA. What are my expectations on a cash-on-cash return? What are some of the tax benefits of buying more assets at the end of the year and maybe moving into a new line of business as opposed to paying taxes on that? So there’s there’s lots of variables to look at, but I think there’s enough operators that have done it that you can reach out to. There’s enough resources to say, hey, can I get the information I need to make a real informed decision about where I want my company to go?

So those are some of the things that I want to look at and John even mentioned it. I got some notes here, route revenue and route profitability. You mentioned that when looking at roll-off, think about that on any line of business revenue per employee. What can this new line of business or service generate from a revenue and earnings? And how does that gel with what I’m doing right now? So that’s what I would add.

Wendy: Yeah, good point. Which also brings to mind. And John, when you guys were, you know, first doing this, did you consider any partnerships or collaborations to help facilitate some of this diversification?

John: So we did initially, we were having to reach out to other companies that did provide them, and if not, we were forcing, you know, our customers over to them and just let them know, hey, these people do provide that. You know, we don’t, unfortunately, and that led to us having to turn away a lot of customers and then potentially losing some of our current customers because now they can go somewhere else that might provide, you know, both or all.

And so in doing that, that was something that we did face and kinda came to the head of it and just said, hey, let’s just go ahead and do it. I think this is something that we do need to take on, and we ended up doing that.

Wendy: So, have you seen now, you know, the flip side of that? Have you seen others reaching out to you to help provide their customers with these services? Because you now have, you know, multiple lines compared to what they were doing.

John: Yeah. So to begin with, we were one of those companies reaching out to one of our friends and asked questions just like y’all were saying, and it finally came to a point where Jonathan came to all of us and it’s like, hey, we gotta start doing this. I was like, well, what, what’s it about? And then finally brought the plan to us all and we all kinda dove into it and realized this is something we do need to get into. And so, yeah, it has been very fruitful to us, and it’s only getting better for us.

Wendy: Fantastic, Damon, let’s talk a little bit about, you know, what kind of growth can, can operators expect when they do this type of diversification of their product lines.

Damon: That’s a great question. It’s probably only limited to their commitment to time and people and capital. You know, I’ve been fortunate enough to look at lots of different companies that do a number of different of these. So, you know, you can look at what, and just in this case, what a roll-off driver can generate in a year with a certain amount of containers versus what a portable restroom operator, a driver service tech can generate with a truck and you know, one route being 202 150 toilets and one roll-off truck to 40 or 50 containers.

You could do the same to with whether it’s storage containers and what some people like about storage containers is it balances the portable restrooms because portable restrooms. There’s that, weekly service component where a storage container, a mobile office is, you deliver it, you don’t have the service component. You just pick it up when it’s done. So they can offer a service to the same clients that they know they need. Same with temp fence. You deliver it once and you pick it up when it’s done. So you don’t have that service component.

So you’re being very valuable to the clients you already have, but you don’t, you’re not committing yourself to that weekly service. So, well, it’s tough to say numbers, I think from percentages, I mean, it’s, it’s really as, as high as you want to go, Wendy. So I think those are some things to think about but you know, a roll-off truck and you know, you can do the math in your area if you’re doing six stops a day at $500 a portable or whatever it is just gonna do the math just like you would on your portable restroom, you know, your price per service and how many services you’re doing a week and put that into your projections just like you would storage containers or how many feet of fence you think you can deliver.

Wendy: Yeah, thoughts on that on that John you want to add?

John: So with that, also like in the area that, you know, wherever they might be in if that area is growing and they’re building subdivisions or shopping centers or Walmart’s maybe or a HEBs and wherever they might be, they might see that them adding more houses, more people bringing in more people to live into that area, they’re gonna need more storage. And if it’s a big enough neighborhood, they also need, they may need a hospital or they may need to upgrade that hospital. So there’s the potential for, for work.

And then with the, if you do are, if you are diversifying it, with the roll-offs, the potential for that waste removal, the profits there can be high. So it can definitely be beneficial to the company. If that’s something you’re looking at going into and the area is breaking ground like that, that’s something I would jump on.

Wendy: Nice, good point. So we had, you know, we’ve made the decision, you know, we’re gonna start doing this, we’ve done our research, we’ve figured out what we are gonna need to add for equipment and personnel. We’ve had our internal conversations about taking this by storm. What do we do then? Let’s talk a little bit of promotion and marketing of this new way of, you know, doing business.

John: So, one of the ways that we started was cold calling, getting on the phone and actually getting, you know, the information out there. Social media now is big, I posted on all social media platforms. And a lot of times people see that before they see the news or, you know, anything going on in the morning. So that’s another way. Getting out there and talking with your current customers now letting them know the services that you do provide currently and then introducing the new ones that you’re starting to offer.

So that way they now know, hey, if South Point is offering this also, they’re also offering that, let’s call them for this. And, and that also is gonna help you as far as advertising and promoting it and just kind of getting out there and, and getting after it, it does take some time and, and effort to get this when you are diversifying your company to actually move it and, and get it going where you want it to go. It’s not gonna do it by itself.

Wendy: Yeah. Valid point. Damon. Thoughts on proper marketing and, and promotion of this.

Damon: Yeah, of course. And, and I love to hear what John said, the cold call. So all you’re doing when you’re starting something new is you’re transferring enthusiasm, you have to have enthusiasm for it. You’re transferring that to the potential client or your new client. And when you do that, when they see that they can buy into that, you know, they, if you’re not enthusiastic about it, if you’re iffy about it, they, they’re gonna sniff that out real quick.

So some specific ways I think you can do that is through the, the invoicing of your current customers. Put an invoice stuffer in there, put it all over that you’re now offering all these other services. If you’re predominantly in portable restrooms, maybe you put some stickers on the inside of the restroom that now offering XYZ with a picture. If you’re if you’re getting roll-offs, maybe put a new sticker on the side of the roll-off. Now offering tent fence now offering portable restrooms. So it’s very visual.

So those are a couple of things that I would consider doing to kind of help push that new product and, and that product launch, we’ll call it.

John: That, that is another thing we did. We did the trifold flyer. So when we do go to events, we tend to throw some of those on top of the tables or have them out in the very front. So people do come in, we can hand it to them or if they get to the table before we get to them, there’s plenty of flyers on there and a lot of people, they see those tri-folds and they’ll grab them, open them up and look at them real quick because those are meant to have just straight to the point information on it, front and back. So that way, it’s a good delivery method also.

Wendy: Great. Well, what do we have for any final thoughts on, you know, diversifying your business, getting some higher profits in there? What are some parting thoughts? What kind of advice would you give to anyone watching this ToiletTalk?

John: So, if I had to give any advice, I would say to do your research, look up what you wanna do and make sure you have answers to questions that you haven’t asked yourself yet. Because when you go take it to your CFO or to your owners or CEOs, whoever you’re dealing with, they’re gonna ask those questions and they’re gonna want answers right then and there so be prepared. And then above all, be ready because it’s gonna be tough. It’s gonna be straining. But if you hold strong and hold steady like it’ll, it’ll benefit you and please and say please and thank you.

Wendy: Oh, perfect. Damon, what kind of advice would you give?

Damon: It’s great advice, John, and you guys have obviously done your homework and I’m sure you’d be very successful. I want to talk a minute about, you know, diversifying kind of what the, the business and we’ve talked about products and services that are existing portable sanitation clients can use. I want to talk a little bit about some diversifying our business lines outside of those clients and some companies that I’ve seen do that in the industry. And specifically, we see a lot of septic and portable restrooms that could be septic pumping, that could be septic installations. We’ve seen that out there.

So it’s not the client overlap, but you’re diversifying your business itself, so you’re not overly reliant on one line of business, all the eggs in one basket. You know, we also see, you know, line jetting, line inspections for that, that type of work grease is another one. It’s again, we’re talking liquid sanitation, liquid waste, but a different line of business. So grease, you’re not gonna have the overlap of portable sanitation, but you’re hauling liquid waste, high volume liquid pumping.

You know, you may have large trailers where you’re hauling 4 to 6000 gallons of industrial nonhazardous industrial waste. Maybe you’re hauling from a landfill to a processing facility. So you’ve got those opportunities to diversify your business outside of sanitation where it’s true diversification of products and services not directed at the same client. So, you know, we see that in a fair amount of cases around the country and there’s obviously plenty more.

But when you talk about liquid waste handling, there’s some of that where as John mentioned earlier, you can have the employee overlap, that one employee can drive a different type of truck if they’ve got the right endorsements. So you’ve got that diversity that you’re not reliant on just a certain person to drive that certain truck, but therefore you’re diversifying your revenue stream outside of construction events, emergency services. So I think that’s something to think about and, Wendy, I’m sure there’s a number of ServiceCore clients that have those other lines of businesses that say, hey, does this work for septic or grease? So I think it’s worthwhile just to talk about that for a minute, at least highlight that. But so that’s the only other thing that I would say that, you know, you have other options outside of serving the construction, the special event, the municipal or kind of the special or the emergency services stuff.

Wendy: Yeah, very valid points. And we all know within this industry, everyone’s willing to help, everyone’s willing to answer questions, consult with you, you know, problem solve. That’s what we all value about this industry. And I just want to thank both of you for taking the time today to have this discussion with us. I’m sure it’ll be very beneficial those who are watching it, John with South Point Rentals. Thank you so much for all that you guys do for the industry and your involvement within the industry. And Damon, of course, you as well. FMC advisors is, you know, constantly doing so much with, you know, folks that might be buying or selling within the industry, but really just that consultant ability that you, you and your team have is is such, such a treat for our industry. So, with that gentlemen, thank you very much and have a great day.

About the Author: Liam Sabot

Liam is an author of over 70 articles about portable toilet rental, septic pumping, and dumpster business management. He is dedicated to providing important information to help sanitation businesses succeed.
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