You’re doing the hours. The phone’s ringing. The skips are out. The yard’s rammed.
But the profit? Still missing in action.
If that sounds familiar, you’re certainly not alone. Plenty of skip hire businesses manage to become extraordinarily busy without becoming particularly profitable.
And that’s what makes the problem so difficult to spot. When a business is busy, it feels successful. Lorries are coming and going, drivers are flat out, the phone won’t stop ringing and someone is inevitably complaining that you need another 50 skips.
Everything looks like growth.
Except, perhaps, the bank account.
So what’s going on?
Is a skip hire business profitable?
Yes, a skip hire business can be very profitable.
A well-run skip hire business can be a very good business. But putting more skips on the road doesn’t automatically mean putting more money in the bank.
I’ve run and worked with enough skip businesses to know that the number of skips going out of the gate tells you surprisingly little about whether the business is actually making money.
Profit sits in the gap between what you charge for a job and what it really costs you to do it. And there can be an awful lot hiding in that gap.
There’s the obvious stuff. Transport, disposal, wages, fuel and repairs. But then there’s poor routing, excessive overtime, skips sitting on customers’ sites for weeks, bad debt, unnecessary processing, cheap broker work and customers who keep everybody extraordinarily busy without actually making you much money.
A skip can be out earning money and still not be earning enough money.
That distinction matters.
More jobs, same hole
When profits start to disappear, the instinctive response is often that you need more sales. It feels obvious enough. There are lorries and skips to pay for, people standing in the yard and an increasingly impressive collection of invoices arriving every month, so surely getting more work through the door must help?
Not necessarily.
If the work you’re already doing isn’t making enough money, adding more of it doesn’t solve the problem. It can make it considerably worse. Every additional job consumes transport, fuel, wages, skip capacity and disposal capacity. If the margin isn’t there to pay for all of that and leave something behind, being busier simply means losing money more efficiently.
You’re scaling failure.
That’s not growth. That’s self-harm in a hi-vis vest.
And this is where skip businesses can get themselves into a peculiar trap. The yard looks busy. The drivers are complaining they’ve got too much to do. Customers are waiting for exchanges. You might even be thinking about another lorry.
Everything around you suggests the business is growing. Meanwhile, the bank account suggests something entirely different.
So before spending more money on Google Ads, buying another lorry or ordering another 50 skips, I’d therefore ask a much less exciting question:
Are you actually making enough money from the work you’ve already got?
Check the leaks before you pour more in
Imagine filling a leaking skip with champagne. You can keep pouring, but it’ll still be empty.
The problem with many of the things that destroy profit in a skip business is that none of them looks particularly dramatic on its own.
A job is a few quid too cheap. A lorry travels a few miles further than it really should. A driver does another hour of overtime. A skip spends another fortnight sitting on a customer’s drive. Disposal goes up but nobody gets around to increasing prices for three months. A broker sends you loads of work, so everyone assumes they must be a good customer.
Individually, none of these things is likely to bring the business down.
Collectively, they can eat it alive.
And because the phones still ring, the lorries still leave the yard and money is still arriving in the bank, you can carry on like this for an awfully long time before confronting what’s actually happening.
The leaks are usually hiding somewhere among:
- jobs priced according to what you think competitors are charging rather than what they actually cost you;
- customers and brokers sending plenty of work but precious little margin;
- lorries travelling too far for jobs that don’t justify the mileage;
- skips sitting on customers’ sites when they could be earning again;
- wages and overtime ballooning whenever things get “busy”;
- disposal costs rising faster than your prices;
- waste being processed at considerable expense without creating enough additional value; and
- people spending hours fixing problems that shouldn’t exist in the first place.
None of that is particularly glamorous.
Neither is making money.
Go hunting in your own P&L
So forget the sales drive for a moment.
Grab a torch and go rat-hunting in your own accounts.
Most owners know their turnover. They’ll probably know roughly what they spend on disposal, wages and fuel. They may even know their overall gross margin.
But that doesn’t necessarily tell you where the money is actually being made.
- Which customers make money?
- Which skip sizes make money?
- Which postcodes make money?
- Which disposal routes make money?
- How much does it really cost you to put a skip on somebody’s drive and collect it again?
And which bits of the business are being quietly subsidised by the profitable ones because they’ve always been there?
This is where averages become dangerous. Your average skip might make an acceptable margin while one type of work is making you a fortune and another is barely washing its face.
Put them together and the average says everything is fine.
But it isn’t.
One of my favourite questions in a struggling business is therefore:
What would happen to your profit if you stopped doing the worst 10% of your work tomorrow?
The answer can be surprisingly uncomfortable.
Because sometimes the quickest route to making more money isn’t selling more.
It’s doing less.
Kill what doesn’t pay. Fix what should pay but doesn’t. Simplify what works.
Then go and sell more of that.
So, should you be chasing more skip hire leads?
Quite possibly.
If you’ve got spare skips, spare transport capacity and profitable work that you want more of, then absolutely. Marketing can help. Google can help. A better website can help. Online ordering can help.
But there’s very little point spending money generating more skip hire leads until you know which customers and which work you actually want more of.
More leads don’t automatically mean more profit any more than more skips do.
If your marketing generates another hundred customers who buy work at the wrong price, in the wrong area, with the wrong waste and occupy resources that could have been used more profitably elsewhere, congratulations.
Your marketing worked.
Your business didn’t.
Marketing should amplify a business model that already works. It shouldn’t be used to compensate for one that doesn’t.
Not sure where your skip hire profit is disappearing?
This is the sort of problem I spend my time looking at.
Not from a marketing agency or accountant’s office, but from inside waste businesses themselves.
And the answer is rarely one enormous, glaring mistake.
Sometimes it’s pricing. Sometimes it’s transport. Sometimes it’s disposal, processing, staffing or sales. Quite often it’s a collection of seemingly insignificant problems that have accumulated over time until, together, they’ve become a very expensive one.
That’s also why simply staring harder at the accounts doesn’t always provide the answer. The numbers tell you that something is wrong. You still need to understand the business behind those numbers to work out why.
Sometimes an owner simply needs somebody from outside the business to look across the whole operation and ask the questions nobody inside it is asking anymore.
So if your skip hire business is flat out but the numbers don’t seem to reflect it, get in touch!
I’ll help you work out where the money is going.
Preferably before you buy another 50 skips.
About Gerald Price
Gerald Price is a business change consultant and interim managing director specialising in business turnarounds, operational improvement and commercial performance, especially within the waste and recycling industry.
Having worked with operators across the sector, he regularly writes about leadership, strategy, waste policy and the commercial realities facing UK waste businesses.
More articles and insights can be found at www.gpcp.co.uk and https://www.linkedin.com/in/geraldprice/
