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Welcome to our latest newsletter! The hauling industry has gone through a seismic shift in recent years, especially following the COVID-19 pandemic. What was once a stable market has turned into an ultra-competitive, cost-heavy environment. With new competitors flooding the market, rising costs across the board, and consumers becoming more selective, the pressure is mounting on businesses from every angle.
Today we’ll explore the specific external pressures affecting your company, how they interconnect, and—most importantly—how you can navigate these challenges to stay profitable and grow. From competition and rising advertising costs to inflation and operational challenges, here's everything you need to know about surviving and winning in this new era.
Post-COVID Surge in Competition
Before the pandemic, the hauling industry had a relatively stable number of competitors, and many businesses enjoyed a comfortable share of the market. However, post-COVID, this has changed dramatically. The number of competitors has more than doubled in most markets, and now you might be facing twice to three times the companies all fighting for the same exact customer base.
While the number of businesses has surged, the population size—and demand for your services—hasn’t grown at the same rate. The market is now completely saturated. Even if each new competitor only takes a small slice of the overall market, the cumulative effect is significant. This increased competition reduces market share for established businesses like yours, forcing you to rethink pricing, marketing, and service offerings just to maintain previous levels of revenue.
How This Affects You:
Pre-COVID Scenario: If your business previously held 10% of the market, earning $250,000 annually, you now might see that share shrink to 8% due to new competitors. That seemingly small percentage drop could lead to a $50,000 loss in revenue.
Post-COVID Scenario: Doubling the competition while keeping the same market size puts immense pressure on all players, especially those without strong differentiation.
The Increasing Cost of Online Ads
With more competitors bidding for the same Google Ads keywords, the cost per click (CPC) is steadily rising. For many companies, including mine, Google Ads is the primary method for attracting new customers. But the higher the number of businesses bidding on a keyword like “junk removal services near me,” the more expensive each click becomes.
How Google Ads Costs Have Risen:
Pre-COVID CPC: You may have been paying $5 per click for a key search term, making it an affordable way to bring in new business.
Post-COVID CPC: With the influx of competitors, you could now be paying $10 or more for the same click, essentially doubling your customer acquisition costs.
This increased cost makes it harder to see a solid return on your advertising investment. Additionally, with the rising number of ads competing for customer attention, converting clicks into actual customers is also becoming more difficult. The increased cost of customer acquisition, combined with tougher competition, is enough to make you want to walk in front of oncoming traffic.
Consumer Bargaining Power & Inflation
The COVID-19 pandemic has also affected consumers. With inflation tightening disposable income, many consumers are now shopping for the best deals, making them more price-sensitive than ever. While you once may have been able to charge a premium for your services, you’re now facing increased price competition as consumers have wayyy more options to choose from.
How Inflation and Competition Impact You:
Consumer Power: With more businesses in the market, consumers can easily shop around, compare prices, and negotiate better deals. This forces businesses to lower their rates or offer discounts, further squeezing margins.
Inflation’s Impact: Rising inflation means consumers have less disposable income, and as they tighten their belts, they become even more selective about where they spend their money. This further increases their bargaining power.
The Rising Cost of Operations
While consumer price sensitivity is rising, so are your operating costs. You are facing increasing expenses across several key areas, making it harder to maintain the same profitability as before.
Rising Costs Include:
Insurance: The cost of insuring your trucks and employees has been rising by an average of 7-10% annually, and much more in some cases. As I always say, insurance sucks but it's an absolutely mandatory part of your business. You have no choice.
Dump Fees: Disposal costs have increased by 5-10% in many areas, meaning every trip to the dump eats into your profit margins. My business has seen an increase in transfer station fees over the last four years, rising from $92 to $130 per ton.
Fuel Costs: Fuel prices fluctuate, but recent years have seen a steady rise.
Labor Costs: The labor market is tight, giving workers more negotiating power. To retain good employees, you may need to raise wages, consider offering benefits, and, with fewer available workers, you might end up paying a premium to keep the staff you already have.
The Shakeout Phase: What Happens Next?
In markets like these, where competition has surged and costs are rising, the natural course of events is a shakeout phase. This is when weaker competitors—often those with poor financial management or operational inefficiencies (that's my nice way of saying 'guys who don't know what the hell they're doing)—start to exit the market. They can’t sustain the financial pressure, and eventually, they stop to think, scratch their heads, and say, 'Hmm, I don’t think I’m actually making any money, and I’m busting my ass. This sucks. I’m going to do something else now.'
Typically, a shakeout takes 2 to 5 years after a market boom, and it leaves behind only the strongest players.
Signs of the Shakeout:
(Currently happening) Rising Costs: As costs increase and profit margins shrink, businesses that entered the market without proper planning may start to go under.
(Will likely start in 2025) Business Failures: Between years 3 and 5 after the boom, many businesses that can't keep up with rising costs and operational challenges will exit the market.
(My guess, start of 2027) Market Stabilization: After the shakeout, the market stabilizes, leaving fewer competitors and opportunities for businesses that have adapted to capture a larger share. The strong survive—and in doing so, become even stronger.
Strategies for Surviving & Thriving
Despite the mounting pressures, there are strategies you can use to keep your business competitive and profitable.
Differentiate Your Business: Instead of competing solely on price, focus on what makes your business unique. Whether it’s eco-friendly disposal practices, faster response times, or exceptional customer service, create a value proposition that sets you apart from the competition.
Optimize Your Advertising: As Google Ads costs rise, focus on high-intent keywords that are more likely to convert into paying customers. Improving your ad quality scores can help lower costs, and diversifying your lead sources can reduce reliance on paid ads.
Control Costs & Streamline Operations: Implement operational efficiencies like route optimization to reduce fuel costs, automate scheduling and invoicing, and use part-time or seasonal labor when demand fluctuates. By keeping costs in check, you can offset some of the pressure from rising operational expenses.
Leverage Customer Relationships: Building long-term customer relationships is crucial. Use follow-up strategies like thank-you cards, loyalty programs, or referral incentives to encourage repeat business and reduce the need for constant new customer acquisition. My company brings in about 50% new customers each year, while the other half comes from repeat and referral business.
In closing
We're undergoing a significant transformation, with external pressures coming from every freaking direction—rising competition, increasing operational costs, changing consumer behaviors, and a tight labor market. But with careful planning, strategic differentiation, and a focus on operational efficiency, your business can not only survive but also emerge stronger after the shakeout.
By staying aware of the trends affecting the industry and continuously adjusting your strategy, you’ll be well-positioned to capture more market share as weaker competitors exit. The key is to remain adaptable, focus on delivering value, staying as lean as possible, and strategically manage your resources to navigate these turbulent times.
See you next Sunday!
Justin Hubbard
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