Hauler, Know Thyself
The key to successful commercial pricing is a thorough knowledge of your financials.
Using the above price sheet for a 6-yard container, a customer would be billed $257.43 per month for a 6-yard container serviced twice per week. However, if the service frequency remained once per week and the customer got a second 6-yard container, then the customer's price would be $232.97 per month (see Figure 2 below).
Similarly, adjustments can be made for enclosures, locked containers, containers on casters that have to be rolled out, or other customer requirements that increase the time needed to service an account.
Another consideration is the weight of certain waste streams. Restaurant waste tends to be heavier than other kinds. Therefore, the disposal component of the price should be increased to account for the increased weight.
Know Your Results
A price model is only as good as the last time it was reviewed. A commercial collection company should review and adjust its price model at least every quarter, possibly more often if the market has changed due to disposal increases, fuel costs, contract bids, or even if the company purchases new equipment.
Ted W. Fenn is an independent financial consultant who primarily serves customers in the solid waste industry. He can be reached at tedfenn@aol.com.
COMMERCIAL ACCOUNT TERMS
Minutes per stop - total driver hours multiplied by 60 minutes, divided by the number of stops serviced.
Pounds per container yard - number of tons disposed divided by 2,000 pounds, divided by the total of container yards picked up.
Monthly desired return - asset replacement costs multiplied by the rate of return desired divided by 12 months.
Annual container factor - historical annual container expenses divided by the investment in containers plus the desired rate of return.
Container component of the monthly standard charge - replacement cost of the container multiplied by the annual container factor divided by 12 months.
Truck component of the monthly standard charge - monthly truck costs plus the replacement cost multiplied by the desired rate of return divided by 12 months, divided by the monthly driver hours, divided by 60 minutes, multiplied by minutes per stop, multiplied by the frequency of weekly service, multiplied by 4.33 weeks.
Disposal component of the monthly standard charge - average pounds per container multiplied by the container size (in yards), multiplied by the frequency of weekly service, multiplied by 4.33 weeks, multiplied by the disposal rate, divided by 2,000 pounds.
— TWF
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