What matters most

In a world of daily data breaches, identity theft and privacy concerns, ensuring the protection of information is dire. Companies are looking for better protection in regard to the secure destruction of their private documents as confidentiality and security top businesses’ list of importance.

Scott Faskan, vice president of operations for Colorado Document Security, a Palisade, Colorado-based on-site document destruction firm, describes a trend shaping the information destruction industry using the belt and suspenders idiom, saying, “You’re seeing more of the belt and suspenders thinking—old men wear belts and suspenders because they think they’re going to lose their pants. Companies are looking for more protection.”

Faskan adds, “Firms are upgrading how they deal with destruction of records.”

Other forces also are shaping the industry. Document destruction firms have added services in response to falling paper prices. Acquisitions by larger firms have allowed smaller companies to expand within their existing markets. Customers are paying attention to the stepped up enforcement of regulations and are making note of companies that earn industry certifications, Faskan says.

“Things like certification and Downstream Data insurance make a real difference when someone calls you,” Faskan says.

He continues, “We just have companies that want a higher level of service today with destruction and compliance.”

That expectation of a higher level of service has been apparent across the information destruction industry, according to industry leaders.

Paperless offices, evidence of growth in product destruction opportunities, compliance concerns and consolidation are part of the future landscape of the secure destruction industry.

In the pages that follow, industry leaders share their thoughts on the trends shaping the secure destruction industry in the U.S. and what the future holds for operators in this sector.
 

1. Don’t parallel profits and paper prices

“The best piece of advice I received when we got into this business was to price our service so that it didn’t matter what the paper markets were doing,” says Nate Segall, president of AccuShred, an information destruction and electronics recycling company headquartered in Toledo.

Segall says too many destruction firms sell based only on price, “rendering their service offerings as nothing more than a commodity.”

In this issue’s cover story, “The Right Attitude,” beginning on page 14, SDB Editor DeAnne Toto explains how Willie Geiser, owner of Maumee, Ohio-based Allshred Services, tries to “avoid the commoditization of shredding service pricing” by customizing services for its customers. Geiser mentions how the revenue his company generates from the sale of its shredded paper is “a bonus.”

“We insist on making a profit on the service we provide,” Geiser tells Toto.

Steve Richards, president and CEO of Nashville, Tennessee-based records management company Richards & Richards, says the revenue his company earns from selling its shredded paper isn’t as meaningful as the revenue that arises from the services the company offers. “Paper is a source of revenue, but not a major source of my revenue. I am fortunate that I have six different service lines,” he says.

Richards & Richards offers records storage; off-site information destruction of paper, media and computer hard drives; data vaulting; e-vaulting; legal copying; document scanning; and consulting.

Faskan says relying strictly on paper prices can affect a company’s revenue and ultimately the fate of that company.

Segall agrees. Too many companies make their service pricing decisions based on recovered paper prices, he says. “It shouldn’t matter what the paper markets are doing,” Segall states.

He continues by pointing out that the price surge in sorted office paper (SOP) to nearly $300 per ton in recent years was “the worst thing that ever happened to our industry.” As a result, numerous destruction firms dropped the prices of their services, “figuring that they could make up on the back end what they were giving away on the front. It just wasn’t a sustainable business model,” Segall says.

This approach affects a company’s ability to invest in its business. “I have no doubt that many firms have postponed future purchases based on the extended flatness of the SOP market,” he says.

“We’re going to purchase what we need, when we need it, regardless of paper sales revenue,” Segall adds.
 

2. Services have value and should be sold as such

Segall suggests the destruction industry should change the way it sells its services by emphasizing what he refers to as value-based pricing rather than cost-based pricing “or the prices that we can charge will continue to soften,” he warns.

With slower growth in recovered paper prices and more customers moving toward paperless offices, Segall says AccuShred is offering additional value-added services to compensate for these two trends.

Segall adds, “We are also seeing an increase in new clients that need containers dropped while they are transitioning to that paperless environment.”

Richards says one trait that separates successful destruction companies from the rest is their service offerings. He says many of his customers are going paperless, though he says he does not think offices will become completely paperless.

Nonetheless, when destruction service providers are limited in what they offer to their customers, they might be limited in business as well, he says.

“I get that it’s a scary economic time right now,” Richards adds, “but don’t narrow your focus on your service offering. Look for opportunities as they are out there. I have six different service lines because I’ve opened my opportunities.”

Bob Johnson, CEO of the National Association for Information Destruction (NAID), the Phoenix-based nonprofit association for the secure destruction industry, says taking services seriously pays off.

“The marketplace and regulations already favor the serious service provider and will continue to do so,” Johnson remarks.

Destruction services providers can benefit from broadening their services as well as their dedication to customer service. Faskan says, “It’s all based on service. It’s commitment to service.”
 

3. Craving compliance

Johnson says “increasingly demanding regulations, six-figure fines, data-related liabilities and media coverage” have made outsourced information destruction a recognized staple service.”

He adds, “Demand for services has peaked in highly regulated sectors.

Talking trends While document destruction firms have expanded their service offerings, and customers are paying more attention to certifications and regulatory compliances, additional trends are shaping the information destruction industry in the United States. To hear in-depth coverage of the secure destruction industry, plan to attend the National Association for Information Destruction (NAID) 2015 Annual Conference, March 20-22 in Grapevine, Texas, at the Gaylord Texan Resort and Convention Center. Hundreds of industry professionals and more than 100 exhibitors will attend the largest information destruction event in the world, according to NAID. The Phoenix-based nonprofit association says the annual event is open to members and nonmembers, most notably information destruction professionals, business owners and sales managers and team members. A golf tournament, block party and several receptions also are planned. For more information, or to register for NAID 2015 Annual Conference, visit www.naidonline.org or email NAID Director of Events and Programs Jamie Hughes at jhughes@naidonline.org.

“The opportunity seems to lay with those who are able to attract the smaller customers and to those able to address the regulatory compliance and liability issues of those regulated sectors,” Johnson continues.

“Twenty-five years ago shredding was a thing [businesses] did because they were responsible and now it’s [because they are] responsible, but it’s also the law,” Richards says.

Faskan says a compliance-driven destruction program is immensely important to customers. “It sounds funny to call it a service, but having compliance assistance through certification is a service to our clients that deals with their need for risk management.”

As a highly regulated industry serving highly regulated clients, being a certified operator sets service providers apart, sources say.

More new clients also are aware of the benefits of a company that has earned certification from NAID, Segall says.

The NAID AAA Certification program certifies secure destruction operations for on-site and off-site paper shredding as well as micromedia destruction and physical destruction of computer hard drives. The group also offers certification for the sanitization of electronic media. NAID certified members are subject to announced and unannounced audits to validate certification.

“The unannounced audits are something that our clients love,” Faskan says.

He says companies are realizing the risk in choosing a document destruction firm that is not certified. “They want a compliance program,” he says.
 

4. Electronic and product destruction expand

NAID’s certification also supports electronic media destruction, which industry leaders say is a natural fit with document destruction.

Faskan predicts that good opportunities are ahead for companies that take on electronic media destruction.

Additionally, Segall says offering electronics recycling to clients will be important. AccuShred added physical hard drive destruction, electronic information destruction and e-waste recycling a few years ago, which continue to be among the company’s fastest-growing segments.

“I believe that we will see healthy growth on the electronic information destruction side,” Segall predicts.

Richards & Richards has increased the types of products it destroys in response to demand for these services, Richards says. Richards says his company uses eight different pieces of equipment to destroy a wide variety of products.

One machine shreds only hard drives, a second consumes tapes and another tears up tractor-trailer tires, he explains.

Richards says he has added equipment in response to customers’ requests for specific services. It is this expansion of product destruction that has helped to set his company apart from competitors, he says. Richards & Richards has destroyed labels for products lacking a necessary FDA (Food and Drug Administration) label and shredded airline tickets for an out-of-business airline.
 

5. Acquisition aftermath

Consolidation has occurred in waves in the information destruction sector and the broader records and information management (RIM) industry, and 2014 was a time of considerable activity.

Livermore, California-based Access has been by far the most active consolidator in the RIM industry recent years. The company made a number of acquisitions in the last year, announcing in June 2014 four purchases—Shred Biz, Shingle Springs, California; Commonwealth Warehouse Inc., Cincinnati; Vital Records Management of Springfield, Massachusetts; and The File Connection, a division of M. Dyer & Sons, Pearl City, Hawaii.

Later in the year, the company announced the purchase of two large companies providing RIM services. In October 2014, Access purchased Retrievex Inc., a RIM services provider headquartered in Conshohocken, Pennsylvania. The company’s 74th acquisition came in November 2014 when Access bought the document storage and imaging business of Cincinnati-based Cintas Corp. in 10 U.S. markets, with Cintas having sold off its document destruction business to Shred-it International, Toronto, in the spring of the year.

Business Records Management of Pittsburgh purchased an Ohio-based shredding company in mid-2014 before being acquired itself by Recall later in the year.

Richards says these moves have helped smaller RIM service providers to expand their clientele because they have fewer competitors in the market.

Richards helps to illustrate the effect of consolidation using the Nashville market. He points out that at one time his company had 18 competitors in Nashville, while today eight competitors are vying for the same business.

“It excites me when I hear that one of these big guys is out of the market; my business is going to go up,” Richards says.

He says he anticipates acquisitions and mergers will continue to occur intermittently throughout the next several years.

“There’s going to be several industry acquisitions, and that leaves an open space in the market for someone else to say they can come along and do it better,” Richards says.

 

The author is associate editor of Storage & Destruction Business and can be reached at mworkman@gie.net.