Short-term solution

For those business owners or operators eager to launch or expand a secure mobile destruction business, saving money upfront can be a game changer.

Starting or expanding a mobile secure destruction business is a capital-intensive endeavor, says Joe Roberto, vice president of sales and marketing at shredding equipment manufacturer Shred-Tech, Cambridge, Ontario. But the process can be made more affordable by purchasing used equipment.
 

Cutting costs

One of the initial ways to cut capital expenditure costs in the secure destruction industry is to consider buying used shred trucks instead of new vehicles. Purchasing a used mobile shredding truck can be a feasible fit for a new destruction company, says Ray Barry, sales manager of the mobile document destruction and paper recycling division of Archdale, North Carolina-based Vecoplan. (Barry served as deputy executive director of the National Association for Information Destruction before joining Vecoplan.)

“In some startup businesses, it could be a good idea to purchase a used truck to reduce startup costs if they can find the right, dependable truck for their business,” Barry says.

However, he advises companies to leave room in their budgets when purchasing used shred trucks.

Barry explains, “Your startup costs will be less [by buying used trucks], but definitely have room in your budget for additional maintenance costs, and remember to have a contingency plan if your truck is down for an extended period of time.”

For many startup businesses, money is not available for new equipment, says Guy Wakutz, sales manager for Alpine Shredders, Kitchener, Ontario. “In the short term, buying used can free up some capital for other necessary startup expenses,” he says.

Wakutz describes how several new businesses Alpine has worked with have purchased used shred trucks in the beginning to manage their initial costs. “This has proven to be successful and enabled them to grow their businesses to the point of adding new trucks to their fleet,” he says.

Roberto adds, “What it boils down to is a lower price enables people to get into the business with less of an investment. It’s easier to start out in a business with a truck that cost maybe $50,000 or $70,000 than one that cost $200,000.”
 

Limiting losses

While cost is the main factor in deciding to buy used, buyers’ motivations for purchasing a used truck vary, Roberto says. He explains how buying a used truck is a way for people to “get their feet wet” when starting off in the secure destruction industry. “If it doesn’t work out, then they can sell that used truck for close to what they paid for it,” Roberto says.

Barry says in some cases buyers can find a used truck that is 3-years-old or younger—a “like new” truck with savings.

Most used trucks available for resale today have been around from two to 12 years, sources say.

“Some savings for purchasing used trucks really depend on you and how well-suited your business is to handle your own maintenance,” Barry says. “For example, some companies in the industry who have the knowledge and capability to maintain their trucks properly can save a significant amount by purchasing trucks ‘as-is,’ and they refurbish everything themselves.”

Barry suggests asking these questions when buying used:

• Does the truck meet current emission standards (regulations)?
• How well was the truck maintained?
• How many hours are on the shredder?
• How many miles are on the truck?
• Will the seller you purchased it from stand behind the truck?
• Will the seller provide training for using the truck?
• Will the seller replace the cutters, knives, etc.?

Beyond getting answers to these questions, Wakutz suggests considering the truck’s brand and model and requesting its maintenance history. He says spending the money upfront to have both the chassis and shredding equipment professionally inspected is well-worth the expenditure.

“If a buyer is serious, he or she should arrange for a full inspection at a dealership. The buyer should control this process to ensure fair assessment of the chassis. Always ask for a detailed service history from the seller and the dealer,” Wakutz advises.

He also suggests contacting the equipment manufacturer for methods to test key features of the vehicle and the shredder.

Regarding other tests, Roberto suggests having someone perform a compression and leak down test, conducting a Department of Transportation inspection, driving the truck “more than just around the block” and looking for any red flags. Buying a used truck “sight unseen,” Roberto says, is not recommended.

In addition to performing tests and inspections, doing one’s homework prior to purchasing a used truck is important.

Wakutz urges buyers to watch used truck listings for a period of three months to nine months. “This will give that buyer a better feel for values, and they may find an old listing that suddenly got reduced in price,” he says.

Wakutz continues, “Once the buyer has a good feel for value, they may be able to close a deal with a lower reasonable offer.”

As Roberto says, the key to making sure a buyer is paying the right price is to do research to determine the truck’s worth. “You’ll have to make some phone calls,” he says.
 

Risks and repairs

Maintenance matters greatly as the cost of maintaining a used truck typically will be higher than a new truck. Buyers should expect to spend more on maintenance and repairs related to the previous wear and tear on the equipment, Wakutz states.

Replacing an engine can range from $10,000 to $30,000, Roberto says.

Wakutz adds that replacing the engine, transmission or shredder can cost in excess of $10,000.

Roberto suggests setting funds aside each month to address maintenance and repairs. “Once a truck gets to a certain age, you have to stay on top of the maintenance,” he says.

Another factor to keep in mind is that most used trucks come without a warranty, according to sources. Barry says this is just one of a number of risks buyers encounter when purchasing used trucks.

“The main risk when purchasing a used truck is dependability … It does come with more risk of course because it is used, and when it is down, your business can suffer. So just know what you are getting into.”

The risk can be particularly high for a one-truck operation.

However, it’s not just startups that are buying used. Roberto says some larger Shred-Tech customers buy used trucks to serve as backup equipment. “Once companies get to a certain size and good cash flow, they buy a used truck with the full intention that it will be parked as a backup. They do that as a precautionary measure.”

To determine if buying a used or new truck is best for an operation, Wakutz offers this advice: “Estimate [as] accurately as possible the monthly capital cost and the monthly maintenance cost of used equipment versus new equipment.”

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