You’re in the process of starting a waste management business, though there’s a burning question on your mind: what should your target customer base be?
On the one hand you’ve got residential customers, which means going to people’s houses and removing waste for them. It creates loads of business opportunities, yet on the other hand, you’ve got commercial customers. These customers represent businesses that need waste removal and management services, opening up a whole new world of profit-making potential.
Which avenue is the best for you to go down? Well, the answer just might shock you…
Pros & Cons of Residential Waste Management
When we talk about residential waste management, we reference companies that go door-to-door and help households with their waste. This can throw up a series of pros and cons – which you’ll see below.
- Pro: Low-Cost Setup: Starting this type of business doesn’t cost as much money as the commercial equivalent. You can handle it on your own with some decent residential waste hauler software and a truck. It is easily the better of the two options in terms of the initial startup costs.
- Pro: Loads of Potential Customers: Going down the residential route means you open your business to many possible customers. A single town or city could include tens of thousands of households, yet only a few hundred businesses. Theoretically, this can make it easier for you to find customers and grow a customer base.
- Pro: Lots of Niches To Go Down: Running a residential waste management business means you can go down so many routes. You could provide a weekly bin collection service for customers, or provide specialist waste removal. For instance, people call you when they need garden waste removal or the removal of tech waste. Having loads of options means you can start small and then build on your services by adding on waste removal solutions to grow your brand and upsell.
- Con: Possibly Lower Profits: A possible downside to residential waste management businesses is that you don’t charge as much as you would with commercial customers. This means every job earns a bit less money, making it tougher to generate profits.
- Con: Lots of Competition: The residential sector is vastly competitive, with loads of people thinking of creating a business like this. That’s because it’s not as heavy regulated or loaded with business legal frameworks, but that means you have to compete with more companies and it’s hard to maintain a loyal customer base.
- Con: You Need Lots of Customers: The other downside to the lower profits side of things is that you need loads of customers to make your business successful. This puts more pressure on customer acquisition and retention.
Pros & Cons of Commercial Waste Management
Going down the commercial waste management route means you work with clients across various business sectors. You could be a collector of industrial waste from warehouses and factories, tech waste from offices, or just a general office waste management consultant. With that in mind, here are the ways in which commercial waste management businesses benefit or suffer:
- Pro: More Money & Stability: The commercial side of this business idea presents higher-value contacts from clients. You also have a better chance of retaining a commercial client because businesses will pick a vendor and stick with them. This brings more stability to the table for your company.
- Pro: Larger Profit Margins: If you compare residential and commercial profit margins, commercial comes out on top. This is down to the commercial contracts you’re able to claim, giving you huge payouts for jobs. Also, the general nature of commercial waste removal allows you to charge more because it’s quite complex.
- Pro: Less Demand For Lots Of Customers: Thanks to the higher profit margins and more money involved, there’s less demand for you to gain loads of customers. You can run your business successfully with a much smaller customer base.
- Con: More Expensive: On the bad side of things, commercial waste management companies are far more expensive to set up. You require more equipment and resources, possibly even a bigger team, and so on.
- Con: Heavily Regulated: Residential waste management is less regulated than the commercial side. It’s down to who your customers are; when you’re handling commercial waste, there’s a bigger chance you’re dealing with hazardous items. As such, regulations are required to ensure you handle and dispose of waste correctly.
- Con: High-Risk Business Environment: While everything’s great when you secure big contracts, the fact remains there’s a darker side to this coin. What if you’re unable to claim contracts and your rivals snap them up? It’s almost impossible to win over clients once they’ve signed contracts, so you’re left in a very difficult position. You could say this makes commercial waste management a bigger risk, though the rewards will be greater if you get things right.
The Answer: Why Don’t You Choose Both?
The pros and cons of both options still leave you wondering which is the best path to go down – but what if you could choose both?
Instead of considering whether you should go for residential or commercial customers, you could do the following:
- Start with a residential waste management business because it’s low-cost
- Work on building a great reputation within the waste management industry
- Earn money through residential work and slowly start branching out
- Add more services to your repertoire before eventually slipping into the commercial market
- Provide commercial waste management services alongside residential services
This path is excellent because you get the pros of both without the cons – in the long run. You start small and work your way up. By the time you venture into the commercial domain, you’ve got a long list of residential clients keeping the money ticking over. It’s less of a risk for your business; you either secure big commercial contracts and make more money, or you don’t and can still rely on the residential side of your business.
So, when it comes to deciding between residential and commercial, the absolute best approach is to pick both!
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