It’s insanely hard for waste brokerages to measure gross profits at a granular level, if they are using manual tools or inferior software. Tracking gross margin on a per-container basis across a customer portfolio can mean the difference between thriving or slowly dying.
Calculating these granular insights without the proper tools is frustrating. All businesses keep track of their costs and revenues, but brokerages, which have two transactions for every interaction, have to align every line item billed from a Hauler to the correct line item invoiced to a Customer. That exercise might span two or more systems, with Excel acting as some sort of manual duct tape and bubble gum method to get you quick-and-dirty data before the process starts all over again for next month.
Discovery Customers access verified and auditable gross-margin data immediately and can make adjustments faster than their competitors. They use that advantage to increase their gross margins by up to 7 percentage points, which directly flows to the bottom line.
The Brokerage Challenge
Every waste brokerage owner and executive understand that their customer portfolio is the cornerstone of their brokerage’s success. Yet it is often difficult for brokerages to quickly and easily access their customer portfolio’s most important metrics like gross margin.
Without these customer profile metrics, a brokerage lacks a clear view of profitability to make informed decisions. This can lead to misallocating resources, investing in locations that may need elimination, and missing cost-saving opportunities.
Discovery’s Gross Margin Report
Discovery’s Gross Margin Report feature auto-generates accurate gross margins for a waste brokerage’s locations. Instead of exporting accounting data into Excel and manually calculating these numbers by matching revenue and payables associated with each client, Discovery users waste invoice data is automatically matched and available at any time. Discovery does the hard work of matching payables line-items from a waste hauler to revenue line-items sent to your customer – including unexpected charges like Excess/Overage and Contamination, roll offs, bulk pickups, and ongoing scheduled services.
Understanding Your Customer Profile
There are three ways the Discovery customer understands its customer profile and activates improvements using the Gross Margin Report:
- Identify and eliminate unprofitable locations
- Identify and eliminate low gross margin locations
- Identify and improve low gross margin locations
Identify Unprofitable Locations
The Gross Margin Report easily shows which of a brokerage’s locations are unprofitable. For the ADRC, that equates to about three locations within its customer profile.
By eliminating these unprofitable locations, the ADRC sees a direct increase in its gross margin by 1.12 percentage points.
Identify Low Gross Margin Locations
Discovery’s Gross Margin Report can also identify low gross margin locations. Low gross margin locations consume capital that can be funneled to more profitable locations for a stronger impact. The Average Discovery Revenue Customer finds that 12 locations produce a low gross margin of less than 20%.
With this knowledge, a brokerage can eliminate those 12 locations from its portfolio. For the ADRC, that equates to a 7.37 percentage point increase in gross margin. With this percentage point increase from 20% to 27.37%, the average customer sees a 35% increase in profitability.
Alternatively, a brokerage could also focus on improving these locations. By increasing these locations’ gross margins by 10 percentage points, our data shows the average brokerage would see a 3.74 percentage point bump in its gross margin.
The Profitability Impact
Discovery’s Gross Margin Reports enable gross margin improvements, which leads to more profitability. For every 1% increase in gross margin, a brokerage experiences a disproportionately larger increase in profitability.
For the ARDC with $1 million annual revenue, that equates to ~$73,000 in additional profit when eliminating low gross margin locations.
The impact increases with a larger portfolio. A brokerage with $10 million annual revenue could see even more efficiency. By understanding simply eliminating unprofitable locations, a brokerage could see a 19.62% increase in Net Profit Margin. By eliminating locations with <20% gross margin, a brokerage could see an additional ~$700k for the year.
What would your brokerage do with an additional $73k next year? How about $737,000? With Discovery’s efficient data extraction and reports, you could have those funds to reinvest that in the business or give your team a raise.
Leverage Your Customer Data
With Discovery’s Gross Margin Report and other data features, our brokerage customers truly understand their customer profile. With one report–instantly generated with the click of a button–brokerage executives know which locations are thriving and which locations require improvement or elimination.
Do you want to understand your brokerage’s portfolio without complicated Excel spreadsheets? Learn how Discovery’s efficiency works for brokers in this software demo.
