Tuesday, May 02, 2006

A Billionaire Junk Man?

Brian Scudamore Story


IT was a misty Thursday in the suburbs of this sprawling city, and inside a recently vacated house, Austin Atkins and Stefan Meissner were up to their elbows in junk.

The detritus was the usual: ratty couches, empty paint cans, old mattresses. In a closet sat a dusty upright piano. Out back, in the weeds, lay a rusted hydraulic car jack.

Mr. Atkins, however, was undaunted. "Time to clean up," he said. Over the next 90 minutes, the cleanly uniformed duo grunted and grimaced as they carted every ounce of junk out to their flatbed truck. When they were finished, they toweled off, shook hands with the real estate broker who hired them, accepted payment and headed for the dump.

The routine was typical for this tag-team of Mr. Cleans, junk haulers from the local franchise of 1-800-GOT-JUNK?, a company based in Vancouver, British Columbia, that has jazzed up the traditionally impersonal act of carting away trash.

Since it was founded 17 years ago, the company has grown from a sole proprietorship in Vancouver to an international corporation that expects revenues of $120 million this year.

The secrets to this success are uniformed haulers, shiny Isuzu trucks and service with a smile. While most carting companies send scruffy men to retrieve refuse from the curb, 1-800-GOT-JUNK? sends haulers right into customers' homes, removing not only the trash but also clean up when they're done.

For Cameron Herold, the company's chief operating officer, the approach is nothing short of revolutionary. "We've done for garbage what Starbucks did for coffee," he said, noting that most of the company's franchises charge a flat $500 per truckload, which includes gas, labor and dump fees. (There are smaller fees for one-quarter and one-half of a truckload.) "We think of ourselves as the FedEx of junk."

But there's more to this story than a bold brand. As many small businesses are turning to angel investors or venture capitalists for help, 1-800-GOT-JUNK? has done it alone, bootstrapping the business exclusively on cash flow, and sharing 25 percent of profits with employees through a bonus program.

The company has also built itself around technology, centralizing call-center operations and dispatching new orders through a proprietary Web-based processing system that will soon use Global Positioning System data for better service.

"When a customer calls, we want to be able to get to their junk and remove it as quickly as possible," said Brian Scudamore, the company's founder and chief executive. "Once you've decided to get rid of this stuff, you really don't want it lying around."

Like many small businesses, 1-800-GOT-JUNK? was born on a whim and youthful enthusiasm.

Back in 1989, Mr. Scudamore was waiting for food in a McDonald's drive-through when he spotted a pickup truck with the words "Mark's Hauling" on the side.

"I looked at the truck and said, 'Now there's an idea,' " he remembered, noting that he was a freshman at the University of British Columbia at the time. "I needed a way to pay for college, and I thought hauling junk was a good choice."

Mr. Scudamore acted immediately, shelling out $700 for a 1976 Ford F-100 pickup, and distributing fliers to spread word that he was the new hauler in town.

Slowly, gigs trickled in. The first year, he earned $1,700; the next year, he broke into five digits. By 1993, the business was taking so much of his time that Mr. Scudamore dropped out of school altogether.

Later that year, he bought two new trucks, and pulled in $100,000. By 1995, the company earned $525,000. Business was booming, yet Mr. Scudamore began to grow wary of complacency.

He dealt with those anxieties by reinventing his company under a franchise strategy, beginning with a pilot in nearby Victoria. When that office teamed with headquarters to top $1 million in revenue in 1997, Mr. Scudamore realized he was on to something. In 1999, he sold another franchise, to an entrepreneur in Toronto.

"By relying on franchise owners to come in and share some of the risk, I realized I could expand the firm without having to turn to outside investors or other funding sources," Mr. Scudamore said. "To me, this was a solid plan for growth."

In 2000, the same year that Mr. Scudamore hired Mr. Herold, 1-800-GOT-JUNK? dipped into the United States. The first franchise sprouted in Portland, Ore.; shortly thereafter, some friends from Canada opened a franchise in San Francisco.

Since then, the company has grown like a pack rat's National Geographic collection, blossoming into 40 franchises by 2002 and 214 by 2005. Last month, 1-800-GOT-JUNK? opened its 242nd franchise, in Spokane, Wash. It recently opened a franchise in Sydney, Australia, and will open one in Birmingham, England, this summer.

Many of these franchise owners are thriving. Alan Remer, owner of the company's outpost in Philadelphia, paid $28,000 for his franchise in 2002. Last year, the enterprise earned $900,000, and he predicts it will earn $1.5 million this year.

"I honestly believe I have bought into McDonald's in the 1960's," said Mr. Remer, who retired as a Wall Street stockbroker after the terror attacks of Sept. 11, 2001. "People want their basements back, and we're the cheapest way to create space in a home."

The haulers, too, are sharing in the success. Each truck tandem receives credit for the money it brings in, and profit sharing is tied to a bonus program for the peak performers. Mr. Herold said that the company gave its top workers bonuses of 17.4 percent last year.

Smaller rewards are offered as well, like items that seem too good to wind up in a dump or a recycling center. At the house that Mr. Atkins and Mr. Meissner were cleaning out in San Jose, the spoils included a BMX bike.

Mr. Scudamore expects 1-800-GOT-JUNK? to become a $1 billion company by 2012. To help achieve that, the company will invest millions in JunkNet, its centralized Web-based system that is used to dispatch orders from Vancouver to franchise owners. Currently, franchise owners must call to keep up with truck locations. But by September, Mr. Scudamore says, the company will begin using G.P.S. in many trucks, enabling dispatchers to send new orders right to the trucks based on where they are.

"The new technology won't only make us more responsive to our customers, but it also will make scheduling easier for our franchise partners," he said. "When's the last time you heard a junk company say something like that?"

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