Patrick Norris·April 8, 2024

Buy & Build a Trash Business to a $4.4m Exit | Patrick Norris Interview

Patrick Norris is a Marine Corps veteran who worked his way up from riding the back of a Waste Management garbage truck in Boston to operations manager at a municipal trash-hauling company under a mentor named Joe, before striking out on his own when Joe refused to share the business/contracting side of the trade. In 2016 he sold his house to fund the purchase of a tiny subscription-based residential trash company outside Boston ('Mr. Trashman') for $624,000, buying it at a bargain 1.8x SDE from a burned-out seller who netted him roughly $300,000 in trucks alone. Over five and a half years he grew it from $625k to $2.9 million in revenue by densifying routes, building a frictionless online sign-up system, and simply out-servicing sloppy national incumbents (Waste Management, Republic, Waste Connections), while personally driving a truck for most of that period and running the business 'on the razor's edge' with minimal management overhead. The episode is a detailed tutorial on the mechanics and economics of small-scale residential trash hauling -- disposal/transfer-station economics, route density, capex on trucks and carts, brutal labor turnover, and how national players' poor service creates perpetual openings for small local operators. He ultimately sold in 2021 for $4.4 million (netting about $5 million total after cash and unearned-revenue adjustments) to Waste Connections, in part because he foresaw his disposal-cost advantage eroding as the business grew past what small regional players could shield him from.

Deal facts

purchase price: $624,000
multiple: 1.8x SDE (on an SDE of ~$190k; effectively ~1.7-1.8x after netting the ~$300k of trucks/assets included in the deal)
sde ebitda: SDE ~$190,000 at purchase; business ran at 25-30% EBITDA margins under his ownership
revenue: $624,000-$625,000/year at purchase; grew to $2.9 million at sale
financing structure: Conventional/SBA-style bank loan from a local bank secured on the business assets (trucks), plus over 50% of his own equity (~$325,000, funded by selling his multi-family house in Somerville, MA); loan was roughly $300,000
notes: Sold for $4.4 million in 2021 (asset sale: trucks, bins/carts, customer list) to Waste Connections (via a regional company he'd worked with); buyer withheld ~$400,000 of unearned/prepaid subscription revenue at close, netting him $4 million from the sale plus he kept an additional $1 million of cash that was in the business bank account on the day of sale, totaling ~$5 million to him personally, with zero debt at time of sale. Business ("Mr. Trashman") was a subscription-based residential trash and recycling collection company in towns outside Boston, MA that lack municipal trash service, bought in 2016 and sold in 2021 (roughly 5.5 years).

Why this business

Patrick worked his way up from a Waste Management garbage truck laborer to operations manager for a mentor (Joe) who owned a municipal trash-hauling company in Boston, growing it from 15 trucks/20 employees to 45 trucks/60 employees. He wanted to eventually win his own municipal contracts like Joe had, but Joe refused to teach him the business/contract side, and a friend told him he'd never get there without striking out on his own. He searched on BizBuySell (initially open to any business, looked at an oil-recycling company and a last-mile carrier business in Philadelphia and passed on both) before buying a small family-owned residential subscription trash company near Boston that he had actually first shown to Joe. Joe's advice was to buy something small enough to handle (under $1 million revenue) rather than over-reach, and Patrick felt his municipal/operating background was a natural fit for trash, particularly the cash-flow-friendly, prepaid subscription residential niche.

What's working

Subscription residential trash service is prepaid (customers pay up to 3-12 months in advance), which eliminates cash-flow/collections risk unlike other trash niches (e.g., roll-off containers) where you do the work before getting paid
Bought at a very low multiple (1.8x SDE) from a burned-out seller who had the business overpriced/listed for two years and was mentally done with the business
Built a fast, frictionless online sign-up (two emails, no phone call needed) that outcompeted big companies (Waste Management, Republic, Waste Connections) on service and customer experience
Big incumbents (Waste Management, Republic, Waste Connections) chronically deliver poor service (leaving whole towns unserviced for a month when short-staffed), creating a perpetual reputational opening for small, responsive local operators
Answering the phone/email personally as owner and communicating proactively when problems arose built a strong local reputation, reinforced by word-of-mouth on town Facebook groups
Densifying routes (going from ~100 stops/day to 300-400+, and 30 to 80 stops/hour) dramatically improved margins as the business grew within its geographic footprint
Maintained a good multi-year disposal-pricing relationship with a regional (not national) transfer station operator, including informal route-swapping/non-compete arrangements ('we'll stay out of each other's way')
Two highly consistent, long-tenured drivers were critical to reliable service and route knowledge, enabling growth
Real estate churn (people moving in/out of towns) was a net-positive growth driver in a hot housing market because the winning company captures switchers when new residents search for trash service

What's hard

Owner ran the business 'on the razor's edge' (Joe's command-and-control ethos) instead of hiring a management layer sooner; in retrospect he'd have spent an extra ~$100k/year on a manager for better work-life balance and possibly a higher sale price
Extremely physically demanding, dangerous labor (top-5 most dangerous US jobs at one point) with roughly an 85% first-year attrition rate for new hires; hard to find people willing to do rear-load truck work
Driver wages rose from $18-20/hr in 2016 to $26-27/hr by 2021 with no applicants, as competitors like Waste Management offered easier automated-arm trucks for similar pay
Disposal (dump/transfer station) pricing is controlled by competitors who own the transfer stations, effectively letting a rival set your cost structure (a 'toll'); disposal prices in Massachusetts roughly doubled ($75/ton to $105/ton to $160/ton) over the ownership period due to landfill scarcity, and trash increasingly had to be hauled as far as Alabama/South Carolina
As the business grew, it approached a ceiling where a larger acquirer/disposal partner (Waste Connections) would eventually squeeze disposal rates, which was a direct trigger for deciding to sell
Owner personally drove trucks for most of the 5.5 years (including going back to work two hours after each of his children were born), an unsustainable workload he'd change if doing it again
High capex business (trucks cost $325k-$400k+, need ~10 years of life, $20-30k/year in maintenance after year one, plus barrels/carts) requiring multiple ongoing loans
Losing his mentor Joe (who passed away in 2019) before Patrick could repair their relationship/thank him for the head start

Notable quotes

I bought a trash company built it for fiveish years and sold it.

The trash never stops. It's the blessing and the curse. The blessing is it's always there, the money is always there, and the curse is that it's always there and you better show up to pick it up.

If I had to sit back and say what's the number one thing that you learned... it would have been a whole lot better to spend extra $100,000 a year and put a manager in place.

Once you become big enough and once you do become a problem for them, they control your disposal so you do have to play nice.