Shredding Industry Sees Bright Future

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Courtesy of Security Shredding & Storage News

Despite the economic crisis, document destruction companies nationwide predict increased revenue growth for 2009 but many expect to see their margins decline or remain flat from the previous year, according to a recently released survey of the industry.

The survey, conducted in March by Shotgun Capital Advisors, a merger and acquisition advisory firm based in Southlake, Texas, was sent to 1,142 independently owned document destruction firms. A total of 242 surveys were returned, a 21 percent participation rate. It was the second year Shotgun Capital conducted the survey and it was conducted as the industry coped with “challenging times,” said Jim McGuire, president of Shotgun Capital.

“What’s surprising about it compared to last year is how fast the industry continues to grow despite the economic climate and the free-fall in paper prices as of last October,” he said. “It still is experiencing double-digit growth.”McGuire said the industry was proving to be recession resistant in difficult economic times.In the introduction to the survey findings, McGuire noted that “the rapid collapse of paper prices, paralyzed credit markets and a focus on cost reductions are testing our industry's ‘recession resistance’ all at once.” The online Document Destruction Industry Benchmark Study consisted of 55 questions dealing with such topics as marketing, sales, customer satisfaction and financial performance.

Growing competition and pricing pressure — notably price-cutting by new entrants to the industry — topped industry concerns for 2009, the survey reported. “Most respondents pointed first to increasing competition and pricing pressures,” it noted. “Over and over again respondents identify ‘low-balling’ by new competitors as the biggest issue facing the industry. Concerns about paper prices ranked second, followed by general concerns about the recession.”

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