How to lose $50k without almost no work

Hi Side Hustle Fam,

A little over a year ago I thought I found a killer side hustle/investment.

A friend who does some service work at our car washes was complaining about banks. They wouldn’t lend him money to buy some roll-off dumpsters.

See he has a junk hauling business and he’s constantly renting dumpsters for jobs. He was complaining about the lack of dumpster rental options and the prices. 

So he found a manufacturer for the dumpsters and the trailer needed to haul and dump them. They wanted $50k for 5 dumpsters in various sizes and the trailer. It was a low-risk way to get into what I thought (based on his comments and on social media posts I was seeing everywhere) was a fairly simple and profitable business. 

I would buy the dumpsters and rent them to the friend, and he would in turn use them for his jobs and rent them to new customers.

Seems like a no-brainer, right? Built-in demand from an industry insider who’s hungry to grow his business. Well, I should have used all or some of my brain because it’s been a disaster. 

Turns out he didn’t have the right truck to haul these big, heavy dumpsters. Everyone, and I do mean everyone, loads the living @#$^ out of these things making them difficult for a 1-ton truck to haul them - which is what he had.  So he had to buy a new-ish bigger heavy duty one. That one was a lemon.  Thousands of dollars in repairs, and hardly any dumpsters hauled, later he gave that one back and got another one. 

That truck has been only a slightly less of a trainwreck, but at least it hauls dumpsters. Except the winch mechanism on the trailer is already burned out from - you guess it - loading and unloaded overloaded dumpsters. More $$$ down the drain. 

Oh and that $50k pricetag to get in the biz? Yeah just about every dude with a decent pickup can afford that - so they did.  I counted at least 5 other NEW companies slinging dumpster rentals in our small county with a population of 160k.

And the economy and uncertainty of the election aren't helping. Overall spending is down and we're seeing it in this business too.

The dumpster guy has barely paid his monthly nut at all and we're now entering the slow season. I'm not too worried about my money, I'll get some or most back somehow, but this whole thing was a mistake.

Here's what I should have done:

Assess the competition by Googling the keyword terms.  I realized only after the dumpsters were already paid for that the incumbent dumpster guys had robust SEO strategies and Google My Business profiles. There were about 6-7 existing companies, all with ~5-star ratings and professional marketing programs.  There was no low-hanging fruit marketing wise.

Assess the demand by calling the competition.  I should have done what I normally do and create a spreadsheet with every major competitor, call them and get their inventory, their pricing, and their availability. Obviously what you want is wait-lists, calls unanswered, and "sorry we're not taking new customers".  If I had done that I would have discovered none of those things were the case. My friend had simply not done enough homework to discover there were plenty of dumpsters available, he just wasn't calling the right people.

Assess the upside. We became friendly with the guy who has all the marketing, SEO, and professional reception dialed in.  

He's even discussing selling to us. He has ~30 dumpsters, 3 drivers and a very nice brand. But his topline is less than $400k.  He'll be lucky to clear $150-170k this year. Which is good money, but this is probably the best case for a dumpster biz in our county.  

We'd have to knock him and the half dozen other big players to get into this territory. That's just not enough upside to justify my time and energy.

Dumb. I wanted to help a friend and make some money. Now I have a stressed out friend who's desperately trying to pay what he owes and make ends meet. Last week he was raking leaves trying to generate income - not good. I'm giving him a break, but it's still very taxing. Everybody feels bad. 

Now I will say we're only 1 year into this thing. There is time for this to turn around. Maybe we buy a local market dominator and it turns out to be a great investment. 

But I will never, ever again ignore my due diligence, no matter how "small" the check. 

Lesson learned. 

Kriss Berg