TOP DOG IN TOP-SECRET TRASHBarry Grahek is mining a boutique niche in high-security recycling
Concerned about possible leaks to rivals, Compaq Computer Corp. decided last year to have a security consultant check for chinks in its armor. He quickly spotted a dangerous weakness: used paper. He urged the company to tighten its controls over paper flow from a document's creation to its disposal. And to handle the key, final phase, the consultant recommended Shred-All Document Processing.
Barry J. Grahek founded Shred-All in Jacksonville, Fla., just seven years ago. Today, the 30-year-old entrepreneur is fielding calls from nervous executives around the country, worried that corporate spies may be sifting through their company dumpsters.
UNMARKED TRUCKS. Grahek's journey from trash to cash began with a single truck and two used shredding machines he bought at auction for $14,000--money raised by maxing out five personal credit cards. Since then, he has sliced and chopped enough security-sensitive stuff --including tires and contact lenses--to build Shred-All into a $10 million company doing business in 17 states. He plans to be operating nationwide within three years.
But secure disposal is just part of his pitch. Grahek has put it together with a completely neglected niche in waste management: companies that want to ride the fashionable recycling wave, but are loath to let go of sensitive material. So Grahek offers bonded workers, locked boxes for trashed documents, unmarked trucks, and high-security shredding plants.
Companies have responded. ``It's as secure as if Compaq was doing it internally,'' says Dan T. Swartwood, Compaq's information security consultant. And it's environmentally correct.
Grahek didn't set out to provide a security service. He just wanted to recycle. In his first job after college, with an electrical engineering firm, he consulted with paper mills and saw how low-quality paper fouled recycling operations. He hoped to persuade banks and insurance companies to part with tons of discarded high-quality recyclable paper.
But his initial pitches fell flat. Companies demanded total confidence that the trash would be shredded. So he shifted focus--and got a jump on competitors.
While still driving the truck, unloading trash, and shredding paper himself in the wee hours, Grahek landed such big-name clients as Prudential Insurance Co. of America and AT&T, which have offices in Jacksonville. He now boasts a long client list of top companies around the country. Many are fierce competitors. While one nondescript Shred-All truck picks up carts of documents from First Union's headquarters in Charlotte, N.C., another may be right across the street at rival NationsBank. In Houston, the company serves neighboring competitors Mobil Oil and Pennzoil. Shred-All works for IBM and Compaq, and for AT&T and its nemesis, MCI.
Demand is soaring in this industry of small businesses, propelled in part by government recycling mandates. ``It has been a clandestine niche,'' said Daniel T. Sandoval, editor of Fibre Market News, which tracks the paper industry. (So clandestine, in fact, that state authorities allow Grahek's trucks to forgo the normally required identifying signs.) ``It's a really fast-growth area as more offices get into recycling.''
But Shred-All chews up more than documents. Its shredders' mastications include a range of research-and-development junk imbued with proprietary information. Among these: prototype 4-ply, steel-belted race-car tires that Michelin doesn't want competitors to get an early look at; bad batches of contact lenses; disk drives; and computer boards.
Grahek's competitors generally are small shops that cover limited areas. Grahek, by contrast, signs on giant enterprises by offering to handle all their branches in states it serves.
The one serious competitor is Toronto-based Pro-Shred, which operates 15 trucks in the U.S. Each carries a shredder, and Pro-Shred's specialty is to destroy materials right in the customer's parking lot, according to President Sean O'Dea. He says this year's U.S. revenues are likely to hit $4 million.
So why aren't the big waste-disposal companies, such as Browning-Ferris Industries Inc., tearing into the secure recycling business? BFI experimented with it several years ago but pulled out after realizing its strength was in volume, not boutique services, says spokesman Peter G. Block. The company now provides high-security document destruction only in a few markets, upon request by customers. Forest products giant Weyerhaeuser Co. offers secure office-paper collection and shredding, but only in areas like Wichita, Kan., where the company can use the product in its own plants.
Shred-All, by contrast, can respond to the whims of its clients. For instance, the company isolated shredded office paper from First Union so the bank corporation's annual report can be produced using its own recycled paper.
Weighing most heavily in Shred-All's favor, though, is cost. The company offers shredding at about a third the cost of shredding in-house. In addition, customers may get money back when Grahek sells their paper. In that case, everyone comes out ahead.
Perhaps it's time to update an old adage: One man's trash is another's niche market.
By Jane Tanner in Jacksonville, Fla.
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.