BY PORING OVER CLIENTS' TRASH, ENTREPRENEURS
FIND PROSPERITY

By ROGER RICKLEFS
Staff Reporter of THE WALL STREET JOURNAL
May 1, 1996

At a quick glance, it's no business for the fainthearted.

It's called "waste accounting," and a big part of the work is telling private garbage haulers, notorious in some places for strong-arm practices, that you would like to monitor their work, calculate any overcharges -- and reduce their revenue.

"At first, I was very apprehensive," says James H. Fitzgerald, who founded Envirotron Ltd., a waste-accounting business, five years ago in New York City. But he forged ahead, discovered his fears were overblown and has developed a rapidly growing business that operates mainly in New York but also has clients in Chicago, Boston, Washington and elsewhere.

In the last few years, dozens of other small businesses across the country have entered the field. They are growing because businesses fear they are paying far too much to have their garbage taken away, but don't know what to do about it. The growth of recycling has awakened many businesses to the huge potential savings from being savvy about trash.

Waste-accounting companies say corruption in the trash business and intimidation by haulers have declined sharply in certain cities and were never major problems in many others. Naomi Replogle, vice president of MGM Services Inc., Houston, reports cheerily, "I haven't had a client killed yet."

MGM operates nationwide and has increased its staff to 50 members from 30 in the past year, Ms. Replogle adds. Client savings from the service average 25% to 30%, Ms. Replogle says.

Some companies save even more. "I thought our [waste] costs were outrageous," says Tom McDonald, an executive at Carol Management Corp., a New York hotel concern. He asked Mr. Fitzgerald's Envirotron to monitor the number of bags of garbage that Carol Management's hotels in Manhattan produced in a month. "Based on this, we cut our cost 50%," Mr. McDonald reports.

Envirotron's staff consists of Mr. Fitzgerald and one other full-time employee; free-lance workers are hired on a project-by-project basis. The company commonly charges a monthly fee or 25% to 33% of the savings it produces for a period of up to three years.

Haulers' charges are generally based on volume, but Envirotron, like others in the field, does more than count garbage bags to earn its fee. For example, Mr. Fitzgerald checks compactor pressure gauges; they are sometimes set lower than they should be, inflating the volume of garbage and the cost to the client.

The entrepreneur says a tape measure comes in handy, too. A simple measurement showed that one client's containers really held only 1 1/2 yards instead of the 2 yards stated on the labels. This discovery reduced the client's annual garbage bill by $70,000, Mr. Fitzgerald says. "I was just thrilled when this happened," he adds. "When I get into an interesting garbage situation, I feel like a private investigator."

Indeed, he sometimes does undercover work. One current client is a restaurant chain that believes it is being overcharged and suspects that its managers have become "too close" to the garbage carters, Mr. Fitzgerald says. He hired a cab driver who gets off work at midnight to go to the restaurants late at night and monitor the garbage that employees had placed outside. Sure enough, this revealed that one of the restaurants was paying double what it should be paying, "to the tune of $200,000 a year," Mr. Fitzgerald says.

Most of the work is much more mundane. Smurfit Waste Reduction Services, a unit of Jefferson Smurfit Corp., Clayton, Mo., finds a computerized monitoring system helps guard against excess usage as well as double billing. "The biggest thing we find is that companies are being over serviced; we can show them what they actually need," says Andrew M. Waters, general manager of the unit. The operation, which the paper producer started 18 months ago, has attracted more than twice as much business as expected, Mr. Waters adds.

As a growth field, waste accounting is attracting a diverse group of entrepreneurs. The 31-year- 1000 old Mr. Fitzgerald, who was a humanities major at New York University, says he stumbled on to the idea of Envirotron when he worked for a hotel and found it was getting far more garbage collections than it needed. Opportunity merged neatly with ambition: "I come from no money, and I had been trying to start a small business since I was 18," Mr. Fitzgerald recalls.

Elana Amsterdam, who is 28 years old, studied European history at Columbia University and worked for a nonprofit environmental organization. She started Ecosav Inc. in New York three years ago. "We're garbage auditors," she says. But like a number of businesses in the field, Ecosav combines waste accounting with consulting on recycling.

New York's waste-accounting operations are confronting an increasingly beleaguered -- and thus more compliant -- group of haulers than was the case only a few years ago. Last year, 23 New York carting concerns were indicted for allegedly running a cartel that inflated prices and controlled private waste collection. At the same time, competition from national waste-management concerns such as Browning-Ferris Industries Inc., Houston, and WMX Technologies Inc., Oak Brook, Ill., is increasing.

"Carters really don't want to be reported to the Department of Consumer Affairs, which could take away their licenses," Mr. Fitzgerald notes. What's more, he says, they would much rather lose some inflated revenue than "lose the whole account to Browning-Ferris."