Purchasing from a competitor?

Hello again,

Me and my brother (17 & 18) own a metal recovery business that does local lots as well as farm lots.

We live 40 minutes from a huge city in a ruralish community and also collect out by my families farm which is about 4 hours away and is really rural.

Our current equipment includes a F150, a single axle aluminium trailer, and a dual 3500# axle dump trailer (We bought a dump because our yard doesn't have a magnet or grapple). We also have a F350 one ton and a dual 7000# trailer that we can borrow from family in exchange for keeping in running and doing other odd jobs.

Out by our farm there is a farm with 200-300 tons of metal. This was purchased from the owner by another company. They supposedly are paying $25/ton for it and driving it to a yard that is a hour and a half away and only getting around $60/ton. Our thought was this, we get $220/ton for prepared at our yard. What if we bought the steel from this other scrapper, had him load it right on our trailer, pay him $60/ton (he makes more because he doesn't have to drive it), pay $80 in fuel, sell t for $220 and profit $80/ton?

Thoughts?

Sounds like a plan
Everyone making money

BUT
Why wouldn't he bring it to your yard himself and get the $220/ton for prepared ?

Because he is a local company? I'm not sure why he doesn't, I just know he is bringing it to the yard a hour and a half away. As far as I know he is a one man operation so it might be that he doesn't want to spend the extra 5 hours in the truck. And I did the math wrong, it would profit $124 a ton if it is prepared. But we have a grinder, huge cut off, and a cutting torch.

The answer is ALWAYS No if you don't ask the question

Meaning if you don't ask him about buying it from him, The answer will be NO

BUT
In your opening post you indicated all you had to do was have him load the trailer and then you would take it to your yard

NOW you are indicating there is additional work (clean up) to do to the load >> we have a grinder, huge cut off, and a cutting torch.
Seems to me you have to account for this additional work when figuring your profit margin
I would think you would have to do a partial off load to clean up the material that was loaded on the trailer first

Also you have to account for consumables that you will be using >> Gas and tips for the torch, Blade for the huge cut off and electric and wheels for the grinder

I also had another question along the same line,

What are thoughts on starting a scrap yard out here? We have a place I could stay for free, cheap land we can rent, and there is plenty of material! Like I said before, the closest yard out here is a hour and a half away and pays very little per ton. We would open a low budget, shoe string yard that buys from the local farmers and whoever else wants to bring in the metal. Almost every farm has metal out here because there isn't a easy way to bring it in and make it worth their three hours driving.

The equipment we would need would be a skid steer, a scale, and either a loader or a excavator with a magnet. Just estimating the costs (eBay and craigslist) we decided we could buy everything we would need for around $40,000 and say another $10,000 for buying capital?

It would be pretty easy to cash flow and you could fill up your spare time by cutting up the combines and tractors. I could run the yard while my brother ran the trucking, we also have a mini mill about the same distance from us as the yard we sell to. The person we know that buys here said that if we could get a least a semi worth (or a couple smaller trailers) we could sell directly to them and make a bit more.

Thoughts once again? Thanks

Opening a yard WAY above my pay grade

Couple things that do jump out at me
Not like the old days >> Meaning EVERYTHING is super regulated
Guessing it would take years and lots and LOTS of Ca$H to get all the permits in play
The Government agency like the EPA would have a lot to say

And there is no way you would be able to run an operation like that under the radar >> Even in the middle of no where
There is always someone asking questions

And 10K would not be nearly enough to cover the scale for 1 week

I am so confused. There are no yards by you, but there is a yard by you that pays 220.00 per ton. Why would it take the other guy 5 hours to take it to the yard that is closer, when he is taking it an hour and a half away now?

We have looked into permits a bit and its not as much as you think where we are because it is just a "transfer yard"

And $10,000 at $60/ton is 160 tons, which is a bit considering where we are.

If you're going to be open to the public, you will need liability insurance. You will also need very deep pockets. The first time you can't pay for a load or write a bad check, you are out of business. You need to be able to identify various types of metal or get an XRF gun ($5,000 to $25,000). Then, there's catalytic converters. Computer software will be another major expense. I'd suggest a lot of research before jumping into this. Get familiar with your state zoning laws and record-keeping laws.

Quote:

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Originally Posted by snowyscrap

We have looked into permits a bit and its not as much as you think where we are because it is just a "transfer yard"

And $10,000 at $60/ton is 160 tons, which is a bit considering where we are.

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what about nonferrous? that adds up fast, and you need a certified scale