Maybe You Can Get This Business Model To Work - I Can't

For a long long time now I have been wanting to start my own salvage & reclamation business, however the dream seems unreachable .
The issue always comes back to "Not Enough Money" to get started .
Over the years I have written many different businesses plans, researched the business model, talked to knowledgeable folks and attended business / economics classes.
It just seems like starting a business is only for the wealthy any more ....

Let me explain exactly what I have been planning ...

Every year billions of dollars worth of usable equipment and building materials are destroyed in "low profit, fast money" recycling operations, and in the process creates far more pollution and waste than necessary ( transport, breaking down, transport again, re-refining, transport again, re-manufacturing, transport again, re-assembly, transport again, wholesaling, transport again, retail transport again, end user ) .

My business model would have been "minimally destructive recycling" of commercial & industrial equipment and buildings .
This business model is "high profit, slow money" - meaning it makes FAR more money than "destructive recycling", but takes longer and requires effort .

What this business would do:
Buy out the "salvage rights" to commercial & industrial buildings, and buy no longer wanted commercial & industrial equipment .
The buildings would be deconstructed for all their useful parts.
Equipment [*1] would be inspected to determine if it would be more practical to refurbished it or strip it down for parts.
All usable components, parts, and equipment would be repaired ( if practical ), cleaned up, tested and than repainted before being moved off to a warehouse to be sold .

[*1] "Equipment" is everything from machines used in manufacturing, to construction equipment, to abandoned hospital equipment .

What I would need to start he business:
It's pretty much a "money" issue - to be exact I conservatively estimated the minumum start up cost would be $1,200,000 USD - and here is why.
1: I would need to buy a plot of land 30 - 40 acres in size located somewhere "optimally" in the rust belt - Boardman Ohio is an excellent location, as it's centrally located near many decaying manufacturing hubs . Land goes for $2,000 - $5,000 an acre .
2: I would need an inclosed workshop and warehouse. A small one would run $450,000 .
3: Equipment and tools to do the "jobs" . I can get away with renting equipment until I can afford to buy it, however the minumum cost I estimated to get started would run $250,000 - $400,000 .
4: Legal - any money left over would have to be used for legal fees. I have found that most communities are extremely hostile toward "industrial entities" . It is also not easy to interpret all the local, state and federal laws I would have to follow.

Other notes:
Leasing land, buildings, and equipment is a huge waste of money.
The lowest lease prices for equipment I have found, per month, runs about 1/19th the cost of new.
The lowest lease prices for land I have found, per month, runs about 1/24th the actual land value.
The lowest lease prices for a building I have found, per month, runs about 1/26th the actual structure's value.

I have not calculated in "man power" to the cost. Including taxes, each individual will cost $16 total per hour - if they are paid $11 per hour in wages .

I have not calculated in taxes, which run around 44% for local & state & federal & "self employment tax" .

I have not included bonding and insurance into the calculation - which runs around $480 per month if my gross sales stays under $150,000 per year .

i will agree with you that renting and leasing things is a waste of money for any long term work....i can justify renting a jack hammer for a day or 2 if needed......simply because ive only ever needed one a few times in my life and i cant justify buying one........

i think the most important thing with recycling is that you must know where the line is on breaking down,saving things,seperating, and saving to re sell.....i get a lot of demolition jobs in my area...in the last few years ive done a water tower, 2 sewage plants , and several smaller residential barns and buildings.. i am blessed with more private land for storage than ill ever need,,,i could use more dry storage but thats another story.....

in the past i used to try and squeeze every extra nickel possible out of each job....as ive gotton older and a touch wiser i have learnt that sometimes in the quest to try and get every extra penny i was actually costing myself money...there is always a point to where you can actually loose money by trying to break everything down as much as possible...

one example i can give is on the large copiers that we talked about the other day...i looked up a few i got at an auction....i sold the formatter boards and hard drives for almost as much as i could have got for the whole copier...and actually i made more that way....the price it would have cost to ship the whole copier would have made me make less money than i did from just selling a few small parts....even if the buyer paid all the shipping charges id still have had to pay fees on the shipping....pluss this way the copier is already gone and im done with it...i have my cash in my pocket and i can use it to buy more material

any business is hard to maintain,,one thing with junk is , it will take some time and experience to make connections....i can not stress enough to any new comer...the main thing to making profit from junk is knowing lots and lots of people....i network every where i go...i love talking to folks and i especially love listening to old men talk....ive got alot of priceless info from them over the years....just remember the more things you can sell the more money you can make...so i always ask everyone what they do, what they use in there work,,,what waste or by products they have,,,what do they buy, and what do they selll..

over the years this process has made me lots of good money , good contacts, and even some good friends

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Originally Posted by RLS0812

For a long long time now I have been wanting to start my own salvage & reclamation business, however the dream seems unreachable .
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There are two kinds of people. There are dreamers and there are doers. I think you're over thinking this.

Go do something ! ;)

Take a tiny little piece of your dream and go make it a reality.

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Originally Posted by Scrappah

There are two kinds of people. There are dreamers and there are doers. I think you're over thinking this.

Go do something ! ;)

Take a tiny little piece of your dream and go make it a reality.

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$$$ please ...
There is no "ramp up" to doing a business like this - it's expensive !

You can do this, but it's just cost prohibitive to start big in full swing. I've known several people who had good ideas, but tried to start too big too quick and brought on their own downfall. I've been part owner of a couple of these ventures and I know how quickly the start up cash can dry up. It hurts to have to bail out on a dream, but it also hurts to have a dream and not pursue it.

Like Wade, I've done many demolition jobs. Most of them have time constraints put on the project that limit the amount of deconstruction versus demolition. The ones that I have time to break down tend to be the ones that I make the most profit as well as saving much from landfills. One good project I had was an old school. It was all brick and we cleaned and palletized them. They were bought by contractors who were rebuilding New Orleans after Katrina.

As Wade indicated, you'll make contacts along the way who will open new doors. When you have items for sale, the thing you need to know is who will buy them. Each time a new door opens, you'll be closer to that dream business you want. Don't lose sight of the overall dream, but like Scrappah says, don't overthink it either.


My advice would be to start as soon as you can but start small, one project at a time. You might not be able to maximize the breakdown on the first few projects like you want, but you'll get started making money. Then you can start buying the things you need to really build your dream business.

Most successful businesses do not start out full size. Think of Microsoft starting in a garage in the early 70's.

Amazon also started in a garage an now look at them. You say you've done a business plan..did you take it to a local sba? they can help you get financing if you did good on the plan. so what Scrappah says is right on...dreamer or doer? there are people who will invest/loan if your plan is as sound as you say.

i dont sugar coat..sorry. ;)

seems to me your confident its profitable...time to stop dreaming an looking for backing then.

good luck.

sirscrapalot - all words in this post are meant to help - end disclaimer

Start with cheap truck and a storage building..........Buy some second hand tools and get to work.........Start up cost less than 10,000..........Probably can get financing on vehicle so start up costs less than 1000...........

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Originally Posted by Sirscrapalot

Amazon also started in a garage an now loon at them. You say you've done a business plan..did you take it to a local sba? they can help you get financeing if you did good on the plan. so what Scrappah says is right on...dreamer or doer? there are people who will invest/loan if your plan is as sound as you say.
i dont sugar coat..sorry. ;)
seema to me your confident its profitable...time to stop dreaming an looking for backing then.
good luck.
sirscrapalot - all words in this post are meant to help - end disclaimer

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The "local" SBA would laugh me out the door, as my home town has rejected any kind of industrial business licenses for the last 30 + years .
( No bank I have approached will loan me a large quantity of money for starting a business )
I have actually looked into the investor rout - every one wants tech companies, no one bothers with recycling - "capitol venture" numbers show it.

My state has no business grants available for salvage businesses ( I hired a lawyer to look into it for me ) .

The cost for the "bare minumum" would be well over $100,000 .
Building in a commercial zone = $75,000 ( Doing anything in my back yard is illegal )
Truck = $5,600
Tools $2,500
Layer and MIC fees = $15,000

I tend to have a more realist view toward this "dream" .
A lot of folks in this forum are lucky enough to live in a relatively "free" area ( were folks mind their own business ) however starting a business in my "back yard" or "garage" is illegal as heck .
If you live in my county -
Working on cars in your own garage is a $3,500 fine .
Having anything deemed "unsightly" on your property is a fine of $150 per day .
Operating a business with out a license starts at a $25,000 fine ( I looked it up ) .
Having grass over 6" tall is $70 per day .

i live in southern ohio,,,there is land for sale very cheap...you can get land for 500 or less per acre....in certain spots......they welcome any type of business here also.....we have coke plants and chemical plants and powers houses....we take all the things no one else wants.....

the best thing about this area is that there are almost zero zoning laws, when you are out in the country....

i am in the process of trying to trade my uncle out of 15 acres of flat land that is closer to the small town part of my area.....see i have lots of land but none of it is accesable to a semi truck....all three places have places where a truck cant get through.......my uncles land on the other hand is very accesable....

i will end up with it eventually...he is messing with me at the moment because he wants some guns that were my papaws and says he wont budge unless he gets at least 2 of them...

as many folks mentioned above,,,trying to go to big is a major down fall of many new comers to this business....sometime in the next few years i want to buy plastic and e scrap locally on a small to medium scale....im already doing the escrap on a decent scale..but i know the plastic is going to be a big venture once i start...i still have alot of things to get done before im ready for that part.....

i dont use credit, i never have and never will..so i do stuff slower than most sometimes....but at least when i do mess up, or get my eyes to big,, i can liquidate everything ive invested easily cause i know its mine and exactly what ive got into it....

RL ....I know i'm being hard on you here but you're doing a very good job of coming up with all the reasons for why this just won't work.

A cranky old woman that i used to work with once said " Ayuh ! Think thought and $hit hisself.

It's kinda of a crude way of putting things but the basic idea is there. If all you're thinking about is how to make it not work then you'll never take that first step.

To be honest, i just don't buy into the view that you've got to have a million dollars to start a business these days. I live in a place where well over 90 % of the new business startups fail within the first five years. People try to jump in whole hog with little or no idea of what they're doing and they fall on their face.

IMHO ... it's better to start on a shoestring and patiently build your business over the years.

The real value in doing it this way is in the "lessons learned" on the way up. You're not born knowing. Schooling can help, but for the most part you have to earn your understanding out there in the real world.

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Originally Posted by wadarbr549

i live in southern ohio,,,there is land for sale very cheap...you can get land for 500 or less per acre....in certain spots......they welcome any type of business here also.....we have coke plants and chemical plants and powers houses....we take all the things no one else wants.....

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Are you near Weirton West Virgina by chance ?

Have you ever been to the scrap yard before? Done any scrappin? Or would you be going from never so much as ID'd a peice of metal to trying to get bids/quotes on deconstructing an entire building an selling off the salvage.

Well my spin on this is you have some good ideas, but you have to crawl before you start to run, that being said how about a business plan like this, that I put in place and it has been working since we opened the doors, now the items are different but the model is pretty close. I opened a used appliance store with a different name than my scrap business used appliances stores are easy to get all the licenses and permits you need. As far as my inventory all my washers, dryers, and refrigators are from my scrap metal removal business. As some of you know I pay five dollars for each of the ITEAMS most can be cleaned up disinfected and resold, if some repairs are needed we make the repairs I have a appliance guy that works part time for me, we also sell used air conditioning units, air handlers, electric motors, compressors. All with a thirty day money back guarantee. Now it's not what you are thinking about opening but for about ten grand you can be up and running, Here are some pictures. Good luck

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Originally Posted by RLS0812

Are you near Weirton West Virgina by chance ?

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im not sure, i am 30 to 45 minutes from huntington west virginia, 25 minutes from ashland kentucky, and 20 minutes from portsmouth ohio.....i am basicaly at the southern most tip of the state of ohio...i live less than 2 miles from the ohio river.....most of the land has been clear cut around here...that is why it is cheaper...alot of it is hilly to...the thing is if you get a big enough piece you can get some good flat fields between your hills...

the best piece of land i own is 40 acres and at least 25 of it is flat, its were my dad was raised and at one time my papaw owned a few thousand acres there....we have old pappers where he sold 2 or 3 hundred acres to family or close friends for a couple hundred dollars....

they all came here from carter county kentucky in the 1930s

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Originally Posted by RLS0812

Are you near Weirton West Virgina by chance ?

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i just looked im 4 hours 25 minutes away from there 243 miles

Ok did I miss the part where you went into detail on your past experience in the scrap industry? No way would I loan you money without a idea on your history or knowledge on the subject.

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Originally Posted by wadarbr549

i just looked im 4 hours 25 minutes away from there 243 miles

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Over by Wierton is a very good area for salvage. Tons of abandon industry for many miles around that area !

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Originally Posted by armstrt8

Have you ever been to the scrap yard before? Done any scrappin? Or would you be going from never so much as ID'd a peice of metal to trying to get bids/quotes on deconstructing an entire building an selling off the salvage.

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Sorry about being late to reply.
The largest scraping project I was on was the Karg's Poultry Farm [*1] , were the entire egg laying and sorting facility was completely torn down and scrapped .
As far as pricing goes, I have been in industrial construction most of my adult life, giving me a lot of knowledge of structures, systems, and more importantly, prices for both the "old" stuff that would be the core of the business, and how much equipment, tools, and manpower costs.
(( A basic crane starts at $3,500 per day with operator, used JLGs start at $22,000 each, standard 6 x 6 I-Beams run $6 per foot, steam turbine blades run $10,000 each, any instrumentation labeled "Rosemount" is not cheap, many high precision gauges start at $800 ... and so on, and so forth ))
[*1] - Was most automated egg farm in the US. Shut down in the 80's. Largest 'flock' they had laying at one time was 50,000 chickens.

Don't take this the wrong way but I think you are burying your self in numbers and looking for excuses, I have been doing this a long time and can not make heads or tails of what you are trying to say, you start small work hard save your money and keep doing that over and over, there are many more profitabile scraping ventures and jobs then scraping a chicken coop or pen no matter how big it is and one thing that I think you are forgetting this job according to what you are say would be a verry costly removal that the customer would have to pay for. Not pay the customer for!!!!!!

I agree with 1956.

When I was in high school, I opened a used computer sales/service store. I bought computers from an E-Waste facility a couple of hours away. I morphed into having my own E-Waste business. I never came up with as detailed of a business plan as you did. I didn't invest much, though.

For scrapping, I used my basement as a work area. I borrowed my father's Dodge Dakota until I had my own truck. I had nothing to lose. When I bought my box truck, I already knew that I wouldn't bellyflop.

Now, if there are $3500 fines for working on your own car... in a garage, I'd move. That is not a business-friendly town. There has to be somewhere better for you. Then, I'd start small. I refurbish computers. 1956 refurbished appliances. Find your niche. Out here, a used appliance company would do very well. The costs would be low too. All you need is an F-150 and a trailer, and a workshop. Take that money and expand it.

A wise man once told me this:

"The Best thing a business can do is grow. Slowly."

I was going to say what Matador said, but he beat me too it. I started out my venture in a garden shed, with a pickup, in a mobil home park. True I had a drunk neighbor who was a plummer who saw whatI was trying to do and helped me by searching the neighborhoods(scored a large batch of unopened resistors that way), but I literly invested nothing. The mobil home park plot my parents were taking care of and the shed was there when we moved in. I understand parts of PA don't like new ideas but if my friend in Altoona can do what we're doing(which reminds me, he has some drums of ewaste I need to get from him), I believe you can too. Nine out of ten times if you keep your operations small, officials look at what you're doing as a hobby and business' look at you as a godsent, but either way they can't fine you for a hobby. Changing or working on your vehicle I can understand because you're getting into the possibility of oil and/or grease getting into drain water and messing up the water pool.

Over the years I've also found craigslist to be my friend when it comes to posting and finding gigs. I'll usualy post I'm a scrapper looking for items and charge gas money(looks better to companies and individuals for some reason). It's because of craigslist I was able to get a gig for Coilcraft when I was in Iowa and Cocca-Cola when I was in NY. I again, only had a pickup and a garden shed to work with. If at some point you make enough profit to expand, then you can look into getting a commercial plot, paying commercial taxes/fees, and handling larger jobs but it's always best to start small first.

Just my two-cents on the matter,
Matt

I would have to say that the matter of government regulation is a valid concern. You shouldn't have to sneak around like a thief in the night while you're trying to start or expand your business. Unfortunately .... there is no "moving away" from it.

The key here is education. It's understanding the problem and then deciding for yourself the best way to go about addressing it.

In a nutshell: There are some people, like many of the entrepreneurs right here in this forum, that are producers. They're people with a dream that have the drive and the passion to build great things. They make things happen. It's this kind of person that is the engine of society.

On the other side of the coin are people who really don't produce anything of value but want to control & direct those who do. They would presume to tell you where to go and what to do. They may allow you to proceed with your plan but only at their discretion and only on their terms.

In time .... they become your boss and run your business.

Any entrepreneur with even an ounce of self respect would never allow such a thing.