piranhas and great white sharks, oh my!

Wanted to share some comments I received while asking questions on a entrepreneurial forum about starting/buying an auto scrap yard. To listen to these guys its a wonder any of us make money?!

Quote:

---

Scrappers and junkers will eat your lunch, kid. They have the permits and zoning that you don't have today. They had the financing years ago that you don't even have today.

They know what everything they hold is worth, too.

You are a fresh little goldfish thinking that you can jump into a shark tank filled with everything from piranhas to Great Whites.

---

Quote:

---

I really do not understand how you figure to beat people at their own game who have a lot of experience?

---

Quote:

---

look out for an EPA nightmare.............

---

Quote:

---

Nobody in the scrap car business would ever sell their lot for less than the current scrap value + land.

Its what they do for a living, literally. That's like saying a jeweler wouldn't know what gold was selling for, or what he could liquidate it for.

---

Were there any productive or encouraging responses at all?

no, not a single one. the consensus is I'm a moron ;)

I need to thicken my skin.

Funny thing I wasn't asking about the industry itself, I was asking about financing a business plan - how to approach banks or investors, what kind of return I need to justify the investment, etc, and they all just jumped on the business idea itself.

I think you need to find a local group of retired business people to talk to. We have one here and they really go out of their way to help you.

Like Joe said, you need to find a more business-savvy group. With attitudes like that, the only thing that would be worth pursuing is a franchise. And most of them are losing propositions. Look around - the ones who make it big are the ones who do what others say can't be done.

That's why I like you guys - always positive!!

Quote:

---

Originally Posted by freonjoe

I think you need to find a local group of retired business people to talk to. We have one here and they really go out of their way to help you.

---

Great suggestion Joe! Coffee shops are popular with this type of folk. Them guys are there everyday same chair same stories. Don't ask questions at first and you will learn just sitting there! hang out a few times and you are like part of the group.

almost every town has a group of some kind promoting new business in their town. the larger town have business enqubator offices like SBA and I believe the group is called SCORE, it is made up of retired former business owners who do just what you need. correction, they will advise you as to how to do what you need.

that said , to start a new auto scrap yard or a ligitimate large salvage yard to day ...... sry to say probably every thing those guys told you is true. we are living in an anti business anti success Amerika right now. they all started their business in the real America. not sayin it cant be done but chancesw are slim I think. just my .02 but good luck hope ya make it.
we used to b a capitalist country, we are now a vulture capitalist society, and unfortunately most of us are just pidgions.

Vultures and pigeons. Is that the realistic way of saying hawks and doves?

I have not been on the forum you were asking the questions. I would guess the majority are experts at being on forums and dreaming about owning a business.

I have for many years owed a small business or worked independently. When ever I asked friends if they might be interested in getting involved their response was similar to what you got. They may be correct but most don't have the guts to try. Mike.

Well said Mike! These guys don't sound very entrepreneurial to me.

Quote:

---

Originally Posted by injunjoe

Well said Mike! These guys don't sound very entrepreneurial to me.

---

For a bunch of supposed risk takers they sound like a bunch of wusses. Best of luck to you pirate, sound like some better advise from this forum.

I would but its a subscribed private forum and kind of work related...I have to play nice on there.

Last one, saved the best for last

Quote:

---

I can say coming from the machining and scrapping out machines side that the scrap business is a dirty, largely unethical one. If you plan to run things honestly, you're going to get your clock cleaned. I know quite a lot of machine shop owners and every single one of them has nothing but bad things to say about scrappers.

-Tweaked scales that read low
-Fudging the condition of materials
-Offering one price, then when the stuff is on-hand, changing the price
...and lots more.

If you aren't willing to be dishonest, you are going to be paying a lot more for scrap than all the other guys, because they are the worst bunch of shysters I've ever seen.

---

Quote:

---

Originally Posted by wayne

Vultures and pigeons. Is that the realistic way of saying hawks and doves?

---

I would think it would mean something more along the lines of predator and prey.

Quote:

---

Originally Posted by Scrapette

I would think it would mean something more along the lines of predator and prey.

---

an irish lass with sharp objects. would that be predator or prey?

Quote:

---

Originally Posted by rbrooks715

an irish lass with sharp objects. would that be predator or prey?

---

Neither. sui generis.

well played madam :)

Starting or buying a scrap yard is not something the average business person can be sucessful at. You need an excellent set of business management skills and deep pockets.

The business management skills include general management, financial management, inventory control, shipping logistics, negotiation ability, understanding of contracts, understanding of government rules and regulations, dealing with law enforcement and other government agencies and , of course, metal pricing.

Profit margins of scrap yards are not anywhere near as high as most scrappers think they are. Schnitzer Steel is a publicly traded scrap company. Here is what they say about ferrous profit for the last quarter:"Operating income per ferrous ton was $11 in the first quarter of fiscal 2012, a decrease of 49% compared to $21 per ton in the first quarter fiscal 2011." At average selling prices of $432 and $353 a ton, those are profit margins of 2.55% and 5.95%.

This website has scrap yards for sale: http://scrap-king.tripod.com/id2.html

One of them has sales of $56 million and profit of $3.3 million EBITDA. That is a 5.90% profit margin.

You need the deep pockets to hold inventory until you can sell it and you need to be able to survive the market slowdowns and downturns. Try to find scrap yard owners who will talk about how they got clobbered by the huge price drops in 2008. Schnitzer Steel (SCHN) stock went from a high of 119 in July 2008 to a low of 16 in November 2008. Undercapitalized scrap yards just went out of business.

Getting other people to finance a scrap yard business will be rather difficult. It would be easier if you had significant capital of your own. I wish you well with your endeavors.

That was the exact advice I was looking for on the business forum. Thank you for the information!

Well let me jump in!! Start with what you have and let it grow slowly... I started with a shopping cart and trash bags 40 years ago. My personal rule is to keep it moving and keep your scene clean to avoid the ire of the public. If you have an apartment rent a store space,if you have a house use the garage,if you have rural land start an outlaw yard...but keep it moving. I just took the leap into a yard and you have to watch everything all the time. I could not get a bank to finance me so I have a small "nut" that I buy with,and I do not advertise (I could get wiped out fast),just word of mouth and slow steady increase. I only have 10% of the buying power I need,,I will be livin' skinny for years to come as I build up.Go gettim' don't be discouraged.

Outlaw yard? You didn't say that did you?

area67, do you sell to a larger yard, or is there enough volume to sel to a broker/refiner? I'd love to hear more about how you make the yard work for you.

My goal is to do a hybrid of sorts...cars and parts on one end, baled material and flattened cars on the other. Wouldn't really buy metal from walk-in customers (there's plenty of places that can do that better already). Cars are my passion and the parts interest me most, but it seems like a good plan to can process your own "waste" and bypass the middleman

Funny you mention Outlaw Yards...Cincinnati requires a license to operate a metal yard, yet out of the 10 businesses in town only 5 actually have licenses. The city wants to license buyers but it can't even keep track of 10 scrap yards?!

New junk yards that sell parts have to jump thru all kinds of hoops to get licensed now but those old ones are "grandfathered" and most of these new restrictions don't apply to them. I have an old friend (told you about the crazy guy) that started pulling junk cars into his front yard 30-40 years ago. When they were too parted out he hauls them away to a bigger scrapyard and drags in more. The county has tried to shut it down and clean it up on numerous occasions but he just tells them to go flip $hit. They can't do anything till he dies.

Alright,alright I ran an outlaw yard for 3 years in the county till a nosy neighbor (who could not even see us) ratted us out. We were not making a mess or doing anything like burning wire/mobile homes. Mostly just processing cars/RV's appliances and doing tire repair for the folks in the county (day or night..3 am flat repairs,no problem, just knock!!). We were doing pretty well....oh,well. Now I have strong support in my yard from a large yard in the next large town over (28 miles). They provide 40yd roll-offs and they get all my ferrous, I put in a car and then surround with appliances etc. I get each box in the 5 ton range. I don't make much per ton, but no trucking (no gas,no truck insurance,no D.O.T.,no traffic) so I can focus on harvesting higher paying metals. I also sell all my aluminum to the same yard,delivering it a large 1 ton van. The "good stuff" copper/brass etc goes to a very large yard 40 miles up the road that I have a vendor relationship with and I get 10% plus better than counter price. I am currently really searching for a better cat buyer and am not happy with my battery buyer. I stay very,very loyal to the yards I sell to with clean,honest,sorted material. I have everything in separate containers (with container weights on the side) and help with unloading. I am not large enough for gaylords. I don't have a loader and am going to keep it that way...equipment costs on old run down stuff drains the bottom line. I don't want heavy farm junk that I have to cut up/or Bus's etc. I am very low tech and specific on what I buy. I have been in this biz for years and seen yards in the growth "death spiral" where they handle millions per year and loose $$(no thanks). I only handle what I can handle and what pays the best! So far so good...

I would not sell parts out of the same location..that gets into retail sales, big can of worms and zoning conflict.Get a relationship with an existing thrift shop/tire shop and sell to them that is o.k. in most places,or just do internet sales.

Quote:

---

Originally Posted by Scrapette

Neither. sui generis.

---

an evolved predator. even more dangerous.

Not predator or prey. Not an evolved predator.

But would question the wisdom of endlessly baiting a person who one thinks is an evolved predator.