Potential business "arrangement": what would you do?

Hey all, a question or two for you...

I'm pretty sharp about some things, but thinking about different business plans ain't one of them and I could use some advice.

The background: I'm a very part-time scrapper with a fair amount of experience taking apart and sorting computers/escrap. I don't know everything about everything, but I know a 486 CPU when I see one (mainly because it says "486" on it...). Mostly I find a computer here and a computer there; I save up the good bits to sell to a forum member and truck the steel, power supplies and #3 insulated wire over to my local scrap yard. I haven't made a bazillion bucks, but it's as fun as anything I do for money.

The scene: I was at my local scrap yard the other day and got to talking to the owner about escrap. Long story short, he gave me four computers to take home, disassemble, and bring back. He wanted to know what I could get for the parts and how long it took me. He *could* be a jerk just looking for free labor and market tips- I don't know him from Adam. However, I've been dealing with his yard for a couple years now and everything I've seen is pretty legit. My impression is that with local competition moving in, he's trying to figure out a way to get more than shred for his computers without the space and experienced labor to do so. In essence, we're both interested to see if there is a way for both of us to make money and be happy about it- he has the materials and at least some wholesale market connections, I have the time and experience necessary as well as some market connections of my own.

My question is: what's the best way to go about this?
A: I get paid $x per piece. He keeps all of the material, I get paid no matter how much or little any one machine is worth with an incentive to work as quickly as possible. Maybe if there is some component (e.g. hard disk platters) he can't sell or I can sell for more we cut a deal. This assumes that [the value of the components] - [my fee] > [shred] (or whatever he gets for them whole).



B: I get paid $x per hour. He keeps all of the material, I get paid a guaranteed rate. Again, if he can't sell something I'll negotiate to buy it off him. And again, this assumes [the value of the components] - [my wage] > [shred]

C: I flat out buy the machines from him, keep the goodies and sell back the steel, motors and wire. This assumes [the value of the components] > [the price he sells the computer to me] > [the price he can sell them whole]

D: Some other arrangement?

A few last thoughts... I don't know what he pays for computers or what he gets for components (though I suppose he'll let me know when we talk next week). I like the idea of buying components from him (memory sticks, CPUs, etc.) so that I can accumulate them and time the market. However, while he doesn't do a whole lot of volume (yet) he eventually has the potential to negotiate better deals and lower shipping.

Anyway, what do you all think? I'm leaning toward A, so long as I can make it work out the equivalent of at least $10-15 per hour. Too much? Too little? Maybe later I'll post the data from my experiment in taking his four machines apart...

cheers,
tbg

I say buy them by the unit for more then he would make just selling as shred you should have meat left on the bone and he'll be happy making the few extra bucks without any major labor or skill

C is definitely the way I would go, in fact, it is the way I DO go. Both A and B are risky to you and not to him. You do the work and give your buyer leads away and he has no ties to you. The first time a full time employee has nothing to do he could put them to tearing down computers and you're out in the cold. Been there done that. The only tricky part is negotiating a fair price for both of you. It can be done, but you've got to really crunch the numbers by disassembling several. You should weigh all the separate items you can sell and figure your profit. Don't forget about shipping, gas money, etc... You will also have to figure rates for complete machines and partial such as missing a hard drive (many of them are missing). Also, tell him up front that you're going to work out the pricing as best you can and may have to reduce prices or may be able to increase. Good luck.

There is only one way to do this, and that is to buy them outright from the yard. What you do with them after that is none of their business. Any other arrangement is not worth your time. If you want to bring the steel/wire and what not to sell back to them, that works too.

All-

Many thanks for your input! I'm gathering there's something of a consensus in keeping my experience/knowledge and labor my own. Now it's just a matter of convincing the owner that he's getting a good enough deal to not try and "mine the gold" himself.

Some semi-hypothetical numbers: he buys computers at shred- on average say 20lbs per @ $0.10 = $2.00 computer. I offer to buy them at $0.20 (or about $4.00 per). He doubles his money. Say that I can get about $8 per (shipping factored in), disassembled, netting me $4. Of that $8 I get per computer, about $2.50 goes back to the scrapyard (in steel, wires, etc), on which the owner makes whatever profit he does (I have no idea what percentage he works on). In this scenario I get $4, he gets $2 plus his normal percentage of $2.50.

This looks feasible to me but perhaps not so attractive to him. I can't be the only schmo in town who knows how to do this. I can offer him more, but at a certain point I'd be making more an hour picking up cans. Any thoughts? And sorry to spell this all out- as I said, I'm rather a dunce when it comes to business-think!

cheers,
tbg

PS I'm heading out of town on a short business trip (Wichita here I come!), so apologies if I don't reply soon...

All-

A brief update on my situation... I finally talked to the scrap yard owner (likable and trustworthy enough, but boy what a character!) and got a little more info. Apparently there is a wholesale processing plant (and refinery?) down the road a ways right here in Kansas- who knew? Unless he comes up with a way of making more money *easily* (that's where I'm supposed to come in), his plan was to buy computers at $0.15/lb and sell them whole to the local plant for $0.25/lb. As he sends truckloads of stuff there anyway his shipping costs are negligible. The local plant also buys individual parts- they seemed to be on par with or a little lower than what's offered here on the forum (I can't believe I didn't ask for a copy of the sheet- next time!). They were close enough that shipping costs may well be the deciding factor in where the boards, CPUs etc wind up. Anyway, the long and short of it is that we both agreed the profit pie (given the amount of time spent) was probably a little too small for the both of us to be dipping our fingers in. In other words, I don't see him doing anything more than buying and selling whole machines; what *I* have to do is figure out whether I can match the wholesale price for whole machines (such that he sells the machines to me and not the plant) and still make it worth my time.

Having nothing to lose, he gave me another 6 desktops to rip through- I'll be finished with them soon and will have data for all 10 machines. A few preliminary tidbits:
The average weight of a machine was 25.6 pounds (some already had a side panel and/or some parts missing, so 26 lbs is a good number for *complete* machines). That means on average I'd have to pay $6.50 per machine to compete with the refinery, making my profit margin... well, I don't know yet, but pretty small. A lot will depend on how much I can get locally for lower-value parts that aren't normally worth shipping out of Kansas.

Out of 10 machines he bought and give to me, one had the motherboard/CPU removed and one was completely gutted and filled with CD drives and power sources (with the wires snipped) to make up the weight- someone was *naughty*!. I didn't catch this either, so buyer beware!

I can't recall any more figures now, but will post more data soon. In the meantime, I've been scheming on how to get more whole computers on my own... (bwahahaha...).

cheers,
tbg

Option C is exactly what I do here with our yard. They have no idea what to do with the stuff.

I buy them, scrap them out and/or refurb them and then bring back the copper/AL to sell to him. Win/win for everybody involved.

Originally Posted by mikeinreco

If you can refurb/resell even a couple of computers out of scrap lot it will usually pay for the scrap........

Absolutely. We have a very strong refurbishing "department".

Our process is:

1. Pickup scrap
2. Determine what works and what doesn't
3. If it works, refurb it
4. If it doesn't, scrap it

9 times out of 10 computers are scrapped because customers are UPGRADING to the newest latest and greatest.

So we resell their old stuff for like $100-$150 a pop (depending on specs) which is much higher than scrap value.

If you need help setting up a process I'd be happy to help. Very experienced in the refurb department.

DOES MACY'S TELL GIMBLIS??? This guy is playing you, so he gives you six desktops and wants to see what you can teach him, it's the oldest game in the book, Now if you are looking for a job that's one thing but if you are looking to run your business that's another. The only thing to do is buy the computers from him outright he's paying tin price for them so offer him double what he paying for the tin most yards work on 40-50$ a ton on shred/tin so he should be happy to give you the material. I would not sell him back the components just sell him back what you don't ship. He's fishing and what's you to show him how much he can or cannot make with electronics. Don't get your hopes up to high, scrap yard do not like for there peddlers to make money from them. Hope It works out well for you.

Refurbing...

Well, yes, that's a good option and I'm convinced selling a couple pieces of working equipment now and then would go a long way towards underwriting the scrapped parts. Unfortunately, I am much, much better (and motivated) to take computers apart than I am putting them back together. Quite simply, I don't have the expertise, the hardware or the software to identify, test and confidently re-sell used equipment. I *am* on eBay, but I have enough to worry about with my customers liking the collectibles I sell, and at least I actually *know* something about those beforehand!

Apart from my new found appreciation of computers as sources of valuable metals, I've always viewed them much as I do toasters. I own a toaster to make toast. Don't much care how it does it, don't much care if I can make it go faster or make it toast two different kinds of bread at the same time. I just want the d*mn thing to work when I need it to.

I know, I know, I'm missing opportunities left and right (virtually all my techie college buddies have silently been telling me "I told you so" for years now).

emeeks- I appreciate the offer- if you have something online I can look at in regards to refurbing machines I'd be glad to. Otherwise, I'll keep it in mind should I ever find the time/motivation to think more seriously about it...

cheers,
tbg

Me of all people suggesting this..shocking.

If your already on Ebay, why don't you just buy'm, an then resell the insides as parts/refine material? People pay stupid amounts for that stuff. Even I know this, an I hate Ebay.

Hell you could sell non-working units on there to. I see it all the time. I don't sell there, but I will use it to get an idea of the value.

That could easily make up for what your losing if you just scrap it. Your already there, your selling parts as is, or for refining, so no need to have testing equipment. You could also use the internet to figure out the issue. if you come across a unit with an issue. Most are easy fixes, just takes the time to seek out the solution. I'm no computer tech, but when I get working units in, I try to sell them. I don't sell them for 100 bucks, maybe 50. It's still better then scrap for it. An I sell'm local. I mean I can get 10 bucks for scrapping it, or make 50 by selling it as a working unit. You can guess which option I take. Oh I could make more off eBay but..bleh, not worth the hassle for me.

I think you should really be looking at Ebay to move the parts or whole units as is. Your already there an have nothing to lose if you sell as is, or for parts. Plenty of Ebay experts here to help you on that side.

Sirscrapalot - Did I really just promote ebay? Egads I must be sober.

First of all you keep saying the guy has compete towers then when you get them home their missing parts or are full of cd drives. These are not compete towers if anything is missing. How many towers is this going to have on a reg. basis. The rule of thumb is no more than 5.00 per tower but the way I look at it if you pay 5.00 for one tower you can make 9.00-10.00 that would be about 4.00-5.00 profit. But if the guy can get you 200 towers a month then you can pay 6.00 per tower(1200.00) but you'll make 600.00-800.00 profit. If you don't have a local buyer than don't do this. Shipping will eat into your profits plus what are you going to do with low grade boards and power boards. A good board buyer that's not ripping off should pay .25-.30# for power boards and at least .20# for low grade. If your going to buy the towers than look in them and make sure that they are complete with ram,processors,pci cards,cd drives, floppy drives,power supplies,mother boards alot of computers will be missing hard drives. Lower the price if they are missing any of these things. Don't forget there are alot of free e-waste out there if you just open your mouth and ask. I have to agree with 1956. This guy is trying to get as much info from you as he can then he's going to blow you off. I wouldn't pay more than .20# tops and that would be for compete towers.

Phoo- where to begin...

First, thanks all for an interesting and informative discussion- I appreciate it!

Second, yes, I get it, the guy wants me to give him information he doesn't have. I am giving him *some* of the information he wants, he is giving *me* the e-scrap ($) for that information, and I'm establishing my own cost/benefit baseline data in the process. I will let him know a) how much an average computer is worth to me (and therefor whether or not it makes sense for me to buy computers from him, or anyone else for that matter, at price X) and b) which, if any, components I'd be better off selling locally as opposed to shipping nationally (technically not absolutely true as his price list doesn't include everything that I'm separating). What I am *not* telling him is how to grade boards, how to identify CPUs, how to save gold connectors, where to get better prices, which tools to use, etc. It is absolutely true that he might take a look at my numbers and decide that it is worth his time, space and labor costs to disassemble computers himself and never give me the time of day again (though I seriously doubt it). Honestly though, that's fine with me- e-scrapping is not much more than a hobby to me- about 0.2% of my annual income comes from e-scrap. If he never sold me a single computer, e-scrap would still be about 0.2% of my income (unless I go pound the pavement to drum up more business). Even if I busted my hump I could probably only process 60 or so machines a week and still keep my day job, sanity and wife. I'd have to do twice that *and* get the computers for *free* if I wanted to replace my day job- it just ain't gonna happen. Which brings me to...

Third, he can sell computers to the local refinery for $0.25/lb, or about $6.25 per. I don't know what all y'all are making off each machine, but I'm finding it hard to gross much more than $8 per, regardless of how much time I put into it. Frankly, I simply can't pay the guy $0.25/lb and make it worth my time- I'm better off picking up cans. In that sense, it doesn't much matter if he never talks to me again- I can't afford to buy machines from him anyway. And, as I mentioned, I kind of doubt *he* could or would want afford to disassemble them himself either.

Fourth, a side note about refurbing *his* machines- he keeps them in a pile on a pallet under the front end of a semi-trailer. They get snowed on, rained on and grit blown into them by the Kansas wind through every orifice they own. Selling parts from *those* machines would be like selling a rat's rootie patootie to a blind man for a wedding ring.

Fifth, this has been a really interesting- and much, much more complicated- little experiment than I expected. The take-home messages for me are 1) that free computers are definitely worth the time while computers that cost much more than a couple bucks a piece rapidly become not-worth it and 2) just because you *can* take something apart doesn't mean you *should*.

Anyway, if anyone is interested in some of my numbers I'd be glad to share via pm....

cheers,
tbg

Thanks for all the info there TBG. Your post came at a great time. A similar situation for me. The place I sell my escrap to buys whole machines at $3.00 each. They used to break them all down to component level but found that it was easier for them to sell the whole machines to their buyer. I've spoken to the owner briefly about "making a deal" with them and he was fairly receptive on the idea. Especially since I would sell almost all of it back to them after breakdown and in turn they would resell to their buyer. I'm trying to come up with a number to offer per machine that would benefit us both.