Being in the business of scrapping, particularly metals from motor vehicles, can be extremely lucrative, testimony to which fact is how fat scrap-yard owners always seem to be and how chilled out they are when it comes to making deals. Haha…
It’s true though, isn’t it? Scrap yard owners always look well-fed, don’t they? Pop around at a scrap yard you’ve perhaps discovered for the first time as well, while you were driving by a certain route perhaps and you’ll probably be made to wait a few minutes before somebody you can talk to about something you’re interested in buying comes out to greet you. You might have spotted what looks like a good-looking body for a classic car re-build project you might want to complete for example, or you might indeed even have some of your own scrap metal to pawn…
Taking a closer look at the scrap yard business though, one soon realizes that there’s a lot more to it than just sitting around all day and waiting for customers to roll through the gates, whether these are buying or selling customers. It makes for a lot of hard work, but fortunately smart work pays off even better in this business.
The surprising need for start-up capital
I was personally rather surprised to learn just how much start-up capital is required to get into something such as running a metal junk yard, when the guy whom I go to (he’s now a dear friend) told me he had received a $113,000 loan to get up and running, from the bank, of all sources for funding! Clearly the bank believes in what appears to be a tried, tested and proven business model in scrapping, but I was surprised to find that you need any start-up capital at all. After all, don’t you get money upfront when you sell parts from something like an accident-damaged car which was perhaps even brought in by somebody who agrees to have you seeing how much it will bring in?
True enough, that’s one of the advantages of being in this line of business, but there are some heavy operational costs and I mean that both literally and figuratively. Do you know how much energy it takes to operate one of those huge, industrial magnets to lift and move whole vehicle bodies, for instance?
There are all manner of other operational costs, so the business would have to essentially hit the ground running, hence the need for start-up capital.
Administration and compliance
It can often feel as if things are moving on way too slowly if you take a closer look at the typical flow of business operations inside a junk yard, but all of that just goes back in large part to administration and compliance requirements. For instance, you shouldn’t be shocked to perhaps see car accident attorneys from the likes of Groth & Associates being consulted prior to the processing and pushing of a certain selection of accident-damaged vehicles sitting in the junk yard, since there would naturally be some legal implications around how those vehicles got that way.
It could all be part of an ongoing investigation in which the goods pushed through the junkyard are still to be used as evidence.