New Dealer looking for answers

**StarkeyScrap** · 04-14-2011, 04:53 PM

We are just getting into the scrap business as a dealer and looking to understand what kind of margins we should be expecting. We have heard considerable margins in the 50% to even 100% range, but the more research we do, the less I see of that. Can you give us any kind of average you are seeing once you have it sold to the smelter?

**Mick** · 04-14-2011, 05:17 PM

Welcome to the Forum, Starkeyscrap. That is going to vary WIDELY, depending on many factors such as area, competition and type of scrap you're dealing. I get a lot of stuff free for several reasons. For some stuff, I pay about 1/10 of what it's worth; other things up to 1/2. Just depends on what it takes for me to get it and still make a profit. For instance, I won't pay much (if anything) for Light Iron. I'll pay about 1/3 to 1/2 of what a catalytic converter is worth and about half for a battery.

**StarkeyScrap** · 04-15-2011, 10:41 AM

thanks Mick. I just thought I might have to post my pricing to be competitive with the other dealers in town, but may be best not to post? We have a large number of car mechanics and junk already in our industrial park and it may be difficult to tell people different prices, but I guess we will figure it out. Thanks for your thoughts.

**zito** · 05-22-2011, 03:31 PM

As others have said, it will depend on what materials you are going after/specializing in, as well as how competitive your market/competition is. The smaller company I work for specializes in catalytic converters and batteries so we pay more for those, and we will also deal in any non-ferrous metals our customers might have. The only steel we deal in is when one of our customers wants us to get rid of their ferrous in addition to buying their catalytics and batts and such. In that case, we'll haul it for free but we won't pay for it. We are in a large city with a very competitive market.

On catalytics we make an average of about $7-8 per piece, and on batteries we make from $0.08-0.12 per lb., depending on the customer. Both those materials are shipped directly to an end-user/smelter. On non-ferrous our margin will be anywhere from $0.15-0.40, depending on the customer, the grading of the material, the amount of it, etc. That material all gets shipped to another yard who ships directly to the smelter, as we don't have enough of that material on our own. If you are expecting to find margins in the 50-100% range, I'm guessing you would have to be out in the middle of the a$$-end of nowhere.

We make our price list readily available to our customers, or to anyone who calls in or comes to the shop, but we don't really publish or post it as such, as prices fluctuate so much and so quickly. Being in Canada, we not only have to adjust for changing metal prices, but as well how the U.S. dollar and Canadian dollar are doing against each other, as we get paid for much of our product in U.S. dollars. We have found though that making our price list/quote readily available to customers helps us, as it shows we're confident in our prices and service. I did get a laugh the other day when someone demanded to know why we weren't paying the prices from our pricelist. Turns out he had a pricelist from June 08, when large GMs were going for $160, vs. the $120 they are currently.

-edit- PS. the margins I mention are our gross margins, and do not take into consideration any of our costs such as the shop and trucks, or prepping and packing material for shipping, or shipping itself.

**zito** · 05-22-2011, 07:37 PM

Originally Posted by Kris Kringle

If that is Gross margins and your paying the prices you used as a Example You have to be Very Large Business. I don't think most here on the Forum Could live with them margins. I would Most likely say most here is Mobile Scrappers. But I could be wrong.

Overall we're not a very large business at all, there's only 3 of us, plus 1 of the co-owners of the business runs the company office in another city/province with a helper there. When it comes to cats though, I'm quite confident we're the largest producer in our province, or at least in 2nd place. This is because we are so competitive with prices. We have to be. If we're not, our competition will get those customers. Keep in mind though, I mentioned we're in a large city. This means there are a LOT of customers. All of the product we generate ourselves (by generate ourselves, I mean buy directly from the guys who wrecked the cars, etc.) comes from within the city, from another city almost the same size 3 hours away, and from the corridor in between the 2 cities. For outside of that core area, we buy from other buyers, the "mobile scrappers" you referred to, who both wreck their own vehicles, as well as buy from other shops etc.

If you, or anyone, has an area to cover with a decently big population, excellent money could be made by a single person with a truck paying close to those same prices on those same margins. That's how the owner and his brother originally started the company and built it up. It comes down to working hard over lots of long hours, being willing and able to learn, and being able to develop a professional relationship with customers and buyers over time. Nothing that's new to most of the people reading these forums, I'm sure. If a muffler shop that generates 20-30 cats a week comes to know you as an honest, well-paying buyer who comes on a regular schedule, they will save their product for you. That's a single customer that's making you $500 a month or more. It may take some time, but it will happen.

**easyrecycle** · 05-22-2011, 09:00 PM

Find out what others are paying...then find your buyers around the pricing you found. Find out where they are taking there stuff. Sometimes if you "hang" out by a hard talking and bull scrap metalscrap metalscrap metalscrap metalting you will see trucks coming and going an just keep a log of the ones you see an kinda back follow that info. Yes its cheating but if you have to be here asking then that would be the best way for you.

But there is no set amount you will make. Its all based on how much of a item you have before you send it out (more means you will make more per pound than if you took 5pounds) an where you are at.

The more you spend the more you make. My avg week I send out around 5grand (5days our office is open) an we make a return around of 0.30cents when you mix everything together (thats $1500). Sometimes I get more of one item that has a return of $1.1per pound an so that means more is made per that week. Just find your buyers....get the metals coming in and sent out...real fast to spend all your money...have tons of items...but then having no money to send out all the goodies!