Wannabe Scrapper here with questions

Hi all,

I am in the first stages of looking at scrapping businesses to buy and came upon SMF, which looks like it will be a great resource.

I have a good understanding of business from other past experiences. However, I am wondering as I look at existing businesses, what I should be looking for and what questions I should ask a seller.

I am looking at a couple small yards which seem to take in ferrous/non-ferrous metals, and I assume, sort and sell them. My main questions at this point are:

1. how do they source inventory from metal sellers -- is it normal to have contracts with demolition companies or municipalities?
2. who do they sell to?
3. what is the time from buying to selling, i.e. how long will I hold inventory/how much cash do I need on hand?

One of the places I have looked at lists equipment including two 5,000 lb scales and 1 truck scale. What is the expected life span for this equipment before I will need to replace it?

What are the other questions you would ask? What are the pitfalls or seller tricks I should be looking out for?

Thanks in advance for any advice.

Welcome from the Dakota's. You have asked some great questions, but they are only the tip of the ice berg. For every question that you find an answer, you will have five more questions.

Metal is a commodity and trades as such. Some individuals make a living brokering metal without even leaving an office, much less seeing it. Contracts are a big part of the business with smaller yards selling to larger yards until it is sold to refineries or sent overseas. Since you are looking at smaller yards, you may want to ask them who they sell what and what kind of contracts they have at the moment. They are probably selling different metals to different businesses. As far as moving your inventory, that is a business decision that many in the business are struggling with at the moment.

In your position I would recommend three strategies:

First visit with the managers and owners of the yards you are interested in buying.
Visit with the manager of some of the largest yards in the area.
Hire a consultant to help you sort through the questions, help you understand the business, and guide you.

Even those that have been in the business for decades learn something new everyday. Reading threads on this forum will give you insight as to who you will be buying metal from and their perspective. After you have several posts, you will be able to private message. If you contact me I would be happy to answer more specific questions. As you read some threads you will find others with a great deal of knowledge that can also be a resource. Good luck.

Thanks for both of these answers. I have a lot to learn about this business!