Building a customer base

**kss** · 06-17-2020, 01:26 PM

Originally Posted by mmerlinn

First, pick the niche that you really want to serve. Then start banging on doors. The BEST time to build a customer base is when NO ONE ELSE wants those customers. In the scrap business, that means when NO ONE ELSE CAN MAKE A PROFIT SELLING SCRAP. When scrap prices recover MOST of those customers will continue to deal with you and NOBODY ELSE because YOU WERE THERE WHEN THOSE CUSTOMERS NEEDED YOU AND NO ONE ELSE WAS THERE. Yes, there will be times where you make NO MONEY for days, weeks, or possibly even months, but when things turn around you will make more money than you dreamed possible.

For example, 50 years ago I bought a U-haul type truck for hauling scrap. After a few weeks I figured appliances were my niche. So, I began banging on appliance dealer doors looking for old appliances. Within 3 years I was scrapping 3 TONS of appliances EVERY day. By the end of the 70's I was able to buy a brand new 2-ton truck with a lift gate and a dump bed.

In the mid-80's, EPA changed the rules, effectively cutting my income in HALF for the same amount of work, so I decided to change my niche to recycling auto scrap. So, I began banging on transmission shops, auto shops, wrecking yards, recycling centers, radiator shops, sheet metal shops, etc. buying radiators, aluminum scrap, transmissions, sheet metal scrap, etc. At the end of 1986 I hauled my last appliance. Going forward I specialized more and more, first cutting out radiators, then sheet metal scrap, and so on until I was only buying transmissions and transfer cases. For several years I was processing 200 transmissions per WEEK, one year even processing 200,000 pounds of aluminum scrap from transmissions.

2008 was another watershed year. In that year the aluminum/iron price ratio went bonkers forcing me out of processing transmissions for scrap. Simply could not buy transmissions at a price where I could make a profit on scrap. Over the previous 20 years I had gradually accumulated knowledge, inventory, and customers relating to recycling used transmission parts. In 2008, I was forced to make transmission parts sales my primary business and effectively have been out of the scrap end of the business since then. Instead of selling 30 tons of iron and 4 tons of aluminum PER MONTH, I am now selling 12 tons of iron and 3 tons of aluminum scrap PER YEAR. Today, I SELECTIVELY buy 5 to 10 transmissions per month and flip them immediately for a profit, dismantle them for parts I can sell, or sit on the rare ones waiting for somebody to need a core to rebuild.

This is true, but prices are down now AND competition is up so its the perfect storm to wipe out quit a few scrappers.

Unfortunately in my experiences, everyone around me either already has a scrap guy, or takes the scrap themselves, so while this is a great suggestion, a lot of times this alone isn't enough, and especially in this saturated market. BUT this is pretty much the only answer, hustle and make contacts, and keep asking around for stuff until it becomes a reliable stream of stuff.

**mmerlinn** · 06-17-2020, 02:27 PM

Originally Posted by kss

This is true, but prices are down now AND competition is up so its the perfect storm to wipe out quit a few scrappers.

Unfortunately in my experiences, everyone around me either already has a scrap guy, or takes the scrap themselves, so while this is a great suggestion, a lot of times this alone isn't enough, and especially in this saturated market. BUT this is pretty much the only answer, hustle and make contacts, and keep asking around for stuff until it becomes a reliable stream of stuff.

At the beginning of a downturn, like now, competition is ALWAYS stiff. Six months from now many of those competitors will be gone. If one starts making contacts now, and keeps going back month after month, one would be johnny-on-the-spot when the competition fails to service the customer. Like I said, it may mean many weeks of minimal income, but picking up the pieces will pay off in the long run.

Downturns in the scrap business typically last for around 5 years before things start to get better. Most of the competition now either cannot or will not last that long. Will it be the same this time? No clue, but I have seen the same exact cycle repeated without fail MULTIPLE times over the last 50 years, so I would be surprised if this downturn was any different.

I once had a customer that I kept going after month after month after month for over 5 years. I finally got his business and kept it until he retired some 30 years later. Even though I was paying less than others, he never let anyone else in all the time he was my customer.