Opportunities & risks in scrap metal business?

by a searcher from Xavier University of Louisiana

3 years ago

I'm engaged with a broker to buy a scrap metal pick up and drop off company in the Houston, TX MSA. It passed my initial filtering and the next step is to tour the facility and talk to the owner. 

Any opportunities & risks with this type of business in your experience?

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searcher from Xavier University of Louisiana

I think he's focusing on smaller bin sizes and he lets the scrap yards have the bigger fish. Which means that he's not maxing out truck capacity, but he's able to spread out his collection sites to over 200 sites (many) around Houston.

3 years ago | like reply | 1 like

searcher from Xavier University of Louisiana

Thanks guys! This business does not own a scrap yard. They simply purchase bins and trucks and they "sell" to companies that generate scrap metal. The pitch is - use my bins and I'll get you the highest price for your scrap. Customers obliged and this company drops off an empty bin. Once it's full, customer calls this company. This company picks up the full bin, drops off an empty bin, takes the full bin to a scrap yard same day and makes 30% gross margin after paying driver and fuel costs. He takes no risk on the scrap metal price and there's little to no working capital requirements (he gets paid before has to pay for the scrap metal).

3 years ago | like reply | 1 like

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