Planning on starting your own business? One of the first things to ask is how profitable the business will be. After all, you don’t want to start a junkyard business that isn’t able to stand on its own two feet. You need to make sure the business is profitable if you want it to last!
When it comes to junkyards, there are a number of factors that can affect their profitability.
Where is your Junkyard Located?
The location of any business is extremely important when it comes to calculating how much money it could make. There needs to be demand in your local area and you need to be in an accessible location. This is where it helps to carry out feasibility studies and research the local market to see if a junkyard is viable in your chosen location.
If your junkyard is in a location that is close to lots of businesses or is close to a residential area, then it increases the chances of your junkyard being profitable. This is because businesses may have lots of junk that they need to dispose of, and consumers may be interested in recycling their unwanted goods.
If you want to optimize the profitability of your junkyard, then it has to be in a great location.
How Large is your Junkyard?
Businesses tend to scale better when they have more space. For a junkyard, space is a vital consideration because it means you can take on more junk, you have more space for machinery, and you’ll find it easier to maneuver vehicles and equipment.
However, that doesn’t mean a larger junkyard equals a more profitable business. If your junkyard is small but in a quiet location that doesn’t get many customers, then the money you save maintaining a smaller place means that you’re making more profit. In contrast, having a large space but few customers means high maintenance and running costs for little profit.
Depending on the location of your junkyard, it’s a good idea to decide whether you need a small space or a large area to keep up with demand.
What Junk Will you Accept?
It’s a good idea to decide early on what kind of junk you accept. Junkyards mainly disassemble vehicles, but some businesses may refuse to take larger vehicles because they don’t have the equipment or expertise to handle them. Other junkyards may accept smaller items such as old computers and decommissioned machinery, but these might not be as profitable when you consider the amount of time it takes to dismantle them.
You’ll also need to consider what kind of metal parts you plan to keep and who you’ll be selling them to. Some junkyards only bother harvesting the scrap metal, but others might also specialize in rare-earth metals such as cerium, neodymium, and holmium. Depending on the scope of your junkyard, you can expect to earn different amounts of profit for varying levels of investment.
The best way to decide what the most profitable junk is would be to compare different profit margins. Consider the labor costs of dismantling different junk and how much material it yields. If you were to sell the materials, would it pay for the cost of labor? If not, then it’s likely not worth your time. However, if you have an experienced specialist that can dismantle devices quickly and harvest rare-earth materials, then it could be worth your time.
How Will Your Junkyard Be Managed?
Management practices play a huge role in the overall success or failure of a junkyard. Much like any other business, it’s important to have a skilled manager at the helm of your business to ensure great results and profitable practices.
For example, some managers may lack experience when it comes to communicating with their workers. They might assign projects to the wrong people, they may overlook the skills of their workers, and they might have trouble putting together teams to dismantle larger items.
With a skilled management team, tasks can be much more efficient, profits will be higher, and your junkyard will be more profitable.
What is the Business Model of your Junkyard?
Junkyards have a myriad of options in order to turn a profit. Many junkyards only focus on dismantling certain things such as vehicles because they can harvest a lot of scrap metal that sells quickly. However, others may specialize in small electronics dismantling because they can accumulate rare-earth metals.
There’s also the overall mission of your junkyard. Do you plan to have multiple small junkyards to create a franchise, or do you want to focus on providing a comprehensive selection of recycling and scrapping services from a single location? The way you run your business will have a huge impact on its profitability and it’s difficult to estimate how much money your junkyard will make.
Is also makes a difference if you are self service junkyard vs a full service junkyard. You may need to consider having skilled labor on hand if you are full service.
How Will You Advertise Your Junkyard?
Junkyards are a very specific service. People go to junkyards to get rid of decommissioned machinery, vehicles, electronics, and other unwanted items. But if you want people to learn more about junkyards, how they can help, and also the benefits of working with a junkyard, then you need to get the message out there.
Advertising and marketing strategies need to be well-defined and you need to have a clear target audience in mind. Are you appealing to people who have too much junk at home? Are you trying to encourage eco-friendly recycling practices? There are many different ways to approach your audience and it’s important to define your strategy early on.
What Can I Expect to Make From a Junkyard?
Prices of scrap metal fluctuate and can change on a daily basis. Add to that the varying costs of various auto parts, electronics, and rare-earth metals, and it’s extremely difficult to give a rough estimation of how much you can expect to make.
However, you can expect a profit margin of anywhere from 20 to 70 percent based on the factors above. Remember that there are many logistical steps to go from receiving junk to processing it and finally turning it into an in-demand product.