What Does It Take to Start a New Recycling
II get lots of calls and emails
from folks who are entertaining the idea of starting a new auto
salvage business. I've had this story on my to-do list for some
time but saved it until now so I could see how some of the new
yards that opened in 2001 and 2002 fared.
The jury is in, and it's interesting. Opening a new yard isn't
nearly as hard as one might think as long as certain things
are done up front. Ironically, they're the same things that
current operators need to do but, most of the time, don't. Plan.
Anyway, on to the meat and potatoes. I saw two folks start new
yards that failed or dramatically under performed. They didn't
have plans. They thought it was as simple as just buying cars
and selling parts. They opened up, had too many employees, lost
their start-up money, and struggled big time. They didn't seek
help, and both lost in excess of $100,000 in their small but
ambitious operations. They didn't research anything, didn't
have an operational or financial plan, and had no goals or benchmarks.
Both of these folks balked at spending money on sophisticated
help. In one of the cases, the owner was a very successful ex-counter
person from this industry. (It takes much more than sales ability
to succeed. In fact, the "winners" in this story,
excepting one, had zero experience.
I saw four folks open new yards that were successful. None of
them knew anything about the business. Some were smart; some
were not as smart. Some had better attitudes than others, but
all shared ambition and a healthy desire for success with varying
degrees of maturity. One was only 20 years old; one was 48.
All four sought help. All four had business plans, with full
blown operating plans and financial targets, which included
goals and benchmarks.
They started with sophisticated and refined systems and allowed
them to run with very few employee. That's not a typo, no plural
there (but it is bad grammar). They all got SBA loans and started
with $50,000 to $75,000 of their own money. All four made a
profit in the first 12 months and are doing well, although they
are working hard and still drawing only modest salaries. All
four spent about $5,000 developing their plans with outside
help and consultation. There is nothing wrong with a small yard
netting 15% to 20%, or at least $100,000. Several aspire to
be bigger, several don't. (See my article earlier this year,
"Is Bigger Better.")
The moral to the story? We have too much baggage. While we are
wringing our hands about change and holding on to excess employees
using bad systems (usually no systems) and weak or non-existent
financial and operating goals, others are starting out with
no baggage and doing well. It's a little like something we know
intuitively very well. How many times have you said that you
can't believe that your kids won't listen to you and learn from
your experience? Oh no, they have to find out on their own.
How many times have we said, "If I only knew then what
I know now?" The new folks have to ask. They are babes.
They don't question; their eager eyes wait for further instructions.
If it were only that easy for us who have been doing it forever….
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