You build a profitable scrap metal business by incorporating solid, time-tested business principles.
The scrap metal business can be incredibly profitable—but it doesn’t happen by accident or by magic. In every industry, successful business owners develop a plan and stick to it. Over time, their diligence and clear boundaries can translate to steady profitability.
The road to success looks a little different for every scrap metal business. But there are a few basic principles at the heart of every profitable scrap metal business. And it always starts with finding excellent customers.
Find scrap metal customers who pay well.
It’s challenging to build a business that caters exclusively to the cheapest people in your customer base. However, if you focus all your attention on this particular demographic, your profit margins will stay razor-thin. Without massive sales volumes, this simply is not a sustainable way to do business.
It’s much better to focus on customers who are willing and able to pay more for scrap metal. There’s nothing wrong with having a few lower-paying customers, of course. But your priority should be the relationships that will keep you in business. If your well-paying customers are happy, they’ll keep coming back, which is how you keep your doors open.
Another desirable trait in a great customer is reliability. Every minute you spend chasing down late payments is a minute you’re not spending on growing your business. Customers who pay promptly are your VIPs.
Find suitable scrap metal suppliers.
Reputable suppliers can make a massive difference in the profitability of your scrap metal business. Working with well-respected partners is excellent for your business’s reputation. But these folks are not always easy to spot, especially if you’re new to the industry. Your best strategy may be to find one local supplier and build a relationship with them. Look for someone with years of experience and an excellent reputation. They can give you advice on who’s trustworthy, spot fair pricing, and more. One good relationship is a powerful stepping stone to creating a great network of scrap metal suppliers.
If you want to get into recycled metals specifically, consider partnering with a recycler for those materials. Foundries and other facilities are usually looking for more volume than a scrapyard can provide. Working with a recycler can open doors to larger orders, which can boost your profitability.
Set your scrap metal prices strategically.
In the scrap metal industry, price fluctuations are normal and frequent. But if you’re not adjusting to these changes, your business may struggle. On the other hand, if you price too high, your customers will simply turn to your competitors.
If you price too low, you risk compromising your profitability. Plus, if you don’t know where prices stand, you may end up paying too much for supply. Again, this can be disastrous for your profits.
The key to fair and competitive pricing is to know what’s happening in the market on any given day. Thankfully, there are several great price-watching tools for scrap metal that you can use to stay current. Two reliable options are www.metalprices.com and www.scrapmetalmap.com.
Additionally, keep an eye on the news, especially any stories related to supply chain disruptions and changes in demand. You can react to unusual market shifts more nimbly if you know they’re coming.
Don’t forget: Pricing is about more than just materials. For example, if you offer delivery services, you need to price appropriately. So make sure you’re shopping around for affordable options regularly.
Be reasonable about your scrap metal inventory.
Optimizing your scrap metal inventory is a balancing act. You want to have enough material to meet your customers’ needs, but it can drag down your books if you have too much in stock. Plus, big piles can make your customers suspicious.
Thankfully, this balance becomes much easier to strike when you’re watching scrap metal price fluctuations. Over time, you’ll know what high and low prices look like for different materials. With that knowledge, you can be strategic about buying low and selling high.
Stay focused on your goal: A profitable scrap metal business.
As a scrap metal business owner, you’re likely to face dozens of decisions every day. Unfortunately, it can be too easy to lose sight of the big picture when bogged down with details. However, every judgment call gets a little easier when viewed through the lens of your primary goal: Profitability.
Scaleit is an industry-leading truck scale software that can support your profitability goals. With Scaleit, you can process more orders per day and scale your business with ease. And Scaleit is priced competitively to protect your profit margins.
To learn more about Scaleit and how we can support your scrap metal business, get in touch.