Do you want to know how much money junkyard owners make yearly? If YES, here are 7 factors that determine the income & profit margin for junkyard businesses. Whenever any entrepreneur wants to start a new business, one of the first questions they usually ask is how profitable the business is.
This narrative also applies to entrepreneurs who are looking towards starting a junkyard business. They would want to know how much they are likely going to make daily, weekly, monthly and annually from their junkyard.
The truth is that there is no one-mold-fits-all when it comes to how much a junkyard is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average junkyard can make yearly and these factors are;
7 Factors That Determine How Much Money Do Junkyards Make Yearly (Profit Margin)
Table of Content
- 1. The Size of the Junkyard
- 2. The Location of the Junkyard
- 3. The Types of Junks That the Junkyard Deals in
- 4. The Management Style of the Junkyard
- 5. The Business Model of the Junkyard
- 6. The Advertising and Marketing Strategies Adopted by the Junkyard
- 7. The Number of Years the Business is in Existence
- Estimated Profit Margin for a Junkyard Business
1. The Size of the Junkyard
One cannot conveniently state the amount a junkyard is expected to make yearly if you do not know the size of the junkyard. As a matter of fact, the amount a small junkyard is expected to make annually will be far different from the amount a standard junkyard franchise will make annually even if they operate in same location. Of course, the amount invested in a small junkyard is different from the amount invested in a large junkyard hence the amount they will both make will be far different.
When it comes to setting up a new business, location plays a major role which is why feasibility studies and market survey are essential before settling for a location.
Usually, if your junkyard is located in an area that is known to generate loads of junks and close to end users of refurbished and recycled raw materials, you may not have to struggle to make good money from the business. But if you locate the junkyard in a location that hardly generates junks and an area that you would need to transport junks from a longer distance, you will sure make lower money.
3. The Types of Junks That the Junkyard Deals in
Another important factor that will determine how much a junkyard is expected to make yearly is the types of junks they deal in. Ideally, a junkyard is a business that is involved in dismantling where wrecked or decommissioned vehicles are brought, their usable parts are sold for use in operating vehicles, while the unusable metal parts, known as scrap metal parts, are sold to metal-recycling companies.
The most common type of junkyards are automobile junkyards, but junkyards for motorcycles, bicycles, small airplanes and boats or trains exist too. The profit margin for these types of junkyards are different.
4. The Management Style of the Junkyard
Another key factor that will determine the amount a junkyard is expected to make yearly is the management style of the junkyard. Trust me, the results you will get when you have a good manager will be greater than what an average or bad manager will get; definitely their results will be obvious and different. Even if you give the managers same conditions to work.
There are different business models that a junkyard can adopt and these business model offers different results. For example, the amount a junkyard that also runs a metal and non – metal recycling plant makes yearly will be different from the amount a junkyard that sells usable parts for use in operating vehicles will make yearly. The amount a junkyard that also operates franchise will make yearly will be far different from the amount a strictly one location junkyard will make.
Another key factor that will determine the amount a junkyard can make yearly is the advertising and marketing strategies adopted by the junkyard. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, but you may be expected to spend more.
But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a junkyard that is engaging in aggressive marketing to make same amount yearly with a junkyard that is passive with its marketing.
7. The Number of Years the Business is in Existence
In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is properly managed. This is so because you would have over the years won loyal customers.
For example, in your first fiscal year (FY1) you might make two hundred and twenty thousand dollars ($220,000), in your second fiscal year (FY2) you might make three hundred and fifty thousand dollars ($350,000) and in your third fiscal year (FY3) you might make two hundred and fifty thousand dollars ($550,000). Interestingly, most businesses including junkyard usually breakeven from the third year of operations.
Estimated Profit Margin for a Junkyard Business
Currently, the average junkyard pays $195 per ton, or per 2,000 pounds for ferrous metals. This breaks down to approximately $10 per 100 pounds of metal. The price that scrap yards pay fluctuates with worldwide supply and demand and can change daily.
Have it in mind that the normal markup on auto parts is in the 50 to 70 per cent range, but it is dependent on the usefulness of the parts retrieved from the scrapped automobile or junk. If it will be required that the junks will be recycled, it means more cost and a reduction to amount or profitability and, in such case, it could be as low as 20 to 35 percent.
In essence, the profit margin of junkyards is between 20 to 70 percent and it includes all the factors involved in getting the junks to the yard, processing the junk and transporting it.