Do you want to start a salvage yard company? If YES, here is a complete guide to starting a salvage yard business with NO money and no experience. If you are looking to start a business that isn’t too common, you may want to look at the salvage business. The salvage business is one where you get to buy antique furniture and collectibles and re-sell them to those who are willing to buy them.
The salvage business as a whole involves having to restore a damaged furniture or item and then offer it up for sale later. Before going into this kind of business, it is essential that you have a technical knowledge about the items you intend salvaging as this will be most helpful to you when running the business.
You will also be meeting different people in the salvage area you intend to go into and so if you love meeting people, persuading them and love the thrill of restoring damaged items and furniture, then the salvage business is for you. Before starting this business, it is important that you first do the needful- one of the needful things to do is to conduct a thorough survey of the business by visiting other salvage businesses -especially those not within your region and then finding out how they work and how the market is generally.
Since the salvage industry is a large one, conducting this survey will enable you find out which niche is most suitable for you. Also, you can find out the general information about running the business and certain tricks you might need to not only stand out and have an edge over your competitors but also how you will generate enough revenue that will allow your business remain profitable.
Once you have found what niche will be most suitable for you to startup in, you might need to start getting in touch with people who are already in the business and then use their knowledge to build your initial client list, which you can then modify as the business keeps growing. You will also need to know from those already in the niche you intend going into, how to successfully source for materials that can be salvaged. Also, knowing your niche will help you know how much it will take to start your business.
Below is a detailed and comprehensive guide on how you too can start your own salvage business from the very scratch.
17 Steps to Starting a Salvage Yard Business
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
Businesses that are involved in salvaging help to reduce the quantity of waste in the society and also help to conserve natural resources. Even though the salvaging business is very helpful as regards solid Waste Management, it is not traditionally seen as a solution to it. One reason why the business has thrived as it did is that it is less time consuming to salvage waste materials and use them for whatever purposes they are required for than to start processing virgin materials.
The salvage industry is, however regardless of its usefulness, experiencing a decline which is due in large part to modern technology and the use of fossil fuels. While many Americans – individuals, institutions and organizations – are vigorously involved in salvaging materials, the demand for these materials haven’t increased as many businesses taking in salvage materials no longer require them as before. There were about 8,000 companies in united states former salvage industry in 1967 employing nearly 80,000 people and generating revenue that was up to .6 billion.
The salvage business industry is uniquely structured and on the bottom is the junkman who picks up waste materials or sources for it from other similar businesses and then sells these items that have been sourced to a material dealer. Sometimes these material dealers restore the goods and then re-sale them and in times when it cannot be restored, sells them as junk.
Material (salvage) dealers often have to compete with social service agencies sometimes as these organizations pick up items from residents, restore them and then sell them in a bid to support their organizations (rehabilitation and charity). Demand and price are the two controlling factors in this industry as the salvage dealer might sometimes have to source for materials at a rate which he would normally not buy in order to be able to meet up demand.
The times when demand for a certain material is spiked might be due to the economic conditions of the country, demand for the material, the availability of the material and the cost of the virgin material in comparison to the salvaged one. The salvage dealer must therefore be very skilled in buying items and must have various reliable sources where these materials might be gotten.
In order to be able to select the right source of materials that can be salvaged, the salvage dealer has to take into consideration the grade, purity and quantity of the materials. High grade waste will be close enough to virgin materials as opposed to low grade waste.
Dirty scrap will usually mean the material cannot be restored which would mean that it will take a longer period for it to be sold off and so most salvage dealers avoid salvaging these kinds of materials. The products from the salvage industry are usually bought majorly by industries that will use these waste products as their sole input and those that will use only small amounts.
In order to be able to recover the waste materials it has salvaged, a salvage business has to first follow a series of steps which are; acquisition, concentration, separation, modification and the sales. Even though these are the basic steps, it is not a must that it is strictly adhered to as certain materials will not need to go through the five processes.
The major way through which materials are salvaged is first through sorting, which has to be done manually and is one of the most time consuming and expensive part of the operation. Certain materials that are ferrous in nature are sorted out using magnets.
Technology however is slowly being developed to help overcome this sorting stage of the salvage business. Also the U.S Environmental Protection Agency (EPA) is helping provide funds that will help salvage businesses in various parts of the business out.
Operating costs involved in salvaging is very high especially when it comes to obtaining and processing these materials as some of the materials that occur in large quantities are usually mixed and most usually not only have limited demand but bring in the lowest cost as well in comparison to those materials that have higher grades.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who require the services of a salvage company are not just restricted to those that are home owners, building contractors, construction companies, or electronic companies but to grocery stores, automobile outlets and factories. The salvage business can therefore be described as one that cuts across all kinds of industries.
Therefore if you are looking to define the demographics for your salvage company, you should strive to make it more encompassing.
3. Decide Which Niche to Concentrate On
The salvage business industry is a huge one and as such, there are lots of niches available to entrepreneurs looking to start their business. A niche is an area that you can choose after taking into consideration factors such as how much you will generate from that niche, how many people are currently in that niche in your region, and how much knowledge you have regarding that niche.
It is only after you have taken all these factors into consideration that you can know how successful you will be in the niche area you are going into. Companies that operate on a large scale can afford to offer more niches than those that operate on a small scale.
Below therefore are some of the niche areas that you can choose from to create a special standing for your business;
- Automotive salvage
- Scrap metal salvage
- Appliance salvage
- Antique furniture and collectibles salvage
- Architectural waste salvage
- Recyclable crafters salvage
- Grocery Salvage
- Insurance Salvage
The Level of Competition in the Industry
The level of competition in the salvage business can be said to be highly dependent on the location of the business as you would need to be physically present in order to salvage what you need as well as sell the restored properties to those who need it.
Because distance can be a huge barrier in this business, some large companies have been able to compete by having multiple locations in areas that they consider strategic enough to help them in achieving their overall goals and objectives. Smaller companies may however not be able to compete in this regard but might offer personalized services that will allow for them to compete in their own way.
If you are therefore thinking of starting your own salvage business in the United States of America, you should be aware that there are several scattered all over the country and be prepared to compete especially against those that will be operating within the same locality as yours.
4. Know Your Major Competitors in the Industry
In every industry, there are brands that are considered to be well known that even those outside the industry know them. In the salvage business industry, this is no different as several of the salvage companies that are well known is probably due to how long they have been in business, their marketing and promotional campaigns, their scale of operation or their customer relationship service. It could even be all or a combination of the above attributes.
If your intention is to make your salvage business well known, you might study the companies you admire and try to adopt some of their practices to yours. Some of the well-known salvage companies in the United States of America and all around the world are;
- Corvair Ranch
- Arizona Motorcycle Junkyard
- Junkyard Wars Junkyard
- AMARC Junkyard
- Tyler’s Lawn Equipment and Vehicle Salvage
- Retrouvius Reclamation and Design
- Cox’s Architectural Salvage Yard
The salvage business has gained prominence in the past few years, even though earlier on it was considered as a dirty business when enterprising individuals gathered the scraps of others and sold them to others that were willing to buy. Nowadays, people visit salvage yards regularly to find something amazing that is cheap enough for them.
One of the most recycled consumer product in the United States is automobile as almost 100 percent of them gets recycled in the country. The automotive recycling market is one that is very crucial as the industry has more than $32 billion in annual sales and employs more than 140,000 people.
The scrap metal salvage industry is one that uses a wide number of economic activities and is considered more environmentally friendly than actually getting and processing virgin metal materials. The players in this industry are varied as there are small, medium and large companies involved.
Players in the scrap metal salvage business have to learn about the two major categories of metals which are; ferrous and nonferrous metals. Ferrous metals contain some degree of iron as a component while the nonferrous does not contain any iron but has other components such as nickel, copper, tin, lead, zinc and others.
5. Decide Whether to Buy a Franchise or Start from Scratch
When it comes to starting a business, there are several decisions you would need to make and one of them is whether to start your business from scratch or to buy a franchise for your business. Even though each of the option has its pros and cons, the one you should pick for your business is the one that will align with your business goals and objectives.
If your intention is to buy a franchise because you are looking to start your salvage business as smoothly as you can, then it is necessary that you study what franchise options are available so that you can know what capabilities they are offering and compare them with others so that you can pick the best for your business.
Starting a business from scratch on the other hand is a way to learn about the nitty gritty of the business. Once you start from the scratch, you are responsible for the business’ growth or lack of and can change strategies whenever you deem it necessary.
Starting from the scratch is usually a scary process and most entrepreneurs who have no idea of how to run a business can easily be overwhelmed. This is why it is important that you have a business plan at hand as this document is what will influence all the decisions and actions you intend to take during the course of running your business.
6. Know the Possible Threats and Challenges You Will Face
As an entrepreneur, you shouldn’t be fazed by the threats and challenges that you will face during the course of starting or running your salvage business as these things are expected. Some of the threats that will arise are ones that cannot be handled or controlled and the best you can do is to remain optimistic and hope for the best.
However, for those you can control, you should ensure that you have already laid down strategies that will enable you to be proactive and allow you tackle the threats you are likely to face.
Therefore, some of the challenges that you are likely to face when starting your salvage business are; intense competition from already existing salvage companies in your area, government policies and regulations regarding the salvage industry, competition from new entrants in the same location, and industry trends that might affect your salvage business positively or negatively.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
As with every other business, the legal entity you choose for your salvage business is one of the most important decisions that you will ever make during the process of starting the business. The importance of this decision is such that it can limit the expansion of your business or how you can source for start-up capital for your business if the wrong one is chosen.
There are several legal entities that are available for any entrepreneur looking to start their business in the United States and each has its advantages and disadvantages, therefore it is necessary that you thoroughly study each legal entity so as to know which will offer the most benefit for your salvage business.
The LLC kind of legal entity is one where the business is regarded as a separate entity from the owners. This means that the law sees the business as an entity that is not only capable of making certain decisions but is also responsible for any consequences that occur as a result of the action or decision it took, which therefore means that the owners in an LLC have limited liabilities.
The LLC is also very flexible and an entrepreneur intending to start with this kind of legal entity can source for funds from either the commercial bank or any private investor. The corporation kind of legal entity is one that is similar to the LLC, the difference being that it is not as flexible, taxation is not the same and it is harder to set up and control as compared to an LLC.
8. Choose a Catchy Business Name
When starting out any business, one way you can easily establish your business legally is by choosing a name for the business. The name you choose should be one that is unique and memorable. Also, while it should be creative and easily pronounceable, it must be indicative of the industry with which you intend to run your business. You can look to famous names in your niche to try and get inspiration for a name to choose.
Below are some names that you should consider when looking to start your salvage business in the United States of America;
- Oak Salvage Yard
- Riveredge Furniture Salvage
- Missus Antique Salvage Yard
- Davo Metal Scrap Yard
- PPP Auto Salvage Yard
9. Discuss with an Agent to Know the Best Insurance Policies for You
When starting any business in the United States, it is important that you purchase insurance policies for your business. If you aren’t too sure of what insurance policies you should get, you can seek advice from an insurance agent or broker as this will help you know how much you will need to set aside for your insurance.
Below are some of the basic insurance policies that you might need to consider purchasing if you are looking to start your salvage business in the United States of America;
- General Liability Insurance
- Auto Insurance
- Business Liability Insurance
- Property Insurance
- Business Owner’s Policy
- Health Insurance
- Workers’ Compensation Insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
The salvage business is one that involves the sale of items that owners do not want to repair to those who do not mind restoring these items. This is therefore a purchase and sell business which is a bit different from the regular retail kind of businesses. The business is not one where you will need to worry about intellectually protecting anything major.
Some entrepreneurs in this business however usually seek for an IPP for the name and logo of their company, for its slogan or any other material production used that is deemed vital to the business. If this is what you intend for your business then you should engage the services of an attorney to help you apply for one with the USPTO.
11. Get the Necessary Professional Certification
Certain businesses require professional certifications before the entrepreneur can start and run the business but it is different for the salvage company as all the customers are interested in is procuring certain parts of items or buying a restored item.
If you intend to go into certain niches, you might require some sort of training in lifting or restoring certain kinds of items but you do not for any reason need any sort of professional certification for that.
12. Get the Necessary Legal Documents You Need to Operate
In starting any business in the United States of America, it is very important to have legal documents with which to make your business legal. Authorities do not take it lightly with businesses that do not have legal documents and the punishment is usually harsh. If you aren’t sure of what documents to get for your business, you can either visit your city hall or have an attorney draw up all that you would need.
Below therefore are some of the documents you would be required to have in order to start your salvage business in the United States;
- Certificate of Incorporation
- Operating Agreement
- Business License
- Insurance Policies
- Employer Identification Number (EIN)
- Business Plan
- Contract Documents
- Employment Agreement
- Federal Tax Identification Number
13. Raise the Needed Startup Capital
As an entrepreneur who is looking to start a business, one of the most important things you will need in order to be able to start and run your business successfully is finance. The importance of finance is such that without it, your business is not likely to start-up and therefore sourcing for finance is one of task that an entrepreneur cannot overlook, which is why having a business plan is important as your business plan will help convince anyone you intend approaching of your seriousness regarding the business and will therefore enable them to be able to invest in your business.
Some of the options that are available to you when sourcing for start-up capital to start and run your business efficiently are;
- Generating part of the start-up capital from personal savings
- Sourcing for soft loans from family members and friends
- Applying for loan from a bank
- Approaching a private investor for loan
14. Choose a Suitable Location for your Business
The choice of where to locate your business is very important as this determines the level of success your business will be able to get and the impact it might have on your close competitors. Some niches in the salvage industry are considered an environmental concern; therefore, the laws might not permit you to run such business from home. If however, you will be salvaging items like furniture with the aim to restoring them, then you could save a whole lot of overhead and running expenses by running the business from home.
Your location must be close to your target market as this will allow you spend less in promoting and advertising your business to them. For instance, if you are located close to your target market, one of the advertising strategies you might use could be an attractive signage that will allow your clients see and know where you are located.
If you are going to be renting or leasing a commercial facility for your business, you should consider how large a facility you would be needing, how much renovations you would be carrying out, if your location falls within the zonal requirements and if your budget is enough to pay for the facility as well as carry out whatever renovations you might need.
You should ensure that you get a facility that will allow you to lease for at least three years and has a release clause of a year as this will allow you know if the place you are in will be favorable to your business.
15. Hire Employees for your Technical and Manpower Needs
This business is one that requires you to love what you are doing and have an expert knowledge as regarding the niche you intend going into because even though this might look like an easy enough business to start up, several things could go wrong and not having expert knowledge about certain aspects of the business could lead to so many challenges that you won’t be able to overcome.
In this kind of business, it is necessary that you have the necessary finance with which to start the business. While you are expected to source for capital that you do not have, investors will only be confident in investing in your business if they not only see a business plan but are sure that you have committed part of your money to start the business as well.
There are several equipment that you would need to help you run your business effectively and they are a van or truck, goggles, dust masks, gloves, and first aid kit. The administrative equipment you would require are; computer, phone, printer, and software (inventory, accounting and customer database).
If you are going to be running a fairly large operation, there is no how you can run the business all by yourself, which is why you would need to build a solid business structure. Ensure that you source for only those that are proficient and also committed to helping you achieve your intended goals and objectives.
Some of the people that you would therefore need to hire are; a Chief Executive Officer (CEO), admin and human resource manager, front desk officer, accountant, field workers, marketing and business development executive, cleaner, security guard and a driver. From the above break down, you will require at least 12 people to be able to run your salvage business efficiently.
The Service Delivery Process of the Business
A salvage yard as it is popularly called mostly operates on the local level where owners look for cars, motorcycles, electronics, furniture that is damaged to buy. The entrepreneur keeps an inventory of the items that he has in possession. If the salvage yard deals with automobiles, the entrepreneur may not bother with repairing it but if it is furniture, it may be restored in such a way that someone else looking to buy furniture for their house might be able to get one.
If it is an auto salvage yard, a potential customer calls to find out if the salvage yard has what it wants and if the answer is in the affirmative, the client will need to make a deposit and then come back to pick the item at a later time after the item has been taken out for the customer.
Once a vehicle no longer has any further use in a junkyard, the hulk is then sold to scrap-metal processors who crush the body of the vehicle into sizable chunks; these chunks are then sold in tons to other salvage yards for recycling or further processing.
16. Write a Marketing Plan Packed with ideas & Strategies
Once you have gotten the start-up capital for your salvage business, it is essential that you seek for ways to generate revenue and make profit that will grow and sustain your business and one of the major ways this can be done is via marketing. Marketing not only helps you attain your revenue generation goal, it also helps you create the necessary awareness for your salvage business.
While marketing your salvage business will help you penetrate the market, get a fair share of the market and generally compete against your competitors, it is important that in order to be able to run your business effectively that you should conduct a market survey that will allow you understand the business you are looking to go into, who your competitors are, who your target market is and what you should expect from them as well as what they should expect from you.
Location is one of the factors that can help propel your marketing and make it very easy for your business to have the desired impact that you intend for it. If your location is easily accessible and convenient for potential customers, you might not need to spend so much in advertising your business like someone whose location is not conspicuous or far off would.
Because you would be marketing your business against salvage businesses that are successful and have their allotted share of the target market, it might be to your advantage to not only hire marketing executives to help execute your marketing strategies, but you also would need to engage the services of a marketing consultant who is well versed in your kind of business to help out with advertising your business.
Below are some of the marketing ideas and strategies that will be effective for your salvage business;
- Empower your marketing executives to source for clients who have items you might need and also source for those who would need these items
- Ensure that your salvage business is listed in yellow pages as well as in online directories
- Distribute handbills and fliers about your business in various strategic locations
- Advertise your salvage business in local newspapers and on radio and television stations
- Install an attractive and conspicuous signage so as to increase awareness about your business
- Advertise your business via your social media platforms such as Facebook, Twitter, Instagram and Snapchat
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
No one starting a business even a local one does not desire to have the business well recognized if not nationally but within the region where it is operating from, and in order to achieve this, it is necessary that you carry out the necessary awareness that will allow your target market to know about your business.
Large companies who understand that boosting the awareness of their brand will not only help create awareness for the business and communicate their corporate identity but will also help them generate revenue that will grow and sustain their business do not mind spending a large amount of money in order to promote their brand.
Before crafting publicity strategies for your salvage business, it is important that you conduct a research so as to know which strategies will be more effective in boosting your brand and creating a corporate identity for your company.
There are several avenues which can be used to promote your business and while some might cost money, others cost nothing at all. With publicity though, persistence is key. Below are therefore some of the strategies you can use to boost the awareness of your brand and also create a corporate identity for it as well;
- Encourage your loyal customers to help spread the word about your business
- Use social media platforms such as Twitter, Facebook, Snapchat and Instagram to promote your business
- Create a website and use this to promote your brand and your services
- Send a press release about your business to the local newspapers and radio stations
- Network with others and use that opportunity to spread the word about your business
- Distribute handbills and fliers in various strategic locations in order to help create awareness about your business