Auto Dismantling Business Start Up

[pinot88]

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Hello Flying Solo Forum!

I’m keen to get some advice about entering the business world, so below is a brainstorm of where my head-space is at. Hoping I can get some feedback from the community as the change from engineering and design to the new business (automotive wrecking) is like chalk and cheese!

My background:
– Mechanical Engineering background with ~ 6 years experience in the automotive/motorsport/engineering design space. A good combination of hands on and problem solving experiences.
– Looking for a new change and business provides that avenue.
– In the process of taking over the family business – small automotive dismantling business.

Business:
– Small auto dismantling yard, currently with 2 staff (I will become 3rd/owner). A decent amount of stock, but think about any automotive wrecker you’ve been to…stock recording is not their forte!
– Stable revenue streams and low stress environment – 10 years running and plenty of goodwill.
– No marketing or advertising.
– Plenty of opportunity to streamline the business and improve back-end documentation.

My strategy to the business:
– Well versed to the industry and have a decent grasp of the automotive industry I have also worked in the shop for 4 years P/T and have run the shop whilst the parents are on holidays.
– Plan of attack is to use the first 1-1.5 years as a learning phase (re-familiarise myself with the business and be involved in it’s day to day running, immerse myself in every aspect of the business). Not keen to jump in without long term, full time experience and start changing up the business straight away.
– Approach improving the business from the perspective of “minimum work for maximum gain” so I don’t waste time working on tasks that have limited yield (for example, going through and re-documenting files into electronic format, if there is not a regular future use for them).
– My questions to the community below reflect some of the thoughts I have of the business thus far.

Questions for the community:
– What do you think of the above approach to entering the business?
– How do you approach lead generation and increasing incoming revenue in a business that people only approach when they “need” something?

My view is that because of the nature of the business (needs based, people only buy parts when they need a replacement), that the best approach is to broaden and expand the customer database as far and wide as possible by building relationships with the public and workshops. Social media can be used to generate more publicity about the business, but ultimately the leads and conversions will come from those that require parts. This would steer me towards directing my time towards mechanical workshops, smash repairers etc. where my stock is more likely to be purchased.

– What podcasts would you recommend to listen to to get further insight into small business operations? Long term, I would love to see the business fully systemised with some staff running the show, but I’m not sure if it is feasible.

– Engineers are very risk adverse and try to always ‘forward plan’, though it’s very simple to get stuck into the paralysis by analysis state of mind. What were some of your best lessons that you learned through the business operations experience?

– There is a lot of improvement I can make to the back end of the business in the way of inventory system. This would greatly help me understand what stock we have and track future in-out of stock, but from a resource POV it isn’t feasible to go and count/barcode all stock (you’d be there for over a year!). Labelling as I go seems to be the best approach I can foresee for now. Has anyone had experience in going through a similar scenario?

If you can include a small background about you and your own business, that would be great! I’d love to understand more about the context of all your feedback.

Looking forward to engaging more with the community.

Thanks
K

[Paul – FS Concierge]

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Hi And Welcome to Flying Solo [USER=112703]@pinot88[/USER] . It is great to have you!

Thank you for joining our community and posting today.

What might work for you is to break up your questions into different threads and post them over a few days or weeks. That way, you will just get a lot more to work with.

To start to answer (some of) your questions, my background was in managing teams to in recruitment, then I moved into cleaning, primarily holiday apartments.

This is a low paid part of the industry that requires a lot of owner involvement.

I shifted focus to commercial cleaning where the dollars are better and the commitment lower but the value of each customer is lower so more customers are needed.

First off, if you have the ability to see the big picture, a month or 2 should be enough to fairly accurately assess where the business is and a little bit more time to evaluate where you would like to take it.

Some options would be to put all the inventory online eg, Ebay, work out some strategies around auto-piloting Gumtree (I do not know if this is possible), adding or removing inventory to specialise in a niche eg, the bush bashing 4WD market, start fabricating some non-ADR parts yourself eg for Toyota 86 or branch off into importing and retailing eg, for Toyota 86 – therefore you could bring some synergies together to make 1+1=3.

I hope I have given you a couple of ideas to think about.

Cheers

[James Millar]

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What is the rate of growth or decline in this market? ie if its retail what would be the total retail sales from wreckers to customers per year? Curious to know if there is a big decline in overall market for this. When I grew up these very a common way of repair cars because the layperson could do so it and cars were made to be fixed. Now in a world of consumable parts and people less inclined to make their own repairs – what is the future of wrecking yards?

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

[pinot88]

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JamesMillar, post: 262757, member: 5318 wrote:

What is the rate of growth or decline in this market? ie if its retail what would be the total retail sales from wreckers to customers per year? Curious to know if there is a big decline in overall market for this. When I grew up these very a common way of repair cars because the layperson could do so it and cars were made to be fixed. Now in a world of consumable parts and people less inclined to make their own repairs – what is the future of wrecking yards?

Hi James,

Thanks for your reply. You’ve raised a good point which is I need to sit down and do some market research. The business I am working into has been fairly stable, but not grown. Though I feel this is more-so from a lack of action than anything.

In my opinion, there’s always a market for second hand, spare parts as the price of OEM components generally steers many consumers away from purchasing brand new. Wreckers of more modern vehicles have multiple client bases (retail, workshops, panel beaters etc.) and you always have clientele who are unable to implement their own repairs. It’s probably a good time to differentiate between pick-a-part places (which you might be alluding to) and shopfronts which sell parts already removed from vehicles.

Various state law changes have impacted the market in that ‘stat write off’ vehicles are being purchased whole and exported overseas for repair and resale.

Shop-front wrecking yards still have greater relevance than pick-a-part places, but with more electronically equipped vehicles, good wreckers need to be on top of this an be able to exploit and capitalise on gaps in the market, I feel.

[bb1]

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pinot88, post: 262761, member: 112703 wrote:

but with more electronically equipped vehicles, good wreckers need to be on top of this an be able to exploit and capitalise on gaps in the market, I feel.

This is a very valid point, I know someone who went into one of these places looking for a replacement mirror, a couple he tried, they couldn’t test if the mirror electrics worked, so he was having to buy an unknown product. Whereas he eventually found one that could test it. SO your point of exploiting just a little thing like that would be a sales bonus IMO.

[James Millar]

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pinot88, post: 262761, member: 112703 wrote:

Hi James,

Thanks for your reply. You’ve raised a good point which is I need to sit down and do some market research. The business I am working into has been fairly stable, but not grown. Though I feel this is more-so from a lack of action than anything.

In my opinion, there’s always a market for second hand, spare parts as the price of OEM components generally steers many consumers away from purchasing brand new. Wreckers of more modern vehicles have multiple client bases (retail, workshops, panel beaters etc.) and you always have clientele who are unable to implement their own repairs. It’s probably a good time to differentiate between pick-a-part places (which you might be alluding to) and shopfronts which sell parts already removed from vehicles.

Various state law changes have impacted the market in that ‘stat write off’ vehicles are being purchased whole and exported overseas for repair and resale.

Shop-front wrecking yards still have greater relevance than pick-a-part places, but with more electronically equipped vehicles, good wreckers need to be on top of this an be able to exploit and capitalise on gaps in the market, I feel.

Ok that’s quite helpful to understand. It sounds like there are still opportunities to be had. I generally think starting point is evaluate the condition and direction of the entire market (taking into account elements in decline and elements that are on incline) before determining whether you can operate a successful business within that market. You might be the best performer by a long shot but if the market is dying then its really a case of swimming against the tide and maybe one that is never coming back in. Extreme example being the old video stores. Not even Warren Buffett could have made one of those work given the market forces at play.

But if you think there is room for the market to change and grow with more new opportunities than dying ones then its a good start. Even if you do an average job in a growing market then at least forces are working with you rather than against. It could well be the case that you could reinvent an otherwise stale industry with a new mindset and new tech.

Good luck with it all

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

[pinot88]

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Thank you all for your contribution. It has definitely given me some direction to think about now. As I go through this journey, I’ll dig deeper into the more detailed facets of the business.

Anyone able to steer me in a good direction regarding business fundamentals and metrics? I have a grasp of what I think are some good metrics to review, but I’d like to hear your feedback.

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