Starting a Computer Refurbishing business: Lessons Learned.

For those of you who don’t know, I am currently attending college at Southern Illinois University.

I am orginally from Michigan, and I have a business I run down there called CircleTech LLC. What we do is go to scrapyards, junk yards, junk removal companies, schools, or anyplace that would have PCs and buy them. Then we flip them on ebay.

This wasn’t even a little joke side hustle. I was making 80K a year after paying all my business expenses. If my college wasn’t covered, I would probably still be in Michigan flipping PCs. That’s a full time income.

I could’ve even scaled up the business more by moving to a warehouse and paying people to do the very low-end service work (packing and shipping, inventory products) while I focus on the “smart” operatins of the business (acquiring new clients, finding IT equipment to resell), increasing my income further.

I came down to Southern Illinois university with the intent in starting the business here, but I ran into a significant problem:

There’s no people down here.

The business I ran required me to be near a densely populated metropolitan area to work best. Think of places like Detroit (where I am from), Columbus, Indianapolis, Saint Louis, Chicago, Nashville, or any other large city. But in a rural area, running a business here is nearly impossible.

I brought my car down here, and will soon be bringing it back to my parents home in Michigan, since there is no reason to pay insurance on something I have zero use for.

Just look at Where recycling centers are actually located. This is a chart of R2 Certified recycling centers around the united states. They are as you expect, located in areas with high populations.

If you plan to do anything related to computer/PC part selling, here is a few things you need to know:

  1. Such a business ONLY works where there are lot’s of people nearby.

There’s a reason tech companies are clustered in cities even though software development can be done remotely: It’s where the people are.

Companies go where the talent is best, even if that talent costs more money.

When lot’s of people are nearby, they generate plenty of ewaste. You as a business owner can come in and buy that ewaste.

Areas with low population density (think <50,000 per US county) just don’t have the same advantages.

I guess that would explain why more and more people are moving out of the countryside and into cities. It’s where the jobs, resources, and technology is.

2. Get ready to be rejected, a LOT.

Now running a computer refurbishing business already fuffils a market need, so there isn’ta need to investigate whether customers need what you have. They do. There is lot’s of ewaste and there are people online who would like to buy your used computers. This isn’t complicated.

The hard part is getting the ewaste.

I went to tons of junkyards, and 75% of them rejected me. It made sense. I was digging around in pallet boxes pulling out parts, they didn’t want me to be there due to insurance and liability reasons.

But the places that DID let me in is where the magic happened.

you walk into a scrapyard. It is thousands and thousands of square feet of all sorts of PCs and parts made as late as last year to as early as the 1980s. you never knew what you were going to find.

Sometimes I would find a sticker on these machines with the name of the business that threw them out, and I would call the company to explain I would pay them multiple times scrap value, for just giving the machines to me directly so they wouldn’t be beat up by scrappers after hitting the yard. It was great.

but getting your “Foot in the Door” is the hardest part of all. If you go to a really large company, they will reject you because they already have a recycling program in place. If you go to an individual, they will only have one or two computers (not very helpful). If you go to a small company, about 10% of the time they will sell you their old equipment. When this happens, you will generally get 10+ machines at a time, enough to keep my inventory stocked for the next 2+ weeks.

3. This is NOT a complicated business. what is your edge?

Good news: Comptuer refurbishing is a low-skill service based business that will always be around as long as we generate ewaste. It’s something anyone can start doing immediately after only a few months of training.

And that is the problem: Anyone can start doing it immediately after only a few months of training.

This means you will generally have huge competitiors who have more certifications, more employees, and generally more of everything you do. But we are all doing the same thing: Trying to buy your old IT equipment to flip it and make a profit.

what is your “edge”? What do you offer that a competitor cannot? Will you do free pickup of any computers? Will you also pick up scrap metal and other waste for your client? why should they contact you as opposed to anyone else?

My “edge” was I offered to pay these small businesses for their computers. They were okay with this, becuase to them it was just a bunch of garbage. So getting $10 for an “old” computer in their eyes was better than the $0 they would get elsewhere.

What will you do different that a large competitor cannot? Maybe you will take more stuff than they can? Maybe you will drive up and collect the ewaste from them? Maybe you will pay them for machines with resale value like I did.

Otherwise, you need to have an edge. without one, nobody will go to you.

4. Want to scale this business up further? Get really to pay through the nose for certifications, compliance, and overhead.

The 800 pound gorillas of the Computer recycling industry all pay millions of dollars per year in overhead from Payroll, lease on vehicles, Certifications like R2 and ISO 14001, electricity, and insurance. You don’t have to pay your employees much for the jobs they are doing (Tearing down computers, listing them) but oh boy is the compliance a nightmare since this is a low-end service based industry with shredding machines and heavy equipment.

Of course, they also make millions of dollars a year. I got wind of a salary at a very large computer recycler I visited in Saint louis. Last year he paid himself 2 million dollars even after payroll and business expenses. There’s money to be made, but the barriers to entry are high. It also took him 20+ years of growing the business to reach that point.

For starters, you need to buy a box truck, which could cost 20K+ by itself used. You need to rent out warehouse space, which could cost thousands of dollars per month. You need to pay for employees, insurance, payroll taxes, materials to ship things, the list doesn’t end. I wouldn’t be suprised if by some accounting method you could determine the employees insurance, taxes, and compliance costs more than you actually have to pay the employee.

Oh yeah, and I haven’t even talked about the compliance side of things yet.

All large computer recyclers have a certification known as R2. R2 guruantees that your company sends nothing to the landfill and costs in total for both direct and indirect costs, $30,000+ a year.

R2 also takes almost a year to reach certification, with most of your money going towards consultants and pollution insurance.

But then once you have R2, you can start approaching really big business (think companies like AT&T, Dell, HP) for their ewaste and MAYBE you will get ahold of machines. Just maybe. Still no Guruantee.

Are you sure you want to start a business like this? Maybe you are. Maybe the profits really are worth the work. but for many people, the risk is too high and the potential reward is too small. Six-figure corporate and trade jobs do exist, and in low cost of living areas can be a great way to build wealth without the risk and demands associated with running a business. Most people just want to keep their bills paid, not be homeless, and save for retirement. If that is you, then you don’t need to start a business.

And Finally, the most important lesson of them all:

5. A College education opens doors to highly-skilled jobs where one can build a real startup.

Over the summer, I went to a bunch of startup meetings with my business idea.

Most of the people there said “cool, but that’s not really a startup. That’s a small business. If you want to start a small business, go to the bank and get a loan”.

In other words, my idea was not new or different enough to interest or attract investors.

Investors seek 10x growth, not a 6% return over 5 years. A Banks job is to do that.

Want to build a sexy startup? Want to work really hard and not just run around and flip stuff for a living? Want to build a product nobody has ever seen before that adds true value to the market? Then in today’s world, a college education is highly reccomended.

This college education can be used to get a job at a startup, where one can learn the real meaning of starting a business from nothing. Not really sure if you have a customer base, and not really sure how big of a market there is for your product.

Plus if nothing else, getting a college education in a STEM or business field can lead to a high salaried job, where one can plan an early retirement like the Financial Samuari, Mr. Money Mustache, or Retire By 40. If your goal is to be able to do what you want, when you want, and not be subject to anyone else’s decisions like corporate buearucracy, endless meetings, or wasting time on meaningless tasks just to look busy, early retirement seems like a great way to execute on this idea.

Of course, another 2008 level crisis could destroy any dreams of early retirement, but you would still be in a better position than 4 out of 5 Americans who live paycheck to Paycheck.

As much as the media loves to talk about how “college degrees are overrated” (coming from journalists who are paid ~30K a year), there are still plenty of benefits of going from networking opportinuties (that don’t really exist here are SIU because again, Rural area) to working on a side project that can get you a job.

Personally right now I am trying to learn to code. The most i’ve written so far is a calculator in python, but it’s a start. Maybe I could learn some PHP to spruce up this website beyond the barebones look it currently has. If you have to go stright into the workforce, you can’t work on these little projects because life starts to get in the way.

What to learn:

There are many, MANY ways to make money. But whatever you do, it needs to be a skill that cannot easily be taught. It needs to be a skill that cannot easily be learned. If you posses such a skill AND the market needs someone with your skill, you will be highly paid. The more complex the skill, the more someone must pay you.

College is a time to learn. College is a time to develop that highly specialized skill set that others cannot easily replicate. This can land you a job, and that’s all most people want.

Want more than a job? Take your highly specialized skill set and build a startup, or join one. Then you can build something the world has never seen before.

You are not Bill Gates. You are not Steve Jobs. You are not Elon Musk, and you are not Jeff Bezos. And you know what? you probably never will have the level of wealth they have. They are the equivalent the winning the 1 billion dollar powerball jackpot combined with an absolutely perfect business idea the world was already screaming out for. Yet for some reason the mainstream media ignores all the startups who came before them, and failed. Amazon didn’t even make a profit until 2018. Incredible. You can run a company for 24 years without making any money. I thought companies were supposed to make money?

Whatever you do, make sure you get the bills paid. After that you can stop worrying about money and grow as a person. If you spend your entire life worrying about making ends meet, you can’t spend that time Educating youself formally or informally. American Capitalism will chew you up and spit you out. That is unless you have a skill to bring to the marketplace.

Get back to work, we have things to do.

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