Born Scrappy
This is the podcast for scrap metal traders and operators who want to get sharper without losing their scrappy edge.
Born Scrappy
Navigating Market Consolidation with Steve Zusman
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In this episode of Born Scrappy, I sit down with Steve Zusman, Vice President and Co-Owner of Metro Metals, for a masterclass on navigating market consolidation in the scrap industry.
Steve brings decades of experience to the table - from growing up in a family-run yard to overseeing multiple business divisions including scrap, real estate, and garbage transfer across the Pacific Northwest.
We talk about the real forces behind consolidation, what it’s like competing with the corporates, and how private operators can still win with strategy, discipline, and heart.
In this episode, we talk about:
👉 What’s actually driving consolidation
👉 Rising insurance & compliance costs
👉 Capital pressure on smaller operators
👉 Why disciplined growth matters
👉 Preparing properly for M&A
👉 And more!
Whether you’re a one-yard hustler or a regional player, this episode will help you rethink how to survive and thrive in today’s market.
Born Scrappy.
Brought to you by Buddy.
The only marketplace and trade OS built for scrappies, by scrappies.
https://www.tradebuddy.io/
https://www.linkedin.com/company/tradewithbuddy/
WHO IS STU KAGAN ANYWAYS?
27 years in the metal recycling game and still learning and growing…
I learnt from the best and worked my way up from yard labourer to Executive Director of Trading and Operations for the largest metal recycler in sub-Saharan Africa. Responsible for 4,500 employees, 85 sites, and the overall profitability of a multi-billion dollar operation.
I brought my breadth and depth of knowledge to bear and co-founded the fastest growing, most-loved, and most awarded metal recycling company in New Zealand.
I thought it was time that tech worked for our industry, so I built THE killer scrap app, Buddy - built for scrappies, by scrappies.
Father of two crazy-awesome boys. Husband to Lisa. Kids rugby coach. YPO member. Founder. Lifelong learner. Mentee. Mentor. Committed Stoic. Undefeated dance-off champion.
COME SAY HI ON LINKEDIN
https://www.linkedin.com/in/stukagan/
Meet Steve Zusman
The Impact of Consolidation
Public vs. Private Perspectives
Challenges in the Scrap Metal Industry
The Future of Small Scrap Businesses
Regulatory and Financial Hurdles
Advantages of Being a Family-Owned Business
Direct Access to Top Management
Personalized Customer Service
Competing with Large Corporations
Decision-Making Flexibility
Financial Prudence and Deleveraging
Navigating Market Challenges
Preparing for Business Acquisitions
Valuing Your Business Realistically
The scrap metal recycling industry has always run on hustle, trust, and sharp instincts. This is the podcast for traders and operators who want to get sharper without losing their scrappy edge. I'm Stu Kagan. Bringing you insights and stories from the people shaping the future of our industry. This is Born Scrappy. Steve, welcome to Born Scrappy. Thanks for having me. Yeah, man. Uh, I'm excited This, um, season five is all about master classes, so we are, um, bringing in specialists and people that have been around and seen it all. So I'm excited to delve into this one with you and, uh, I know you've been around for a while, so we'll get into the meat of it all, which is gonna be quite exciting. So, just to give everybody some sort of context, this episode is called Navigating Market Consolidation. And what it really means for scrap operators. Now, Steve, can you give us some background on how you got into this industry, you know, and where you are today as a company? Uh, Metro Metals? Sure, sure. Um, well, I did like a lot of people in the industry started off with the, uh, family business, uh, way back in the 1960s. Um, I have been working in the industry since I was approximately 15 years old. Even actually before that. My dad used to bring me to the scrap yard to sort metal when I was a, a kid on Saturdays to get outta my mom's hair. And my reward would be a fast food meal, uh, at the time. So, uh, been in a long, long, long time. Um, back then it was called Zeman Metals. In 91 I partnered with Victor Winkler and. We changed the name to Metro Metals Northwest thinking it was a little more corporate and big world than using the family names. And, uh, we've just, you know, taken off since we have three fairly distinct divisions. We have the scrap metal division, the real estate division, and the, uh, garbage transfer business, mainly in the Pacific Northwest, but also we do a lot of business in Colorado and surrounding states as well. Steve, I don't think that context was needed for anybody in the United States. I think everybody knows the market share you have in your region. I think that's great context for the international listeners. I, I must tell you, I did sort out Steve for this and make sure that he was available to come and talk to us so. Very excited to get going on this. Steve. Let's jump into it. These episodes are all about focusing on one topic. I look forward to doing another episode with you one day where we talk more about your experience and your lessons that you've learned. But let's get into consolidation and kind of understanding what it really means and. I guess everybody remembers the first time consolidation stopped being a headline and it started really changing their day to day. And what I mean by that is you go to these conferences and somebody gets on the stage and they're like, yeah, you know, the future, it's consolidation and vertical and uh, horizontal. And everybody's like, the big guys are eating the small guys, and you know what's gonna happen next. And all of a sudden something happens where it's like, oh wait. This isn't just something they're talking about on stage, it's actually affecting my day to day. So is there anything that ever happened with you where you can go like, I now see what everybody's talking about? Well, in the early days when consolidation was becoming a bit of a byword, I am either fortunately or unfortunately old enough to remember the metal management days when that big roll up was going on. It didn't work out so well. They did a lot of, uh, purchasing without seemingly, at least I wasn't on the inside, but a lot of the due diligence wasn't there. Uh, I talked to some people who, yeah, they bought such and such a company and the inventory wasn't there, or maybe the talent wasn't there. I think when it comes to consolidation, I was given a little bit of thought to this, so I actually took this podcast semi seriously anyway, as seriously as I take. But, um, there's kind of a dichotomy of viewpoints as I look at it. There's the publicly held version and then there's the privately owned version. I obviously come from the privately owned standpoint, but of a yard of at least, or yards, I should say, a company of decent size. And it appears to me that at least in the publicly held side, they're more concerned with top line revenue growth. Um, you know, in my neck of the woods, which are headquarters in Portland, Oregon, we are the home of where Schnitzer Steel started, and I knew Leonard Schnitzer and the five Brothers. So I've got pretty good, you know, history of watching them. And when they ran it, I actually was a privately held business, but after they sold it, it, it seemed to become more of a top line revenue growth. Um. From my education back at the University of Oregon and a highly esteemed university of Ralph Miller University. It's a very selective university based in the Pacific Northwest. We were taught, you know, just like real estate, location, location, location. We were taught margin, margin, margin. So bottom line revenue versus top line revenue for us. You know, that's key. Uh, it is like one of the oldest phrases. Sometimes some of the best buys you make are the ones you don't make. We try to live to that. But you know, that being said, Schnitzer, which turned into Radius, they were just bought for one point something billion with, uh, a multiple that was like outta sight. So sometimes top line revenue goes very well. Of course, you can't really relate it to a, a tech company for instance. Their multiples are ridiculous. But for us, in the real world. I think the big guys, the corporate company, you know, for them the growth is, is important. They have to show growth all the time. For us, again, like I said, we wanna see money at the bottom line. We have to pay our bills every day. And looking back at Schnitzer, um, we are always asking ourselves, how do you lose millions of dollars quarter by quarter? By quarter? It's like 15 straight quarters and still come out on top. And we used to walk around and say they're crazy. And then they made the sale to Toyota. I was talking to my partner Victor. Yeah, they're crazy like a fox.'cause that worked out. But again, yeah, exactly at corporate level versus the privately owned company, which has hurdles after hurdles, which I can go into that as well, but, well, we will, Steve, we will. We are gonna go into all those hurdles.'cause I think that's where I want to get into. But how did you feel your business had to change the way you operated? Or did you decide, well, we actually need to grow in order to compete? Or did you decide, you know, we could lose our people? We needed to get the edge on the sales because now they were much bigger company. How did you guys, you know, when, when it became the norm, consolidation was happening all around you. What did you guys change in your business? Well, one, one of the things we did. And have always done, we never ever worry about the competition. Everybody's got competition. I don't care where you're at. And maybe you said, gosh, you know, let, let's move to such and such. There's nobody there. I can almost guarantee you in a little while, somebody will be there. So there's always competitions. Bottom line, we focused on ourselves. We didn't worry. I, I still remember the day when Leonard Schnitzer. Told my partner, he goes, you better watch both ways when you're crossing the street. And that just spurred us on to do more. Um, but, but the growth is for us is slow, organic. We have areas that we like to be in, but we don't feel the need is, Hey, I gotta buy this guy. I gotta buy that guy. I gotta grow, grow, grow, grow. It's organic, slow growth, lots of due diligence. Uh, any deals that we do are generally bigger deals. We don't try to add. Small post stamped yard.'cause as we found out, the more managers you have, the more yards you have, the more headaches you have. I'd rather do the bigger deals and not the smaller deals, which, uh, again, it's just, there's so much happening. It starts to drive you a little crazy. That's very valid. I mean, that makes a lot of sense. Yes, it takes a little bit more effort, but the payoff on the big deals is just so substantially bigger and great. And sometimes you can find the small deals, you know, for smaller yards can take the same amount of time as the big ones. But you know, the outcome is, is completely different. So. Yeah, that makes sense. So I guess for you guys in with the market consolidating, you guys have just stuck to your knitting and you've just made sure that you focused on yourselves, you grew in the way you wanted to organically, you made sure you had depth inside the company and you could run the yards that you wanted to run. And if you were, there was an acquisition on the table, it was a large acquisition that probably, I'm guessing, came with the right amount of volume and the right amount of people as well, I would assume. Definitely, and you're almost looking for good talent. I mean, it's not uncommon for people to have 10, 20, 30 plus year careers at Metro Metals'cause we pay a little higher. Our benefits are a little better. Our 401k is ridiculously good. But we do that for a reason. We don't wanna lose the good people we have that help us with the growth and the profit level that we're looking for. But. I thank God I'm not just a little one horse Saloon anymore because frankly I don't, it, it is kinda like they talk about the KS shaped economy these days. To me it's our business is, is almost the same way. You've got the bigger companies that can grow and prosper and they've got enough capital to do what they need. But the smaller companies, man, I feel sorry for them. It, it's a tough environment in which to exist, especially on the West coast, but I think nationwide as well. So I want to delve into what's driving a lot of the consolidation.'cause I think we're gonna delve deep into what is really pushing for. But I wanted to ask you one more thing before we get there. Is consolidation just big guys buying small guys? Or do you see small guys merging with other small guys? Like what? What do you think? Is it as simple as just big guys buying smokers and it could be. I mean, there's no question the other strategy or, um, George Bush would say Strategery. It's always one of my favorite phrases of his, but you know, I can't really speak to them. I've never been in the large corporate world, but, you know, I'm seeing areas that. Like George Adams would, for instance, he'd look and I, I've seen they've made a lot of, uh, acquisitions in the South, for instance and in other areas of the country. So I'm sure there's, there's a definite strategy, Hey, we wanna be bigger in the northeast, we want to grow in the south, or, or, you know, various areas. Um, so I mean, these days it's, it's also strength through numbers. There's no question that the day of the little guy is peaked and going away. And even I call ourselves a regional player. Even regional players like ourselves have to continue to bolster what we do to be able to, uh, um, get over the various hurdles of business. So yeah, I think some of it is strategy. I want to be in this location or that location. Uh, maybe for us, something key is when we acquired Denver. That gave us both domestic exposure and the export exposure. So I'm sure that that's also looked at as a strategy for some of the larger companies, uh, smaller guys. I think they're just trying to hang in there. Do you see smaller guys getting together trying to like, create something bigger by getting smaller guys? Or is it just kind of your industry? I don't know. It's more the smaller guys have more of the pioneer spirit if, if you will. Mm-hmm. But I think the smaller guys, if we're talking about them, I, I think they're going away. I don't think you can exist in the business world in which we live today. Well, let's go into that because when we had a call the other day to talk about having you do this masterclass with us, you gave me a, a side of consolidation that I hadn't really looked at. To me, consolidation was strategic from the larger player. You know, George comes up all the time, whether it's George or Enos, or anybody else who's ever acquiring some yards. I always look at it as top down. So they're focused on growing their entity by bringing in small operations. You started talking to me about, you know, there's more about compliance and I think this might be mostly for the West Coast, and I think people don't think this immediately, so I'd love you to just explain what you were telling me about how, and your perspective is there won't be any smaller guys later. I think it is very much a West Coast perspective. But it's due to what you're gonna tell us now about how they're being pushed out of business. So just tell everybody what you were telling me. Well, it used to be, and remember I've been doing this for over 50 years now. It, it used to be businesses and cycles. I'd see it for years. I'd see it for decades. Growth, consolidation, getting bigger, bigger, bigger. And then somebody would break off. They'd start their own business and a few people would maybe go with them, et cetera. So, you know, it's just like a garden. You know, you plant your garden and and would get big and then maybe a few seeds would fall off and germinate and start another business elsewhere. I think that was the case today. There's more hurdles than, uh, I swear to God, sometimes I think I could be in the Olympics. I could be a hurdler'cause there's more hurdles. To go through these days to be in a business than I think ever before. You mentioned, uh, you know, regional West Coast. Uh, agreed. We have a few extra hurdles, however, let's talk about one of the number ones. Our, our number one expense that's gone up in this last year insurance and, and that's nationwide. Yeah. Insurance is crazy. I, I, it's worldwide, actually. We've gone a hundred percent, 200%, 300%, but. Our insurance bills are nuts. It is the only business that I know. I'm fond of saying this only business I know, but they really don't want your business. All the rest of us is, Hey, we wanna buy your medal, we wanna buy this, we wanna buy that insurance business. They go, would you please take me on as a client? It is the craziest business I've ever seen and that anybody can relate to nationwide. Um, then the next topic for me, the next big hurdle, environmental. Now admittedly, that is a little more regional. However, I think we all know, you know, it's growing, it's certainly worldwide. Um, I mean, I've got my horror stories about sending material, you know, over to China and then in mid water they changed the rules and then it got there and they end up holding my containers for a year while we tried to navigate the new rules. So, but that's, you know, maybe a story for another day, but, but mm-hmm. On in the environmental front. I mean, right now we're in the middle of covering our shredder and in some areas of the country, they're covering your shredder. You guys are nuts. But on the West coast, you gotta cover your shredder. Everybody's coming after you. And I'm not talking about a hundred thousand dollars deal. I'm talking about 15 to$20 million to cover a shredder. What are we gonna get out of it? What's the value to our bottom line, our return on investment? Try zero. Nothing. It enables us to stay in business, and that's obviously somebody who owns some shredders, but the environmental parts, the various rules, regulations, uh, you know, be it water, air or whatever. Uh, a little guy who wants to start a business, you've gotta start with the base on the ground and, and work up into the air. It'll cost you a fortune. Um, so that's certainly difficult. What about permits? Have you ever tried to build anything and get a permit? I don't know what the city people do all the time. They're all saying, we want business. We want business. We want business. Until they actually have to do something. Then you're asking for a permit. Try waiting weeks. Try waiting months, and then having them say, yeah, everything looks good except for this one part here, and you need to adjust that part. Oh, by the way, to adjust that part, you have to do the following. Well, yeah, but that's okay. You're gonna do that. Okay, great. Come to us. When you're doing so, then you got more weeks or months. So getting permits, I was laughing uh, a while back. We were talking about, uh, signs and elevators. Who cares about a sign? Who cares about an elevator? We have an elevator inspector that comes every three months at one time. I got to be the smart alec that sometimes I can be. It's like I walked up and I go, don't you have anything better to do than inspect our elevator? And then as well as with the sign, unless you're grandfathered in for certain signage, I remember the sign permit guy came and go, yeah, it can't be, yeah, you gotta take the sign down. It's too big. Or, or whatever. It's like, you gotta be kidding. No, no, no. It's important. So it's all these little things, rules, regulations, science. I haven't even talked about taxes yet.'cause, you know mm-hmm. Again, you wanna talk about something nationwide, worldwide. We all gotta pay taxes, be it from, from payroll to to income, whatever your business taxes are. So, uh, again, another major hurdle, um, and you can stop me if I'm running too long, but like I said, Olympic hurdler here, there's a lot of'em. Uh, capital try being in the business today in, in, in these capital markets again. Small guy or big guy. It doesn't, it's all relative to scale, but um. Yeah, I think, I think Steve, I capital's a really interesting one for me because just everybody's really excited about, uh, and, and I'm not even talking about the capital of buying some fixed assets, like putting a, a cover over your shredder. That that's another level. Just actually being able to run a business when the copper runs through over.$12,000, uh, in the enemy, all of a sudden the capital that's needed to fill a container is, you know, 20, 30% more than what you were doing a little while ago. Maybe 10, 15%. But the point is it's substantially more capital needed. So to go back to what we were talking about, consolidation, it's not necessarily the big guy buying the small guy because he wants them strategically. I'm not saying he doesn't want them, but actually you saying a lot of the time, the small guy. Having feeling like they need to get out. Is that right? Right. Pressure. Pressure. You better believe it. Yeah. You gotta make, you gotta make payroll. We just had a company that we did, they were actually a supplier test. We did business with them for 30, 40 years and they had to fold the tent. They just can't afford it. We can't afford what we're paying. We have a, you know, our roll off truck systems. It used to be, uh, my partner and I were chatting about this the other day. We used to be able to buy, uh, you know, a fifth wheel for, I dunno, it's 25,000, 50,000 bucks. Then you, you slap on a system, you're rolling down the road for a hundred grand, latest, uh, latest addition to our fleet, 350,000 bucks for a truck and, uh, roll a system. So if you're picking up from suppliers, which is our main niche, is, uh, um, we're, we're more of a mobile. Um, scrap metal company. We go and get the material, put the drop boxes out the customers, but the barrier to entry is huge. Even a small truck is gonna cost you for a decent one. It's gonna cost you 50 to a hundred grand. You want to go up to your roll off trucks, you're up to 350. And we add an electric truck to fleet, which was, that was actually a hilarious story'cause it, it retail for$400,000, but they really wanted somebody to have one on the road. And I, I, I think my partner ended up paying less than a hundred thousand dollars for it. They wanted to keep it moving and admittedly, the, the uses of it are, are somewhat limited anyway'cause of the, the battery power, but I'm assuming that's gonna get better over time. You talk about this capital constraints, it's really hard. The barriers to entry are just huge now. But what it does is it actually creates a moat for you. So if you are willing to build the cover on the shredder, well, there's not many other people that are. All of a sudden there is a benefit to the larger player because if you do have the capital, it is a lot easier to stay in business and while others fall over. Another struggle. You are actually able to obtain more volume, get better margins, hopefully for your sake, et cetera, et cetera. But that brings me into, I want to talk about what the hidden edge is, because in consolidation, we all think. The huge multinationals, the corporates buying out the smaller guys. Now I had the, the pleasure of being in Auckland, New Zealand and getting to compete with the largest scrap metal company in the world. And actually really enjoyed it. I found it, uh, not that difficult. In fact, they were easier to compete with than the, um, family owned businesses. Now, a lot of people throw their hands in the air. Oh, well. Big guys moving to town. I'm screwed. I have a different feeling to that. I'd love to hear from your side, like what are the advantages you have when there is large consolidation and the big players are taking over the smaller guys in your area as a family owned or privately owned business. Where do you see the advantages? Well, for us and and, and something we like to drill into a lot of. Our suppliers and prospective suppliers, we tell'em, where else can you go? You wanna come to our headquarters? You can want to come to our offices or call on the phone. You can talk to me, you can talk to my partner. Where else can you go where you're going? Right to the top. Have you ever tried to get to the top of a publicly held company and talk to an actual. Obviously if you're publicly held, there's more than one owner, but let's just say the president or the CEO or whatever. Now I don't know about you, but I'm not just gonna pick up the phone and get ahold of A-A-C-E-O of one of the larger companies. They're just gonna pick it up and they go, oh, hey Steve, how you doing? It's not gonna work like that. So my partner and I are, we're always available and we have a lot of be it employees or suppliers that will call us all the time and just say, Hey, what do you think about this? We always tell'em, we go. Hey, we're usually weeks ahead of the markets. Gimme a call and I'll tell you what we're seeing happening in the commodities world or what steel sales are going forward. So I think that's one of our, one of our biggest positives is you get right to the top with us. Maybe on some of the larger companies, you just can't do that. So I, I think for me, that's, that's probably our number one. But we're a very customer service. Oriented company. Um, and that's where, again, that's where we've made hay and we always have. And as far as, uh, my partner and I, we all take everything from the little guy to, to the biggest customer. We take it all very personal. You know, it's amazing how sometimes if, if you lose an account, I wanna know why, when, how, what happened, what did we do wrong? What do we need to fix it? Or even if you don't lose a customer, so many complaints about something. I'm not just gonna brush it under the rug, and this isn't a paid advertisement either, but I want to know what went wrong. I think sometimes in larger companies, maybe something like that won't matter so much, but we take it very personally, Steve, no matter how good you are, as a really, really large corporation. It's actually impossible for you to do what you just said. So it's not that we don't think these large corporates are good at what they do. Eventually you get to a stage in a business size where the owner cannot be present all the time because he is working on, uh, shareholders, he's handing the relationship with the board, et cetera, et cetera. So I guess it's about taking advantage of that. So instead of throwing your hands in the air and saying the big boy's moving to town. What you should be doing as the owner of a business is getting out there, seeing everybody, make sure that you are the face of your business. Focusing on customer relationships instead of just giving up. There are ways to actually compete, which they are unfortunately for them, unable to compete with things like speed of decision making. I, I understand I had 85 yards and, and 4,200 people in Southern Africa. My guys in my yard could not just make certain decisions. We tried to empower them as much as possible so that they could, but there were certain things they just couldn't do. They couldn't pay over a maximum buying price that was set by head office. Now that is something you have to do when you have that money yard.'cause otherwise everybody pays whatever they want. But if you walk into my yard where I own the yard and some guy needs an extra few cents. And I'm right there. I'm like, you know what? This guy always comes in today. We are gonna look after you, Johnny. No problem. And that's the kind of thing and the difference that you can make. That guy, Johnny comes back to you all the time because he knows that Steve is available and he's there to look after and when needed. And it's not just that I had the experience in New Zealand where we were able to buy bins for our trucks very quickly. We had the, the availability of the capital, but we'd have any red tape we didn't have to apply for, for CapEx. We landed a customer bang out on the road buying something. They arrive in the next few weeks and they're at the customer. When you're at a large corporate, you're applying for next year's CapEx. Now it's very difficult then to set your sales team up and say, I want you to go out and add all these new accounts.'cause if they land an account, you're like, oh, we have bins coming next year. I applied for it in CapEx. Yeah. So those are the kind of things that I just see. Um, you know, and then there's obviously trust where it's not that you can't trust the big guy, but you can build trust. It can be a part of your family brand, um, that's out there. So. I just wanna make people feel positive because I get what you're saying on the one side, specifically in the West coast, but a lot of the other stuff hits everybody else. It is hard being a smaller operation, I'm saying smaller than the the multinationals, and there's a lot of requirements on you, which is hard, but there is also an advantage that you can use to go and buy more volume and make more money. We just went through the scenarios you're talking about the other day with two or three different accounts. They wanted specialty boxes. Again, our buyers came in and said, Hey, we got an opportunity for such and such account, but we need this with this particular type of boxes. And we're just like, okay, what's, what's the return? What do they need? Et cetera, et cetera. You know, it's just, okay, it's done. Let's make it happen. So yeah, there is, there is that positive side. But remember, gotta have the money to pay for these boxes. Absolutely. You know, so, so again, there's a certain size and capital resource strength. You can do it, but there's eventually, you gotta, eventually there's gonna be a bottom of that barrel of cash eventually. You know, there's only so much you could take one of these. One of the lessons we learned at Ralph Miller University was to deleverage. And that's what, anytime anybody's ever asked me what. What's one of the most important things that, that you would recommend? I said, for God's sake, whatever you do, don't borrow too much money that you cannot afford. I mean, let's face it, the day of the two to 3% money. Oh, that, that's long gone. Yeah. Yeah. If you're big corporate borrower, maybe you're 6%, but if you're a little guy, you're 6, 9, 10, what? You know, whatever. Money's not cheap. It is, it's not just cheap anymore. It's not water. Um, so whatever you do, don't get your leverage levels so high that the minute there's a downturn, boom, it's like, it's like the trap is set, the mouse is caught, you're dead. You got no more. As we like to say, uh, banks are your best friend. Until you missed the first payment. Oh man, I, I lived that Steve, I lived that in New Zealand. Like we were leveraged against all our assets. We had trade finance for our stock in order to compete with the big guys. That's what we had to do. And COVID hit and like, who saw COVID coming? Right? And then New Zealand was shut down completely. It was an absolute nightmare. But, um, so I totally agree with you. Like I now have a technology company and the advantage of that is you sell equity. You know, you don't have debt, so no one can actually come and shut you down tomorrow because you have to pay them back. Of course, you have to give away equity in your company. But from what I've been through, if I want money in, I prefer giving away a, a chunk of the business instead of, um, you basically holding a sword to my neck. And one thing goes wrong, and which is, as you said, like often it's out of your control. And that's what I really like about what you said, you know, de-leveraging because you can't see into the future a market downturn. You know, a friend of mine in the UK. Had bought Sims and he's, he struggled. He struggled with the market. You know, the Ferris never picked up. It was really hard for him to turn it around and the deal fell through. Like, did he do anything wrong? I don't believe so. I think, um, markets went against him and he was trying to leverage it and, uh, it didn't happen. So I think that's great advice for anybody. Family, businesses, et cetera. You can lose your family business. Very quickly when you get excited about what you think is cheap money or the banks love you, like you said, and uh, they very quickly don't. Let's understand.'cause I want to go into a little bit with consolidation comes a lot of m and a. So we talk about acquisitions, um, that are happening in the industry. I guess what do people misunderstand about scale when they think about evaluation or the negotiating powers? So what I mean by that is. When I'm looking to sell my business.'cause now what you're saying is more people are looking to sell their business instead of maybe being approached for their business. Um, I guess where is the leverage and how much is it about the volume that I have or the size that I'm, versus maybe processes and systems and depth of talent, et cetera? Well, one of the things that I have seen is. We do some sub work for commercial metals, for instance, is a good example, which is obviously, you know, big size company and we'll do some work with them more on, on the local level. They'll have their steel mills. Okay. They have some steel companies that they own and so we'll sometimes contract with. Companies to do all of their scrap nationally. Then they'll take that national business and they say, okay, we want to do some business with somebody at a regional level. You know, like yourself, Metro Metals, and we'll do that work for them. So again, there's that size that they have that sometimes can form relationships. Uh, this one particular account I have, they actually make the steel, they sell them the steel. And then at my level, they wanna recycle the steel back and that's where I come in. So you get a certain size and, and that can certainly be a huge benefit for when you have economies of scale, you know, for instance. So, so that can really help the big guys. Um, so I don't know if that really answers your question. So, so scale is important. Um, you know, I guess when looking for an acquisition, uh, when people are looking to sell, if I was looking to sell my business now, if I was listening and I'm like, you know what? Things are hard. How would you recommend people prepare for that? Like if they think they want to sell it at the end of this year, what would you say these family businesses or privately run businesses should be doing now? Well, one thing that I find on the, on the smaller scale level is. Even a small company can easily be worth a million, 2 million plus dollars, let's say. Well, first of all, the, the written rule or unwritten rule is everybody else wants a lot more than their company's actually worth, but that's okay. That's what dreams are made up. But it's amazing how many people still want to draw it on a napkin. So you gotta get some professional legal help. Get an accountant, have an attorney for God's sake. Don't try to do it yourself on a napkin and a handshake. Get professional help. Even at at the smallest level, you know, for us, we have maybe fortunately or unfortunately, teams of attorneys, accountants, whatever, that will work with us so that when we wanna acquire someone, you say, okay, does this make financial sense? And we look at at the cost and the return on the cost, and. So don't try to do it yourself. Make sure you've got, you build a good team. And then of course, when you get to a certain size, you talk to various bankers, uh, who you know, their specialty is in, in the m and a field. Um, and, and there's some, I mean, all the big banks have some terrific teams. You know, Wells, B of A, uh, um, we've talked to a few different ones, you know, over time. And so, so get your professionals lined up. Even just from maybe the small town business attorney, you know, to the big time, uh, New York Bank. So get your professionals, accountants, attorneys, get'em lined up to help assist, because I, I remember telling a, I sold a piece of property once and it gave the money to, uh, an asset manager. I said, so here's the deal. Here's the money. I'm not selling it again. So, so don't lose the money. That's what you could say. The same thing with the little guy. If he wants to sell his business, great. Sell your business, but for God's sake, do it. Right?'cause you can't sell it again. Once it's sold, it's gone. Uh, so yeah, that's exactly right. I, I think people underestimate. How much value can be added to having done your homework upfront? Um, whether it's using consultants, which I totally agree with. Um, even all the way down to just making sure that your books are in order. Like, just make sure that it's. Nice and easy'cause there will be a due diligence. There will be a period that the buyer wants to go through everything that you've told them and you thought you had a great lunch and you said, yeah, you've got this incredible opportunity and you've got 1,500 customers and everything is gonna be checked. Now if you're trying to pull out napkins and you're trying to pull out pieces of paper to prove your story, it's gonna be a lot harder. Another thing I love is there's a saying that time kills all deals. So if you've done all the due diligence information, you've prepared everything upfront. If somebody is interested in your business, and it can happen really quickly, it's more likely to actually happen. Whereas if it's becoming a 3, 4, 5 month process, because every time they ask you for documents or some information, it takes you three weeks to get back to them. The buyer can emotionally, mentally, just move on and just be, this is. This is in the two hard basket. Something else is, is more attractive and I'm over it. So I think if anybody is really considering that they're going to be selling, I think that preparation is absolutely key and preparation is key. But I think one falsehood that smaller companies can, can fall into is when they value their company. Blue sky, they go, what's your ebitda? You know, we need real numbers. What's your ebitda? Well, duh, dah, dah, dah. But the blue sky, the potential is opportunity. Yeah, yeah. Which again, that leads back to what I said before. People always wanna sell their businesses for more than they're actually worth. And that difference is the blue sky. Now, sure, as an acquirer, you can afford to pay some blue sky. Um, but at a certain point it's just like, okay, there's enough with potential. We gotta see, you know, real results, real money. What are we buying? Yeah, what are we buying today? What, what are we buying? I've just seen it more times than I could possibly even tell you. It's, it's worth this. I go, nah, it really isn't. But. Okay. You know, if you, if you want to sell on Blue Sky opportunities, you need to start a tech company. That's how, that's how tech companies are valued, right? You've got the different phases that you go through and it's all dependent on, you know, it starts by just being somebody's dream in their head, and eventually there's more data needed along the way, but you are always talking about where you can go, and that's not how. Operational businesses and physical operations are sold and traded, so that's like come back to the, come with a realistic number. Yeah. Yeah. You gotta come back to the real world. Stay with me now. Exactly. Yeah, exactly. Steve, um, before we, we finish this episode, I always ask my guests for questions about themselves, and this is just to get to know you a little bit better, so next time somebody sees you at the conference, it can be, ah, we both love the same book or say, I've been to that place as well. So let's just finish up with some, um, questions about you. Sure. What's your favorite TV show or movie? Uh, well, presently it's Landman. Got, is, is my favorite TV show. Uh, prior to that it was Billions. Uh, I, I think we're seeing a common theme here, maybe, but, uh, but, but also, you know, I like fun stuff too. It's like, I love traveling the world and, and cruising. So like Mighty Cruise ships on the Smithsonian Channel. Love that one. Uh, Stanley Tucci searching for Italy. Where you just go around Italy and you watch'em eat. It's, it's fascinating. I guess if you like to eat then the Food channel, fascinating shit. Yeah. And then of course Godfather one and two, which is a mandatory for any self-righteous guy, I guess. Now my wife, my wife, every time I turn on The Godfather, she goes into another room, but it's like, honey, this is the Bible. That's awesome. The, um, I must say billions is, is definitely up there in my top shows as well. So, um, I, I like your theme that you were going to them. Um, favorite places to visit, is this gonna be Italy? Yeah, we love Italy. We love Italy, but you know, anywhere, uh, Southern Mediterranean is great. We start in Portugal just round, uh, round Gibraltar and then go south of Italy, Spain, France, Monte Carlo. It's all good. Head on. Keep going. Go over to Greece. You know, it's those, you know, all the best food. So literally good food. Each country there is the best food. It's phenomenal. Yeah, exactly. Real octopus in uh oh man. Real octopus and ethos Beer in Greece. Can't be happy days. I hear you. Have you got a favorite book? Uh, shoe Dog. Shoe Dog by Phil Knight. Local guy, local company, but kind of a personal hero of mine because, I mean, reading the book, uh, when he was doing his initial buildup to the company and going overseas and talking to the consumers, all of it just hit home over and over again. I, I loved it. His company got a little bigger than ours though. But, um, yeah, I I never finished the book. How did it end? I'm just joking. Um, Scoog, it's by, it's my favorite. It's my favorite book. It's, yeah. Love it. It's absolutely phenomenal. Love if you, if you listening now and you haven't read Shoe Dog Seriously. Like, maybe I can give you a like podcast. Use this code and get a discount. Sorry guys. I can't give you that. But seriously, you've gotta listen to Shoe Dog. What an incredible, it's the story of Phil Knight who founded Nike. So you might have heard of Nike, that small little brand, and, and just remember it's Phil Knight would say one of the favorites phrases of all time you grow or you die. My partner and I, we've, uh, I, I told him multiple times and people say, when are you getting out? When are you getting outta the business? I go. I don't know, but you'll never know.'cause we'll probably do a deal two days before I decide to walk out of the business. We might grow incrementally. It, it might be slow growth, but we're always gonna look to grow because if we don't, I always feel like somebody is, is nipping at our heels and, and I'm almost afraid of that. So yeah. That afraid you grow, you die. Super key. Totally agree. Yeah. I love it. Have you got a favorite quote? I mean, you just gave us one, but have you got a favorite quote? Um. I am Iron Man, Ozzy Osborne. It's very applicable. I haven't actually heard anybody say that. Wouldn't you say? No. I mean that one by Phil Knight. Um, and it's, I don't, I don't know if you'd call it a quote, but in, in today's scrap metal world, when Robert Schiller, the Economist would say, or later taken by Alan Greenspan, the phrase irrational exuberance. Always hits home for me. We are living it. We're in the middle of it. Look at gold. Look at precious metals. Look at industrial metals, say for maybe nickel, but even lately, nickels kind of caught the same cold as everybody else. Irrational exuberance. We're living it baby. If we could get the Ferris world to catch that same cold, I, I'd freaking love it. I'd be over in Malta right now. Smoking a cigar. Sitting, sitting down, looking at, at the Mediterranean Ocean Ferris is, uh, it's taking a while, but let's just hope 2026 is when it all turns. I remember when, years ago when, uh, Bob Philip, who was one of the luminaries of the business years and years ago when he worked at. At Schnitzer Steel and Bob Philip said, he goes, there's gonna be a shortage of steel. We gotta invest in steel. There's gonna be a shortage of steel. That was 20 years ago. I said, I don't think we've ever run outta steel. Steel is still fairly plentiful. So you know, even the great ones times looking forward to that day. That's for sure. Steve, this has been amazing. Thank you so much for joining us on Born Scrappy. You bet. Pleasure. My pleasure. Cheers. That's it for this episode of Born Scrappy. If you have any questions, stories, or topics you want us to dig into, send them my way. Until then, keep it scrappy.
