Gordon Muir, co-founder of Kirksville, Mo.-based Perfect Metals USA, talks with the Opportunist’s Managing Editor Leslie Stone about his company’s role in the recycling industry and its strategy for growth.
Serendipity was at work the day Gordon Muir and his business partner, David Janes, rented a warehouse in which to build racecars (their hobby). There, inside the otherwise empty building, sat a huge contraption about 40 feet long and 20 feet tall—and the owner refused to move it. “It was definitely in our way,” Muir explains, “but we thought well, we will just have to put up with it being here.”
Turns out, the unsightly machine was a recycling baler designed to compact aluminum cans into squares about the size of a bale of hay. “The owner convinced us to consider getting into the business of recycling metals, aluminum, brass, copper and electric motors and things like that,” says Muir, who was semi-retired at the time but had, coincidentally, been involved in the recycling industry in the early 1990s. “From there, people kept asking us if we’d take steel, but we didn’t have scales to weigh big trailers and things, so we spent 100 grand on a commercial truck scale. We needed to get material to our buyers on time and, typically, buyers don’t have enough trucks and trailers. So, we figured we might as well start buying tractor-trailer units. We bought one and then another and another, and now we have five trucks and a dozen trailers for hauling the steel to market.” By the end of 2010—Muir and Janes’ first year in the recycling business—their fledgling company had earned $600,000 in revenue.
Three years later, Perfect Metals USA is a $6 million operation. “Even in our second year of operation we did close to $5 million,” Muir adds. “It’s weird. Without that can baler being in the warehouse, we would be building racecars today. All we ever wanted to do was build a few cars a year and enjoy drag racing. Now we are doing 10 times more business than the fellow who convinced us we should be baling cans and recycling metals ever did. Dave and I are both intelligent people—I have been involved in building companies over the last 40 years and Dave has over 20 years of management experience—so I believe we have enough expertise between the two of us to take this company to the next level and become a major contender to a buyer. I hope to be doing half a billion dollars or more within the next five years.”
Opportunist: What kind of material does Perfect Metals recycle?
Gordon Muir: We are strictly metal; we don’t handle waste or plastics or paper products or cardboard. We buy the material and process it and then we send it out to either local buyers or to the mills, but everything we have is recycled for the United States. Most of the big conglomerates are focused on the East Coast and are shipping material overseas. We don’t send anything to China or India—sending overseas is not on our agenda—we want everything we are doing to be here in the United States.
Opportunist: Where do you obtain the metals you recycle?
Gordon Muir: It’s quite simple. People bring the material to us. Ninety-nine percent of our traffic comes directly to us; we don’t typically have to go and get anything. Everybody just brings the product to us in semi-trailer loads or bags. We weigh it and sort it into whatever it is they’re bringing us—steel, aluminum, copper or computer parts—and then we pay the seller by the pound or by the ton, and we take the product and upgrade it.
Opportunist: How do you upgrade metal?
Gordon Muir. Let’s say we’re buying aluminum screen doors. First, we remove all the screws and anything else that is not aluminum. We may be buying it for 10 cents a pound and because we upgrade it we can sell it for 60 cents a pound. We get lots of cars and we pay for them by the ton. Then we basically strip the car down to components. We remove the wheels and tires. If the wheels are aluminum, we get a good price for those, and if the tires are in good shape, we sell those as well. So, instead of the $300 per ton that we originally paid, we have stripped it out and we are now averaging $650 to $700 a ton for that car. In a nutshell, we take material in one door and process and refine it—upgrade it—to a more saleable product and send it out at a higher price. All our buyers are local buyers. We don’t travel more than 200 miles to sell a product.
Opportunist: Once the metals are upgraded, who buys them?
Gordon Muir: Our buyers are multinational companies. Alter Metal Recycling is one of our customers. Alter is one of the leading scrap metal recycling companies in North America, and I would say it probably does $1 billion or more annually. Azcon Corp. and Southern Metal Processing Co. are also our buyers. Azcon is a leading scrap processor, broker and mill services management company. Typically, these companies will want a load of material and we will send them a tonnage and breakdown of what is in the load and two or three buyers will bid on it. We get the best price and take the material to them.
Opportunist: What obstacles, if any, has Perfect Metals USA had to overcome?
Gordon Muir: The only problem I see with a business like ours is, because we only draw from a certain radius, we cannot grow from $5 million in sales to $10 million in sales from within the same area. We saw an opportunity to acquire smaller yards and create larger feeder yards. Many of them aren’t big enough for a major player to come along and buy out, but for somebody like us it works out perfectly.
Also, you have to stay up to date on prices. If you buy something for $300 dollars a ton and the price of steel drops, you will have to sell it for less margin. It’s very important to keep watching the market so you will be able to sell your materials at the right time.
Opportunist: Please tell us about your growth strategy.
Gordon Muir: We plan to grow through acquisition, and there are so many targets out there. Our strategy is not something that is uncommon, but it is by far the best way for companies to grow. For example, if I am doing $7 million in sales today and I can go out and buy a company doing $60 million tomorrow, I believe we are going to be significantly different in one year than we are today. We are doing between $6 million and $7 million a year without acquisitions. Shareholders need to know that we are very aggressive and we are out there. We have shown that we can grow significantly and can easily do 100 times our revenue in the next five years. It’s not like we have to sell hand lotion or microchips. All we have to do is look at potential acquisitions and go and buy one. It’s a ridiculously easy strategy. Growth through acquisition is by far the easiest and quickest way to increase your revenue. I see it everywhere I look. Every time I talk with someone who loves their business I see an opportunity to buy them out.
We are also expanding into demolition projects and we are currently looking at two in Indiana. Both are multimillion-dollar projects with fairly significant profit margins.
Opportunist: Do you simply buy out the companies and take them over? How does it work?
Gordon Muir: A gentle transition is what we’d like to see. Obviously, we take a significant stake in the company with the ability contractually to own 100 percent over a 24 to 36 month period. Most of these people with private companies don’t have an exit strategy. So, unless somebody comes along and wants to buy them out, they are stuck. An amazing majority of these companies are privately owned.
Opportunist: What criteria do you look for in the companies you acquire?
Gordon Muir: We look at length of ownership and type of ownership. One potential acquisition is family owned and doing about $30 million annually, but there is nobody to pass it down to. Mom and dad run the company and the kids don’t want anything to do with the business because of the stigma of a scrap yard. Their attitude is: ‘Who wants to own that or be part of that?’ We want to move the typical scrap yard owner into the next millennium’s sophisticated and clean operation. We are stewards of the environment and we produce zero emissions, zero waste and zero landfills.
When we acquire a company we plan to lay down concrete pads so people won’t have to drive in the mud. We also believe it’s important for all workers to have a corporate identity and wear corporate clothing and be clean-shaven. They should look like people you would want to do business with.
Opportunist: Do you have any major deals or joint ventures in the works?
Gordon Muir: We have some deals in the works but we aren’t ready to announce anything at the moment. We are in kind of a quiet period right now.
Opportunist: What are your competitive advantages?
Gordon Muir: Well, I think it’s really simple. We have the ability as a young public company to raise funds to acquire smaller companies. I am also a software expert and designer, by the way. I was one of the first designers of cloud technology back in the 1990s. When the Internet was still running off dial-up, I was designing software for high-speed Internet. I have developed a plan to take all our potential acquisitions and bridge everything electronically by using software specifically designed for our business. It wouldn’t matter where our facility is—whether we have a ton or a pound or an ounce of material, anything bought or sold at any of our facilities would be known instantaneously. And we will tie our entire inventory together with our cash flow, with second-by-second, real-time updates of everything we are doing in a facility.
We are not a huge player, so I believe we can grow to several hundred millions in sales and acquisitions before anybody notices us. We have some creative people on staff, and two people in particular, who are retired from a major corporation that did close to $1 billion in annual revenues. There is a third person from the same company who will be joining us as soon as he takes early retirement. One of the guys we’ve got working for us is picking up two or three potential acquisition targets a week.
Opportunist: Do you have any competitors?
We have a reputation of being honest and friendly, which is something this industry has been missing for years. Most people get ripped off in scrap yards. Many lack scales and state certification, and they are under-weighing people simply because they can. We have to check our scales out every three months. People come and say, ‘Wow, we cannot believe you are giving us this much because the people over in St. Louis were only giving us x dollars.’ Also, a lot of these companies pay people by a check that they cannot cover and, of course, it bounces. These people work hard to get all their scrap materials, and they are forced to try and collect money that is rightfully theirs. We want to make sure people get an honest wage and are treated fairly. We don’t judge people by what they wear or how many teeth they have; we treat them as our clients.
Opportunist: We understand you launched an e-waste and precious metals division last July. Can you tell us about it?
Gordon Muir: I guess you could say we have ticked off the pawn broker in town because we launched a precious metals division and started giving people fair prices for their gold. We simply buy the gold and silver, but I am also an avid coin collector so I deal quite a bit in silver and gold coins. There is a significant profit margin in it, and that is something that has been going quite well in town. Our e-waste division recycles computer hardware. We can add that to each of our facilities.
Opportunist: What do you find most rewarding about your work?
Gordon Muir: The growth. I like for things to grow and move forward. I think that we have a great little company that has the potential to be a very large company.
Opportunist: What prompted you to want to take the company public?
Gordon Muir: Well, when you’re a private company going out there to raise money you’re always going to be paying the money back. It’s basically debt financing if you’re private. Unless you’ve got the best mousetrap, there are very few people who can raise the kind of money they need to succeed. In the circle of people I have befriended over the last 40 years, I have discovered that it’s relatively easier to raise significant amounts of money in the public market versus being private. Sure, the stock market is volatile, but if you’ve got a company that is going out there and increasing their revenue every three to six months, you’ve got something that in the first five years of growth is going to be a significant player in the market.
We are owned by a Nevada company, with only two shareholders: my partner and myself. We are near completion with our audit and discovered we have a lot of different options for taking the company public. The market always slows down a little bit in summer, so we would like to be public by September or October of this year.
Opportunist: Where do you see the company in three to five years?
Gordon Muir: We are in acquisition mode and will acquire as many of these facilities in as many states as we can. Our goal in the next three to five years is to have approximately 50 facilities running similar to ours. Right now we just have one facility. During the last year we have been focused on consolidating our companies and merging them together.
When you look at the numbers and the potential that’s out there—and this is not rocket science or new technology, although technology certainly plays a part in what my plan is—I see us doing close to half a billion in sales. I want to retire, I really do. [Laughs
Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides in Florida. Follow her on twitter at @les7989.
Visit Perfect Metals Online - Perfectmetalsusa.com