Should you replace material bins for Cart-Away?
Many of our potential customers mention that they don’t know if they have the space to ADD a Cart-Away concrete system. We can see that logic, but we suggest that there is probably significant room for this profitable addition if you replace some low performing bins.
The decision should come down to profitability per square foot of yard space. Your product mix should provide the highest profitability as possible. To understand your product-mix profitability, you will need to do a couple of calculations. NOTE; There is one other major reason, but we will discuss that in the last paragraph.
- How much gross profit do I receive from each bulk product that I offer? In our material yard we calculate the cost of the material, plus any shipping charges to get our Cost of Goods (COGS) for each bulk item that we stock.
In Oregon we must order our materials by the ton. We sell by the cubic yard so we must convert from tons to yards by asking our supplier what the conversion factor is for their product. Once we make the conversion we can know our COGS by the yard, before delivery charges. We then add in what it costs for delivery to get closer to the actual COGS. We double that COGS number to get our retail price. EXAMPLE: 1″ to 2″ river cobbles cost 20.65 per cubic yard when we purchase a 16-yard truckload. Delivery is $55.00, so our COGS is $55.00 freight divided by 16 = $3.44 plus $20.65 = $24.09 COGS. We retail this product at $48.20 per yard. We then figure out what our gross profits are for every truckload that we order. EXAMPLE: (48.20 retail minus $24.09 COGS = $24.11 gross profit)
- How many times did I fill the bin during the last 12-months? In retail they call this the “turn-rate”. I can look at my invoices for the last 12-months and discover that I placed 6 orders for these river cobbles. My turn rate is 6. In this example I made a gross profit of $385.76 on each of these 6 truck loads (6 X $24.11 = $385.76). Now take the number of turns multiplied by the gross profit per turn and you now have a number that give you a value of the product within your yard. My river cobbles turned 6 times this last 12-months and gave me $2314.56 annualized gross profit.
- How many square feet do I need to stock and sell this material? The river cobble bins are 12′ wide and 15′ deep, so it is 180 square feet of sales space. Now if I divide my annual gross profit from this space, I should know what gross profit I receive for each square footage of sales space for my river cobbles. $2314.56 divided by 180 sq.ft. = $12.86 per square feet of profit in river cobbles. You should collect and update this same sales data on each square foot of bin space in your yard.
- What can I move into each bin that will yield the strongest gross per sq. ft.? If I do the calculations on each of my bins, I should learn the winners and the losers. It has been our experience that if people do this process, and then compared the profits per sq. ft. of adding Cart-Away ready-mix, they dump some bins and go into concrete. This exercise will take you about 2-days, but you will find the data very helpful in building higher profits from your space. We have found that it will take less than 5 low performing bins to have a space for a Cart-Away loading system and 4 trailers.
What is the profit from Cart-Away?
There are over 400 Cart-Away locations like the one in the picture above. A Cart-Away system like this will have a footprint of less than 900 square feet. We have been collecting data on sites like this since 1993 and we can predict annual sales and gross profits pretty accurately. Doing 1500 cubic yards of concrete sales each year is not that hard to accomplish in a small to mid-sized market. I will use 1500 for this comparison so that we are not overstating the numbers. We have many operators who produce 4,000 to 6,000 yard each year by adding trailers to the fleet. Ready-mixed concrete is the most consumed product in the built environment, so making these comparative sales volumes is not hard.
Most Cart-Away operators sell a cubic yard of ready-mix at between $180 and $220 retail. We will use $190 retail per yard for comparison math. The Cost of Goods to produce a cubic yard of concrete is between $78 and $91, depending upon aggregate and cement costs in the region. We will use $83 for our cost of goods in this math. Now the math: $190 retail less $83 COGS = $107 in gross profit per cubic yard sold. Then we take $107 times 1,500 yards sold to get the annualized gross profits. The total is $160,500 gross profit with Cart-Away in 900 square feet of space.
Now we need to find out what our profit per square foot number is. A Cart-Away automated system and 4 mixing trailers will take about 900 square feet of space in your yard. Next, find your profit formula by taking $160,500 gross profit per year divided by 900 = $178.33 gross profit per sq. ft. With the data on your bulk materials and your projected profits from Cart-Away, it is time to think about making adjustments in your product mix.
Are there 4 or 5 low performing bins in your yard?
If your yard has some low profit bins, you should seriously consider adding a high profit replacement for that space. If you have 5 bins that are performing like the river cobble example, then that space is only returning you $64.30 per sq. ft (5 X $12.86 = $64.30). You could be doing 2.75 times that amount of profit per square foot with ready-mixed concrete. Cart-Away concrete profits are the highest in the $50 billion dollar ready-mixed concrete industry. High profits are the reason that most new Cart-Away start-ups pay off their equipment investment in 18 to 24 months. We have helped hundreds of material yards replace low performing bins with a Cart-Away profit center. Ask one of our material supply experts to assist you in doing the math on your available space.
The EXTRA benefit of selling ready-mixed concrete
The math should work for you, but the big reason for adding Cart-Away is EXPOSURE. When you put your logo on these rolling billboards you will have the best marketing system you have ever seen. You can have your number on a dump truck and join all of the other trucks on the road, or you can have your company name on a rotating drum powered by a humming little engine. These spinning mixers get noticed everywhere they go. We guarantee that your phone will ring once your trailers hit your city streets. Then comes the BIG payoff – You will have hundreds of new customers come into your yard that will have never been in before. If you are wise you will convert them into customers for your other product offerings. Our satisfied customers across the country know that their customer count increases every year because they are the go-to place for concrete and other materials. It is time add to your business and better utilize your yard space. Dump some bins and add Cart-Away.