From $75K Junkyard to $50B Auction Website

Read time: 5 minutes

Good morning! It's Tuesday, March 12th. Today's post breaks down how John Willis revolutionized the junk car industry and pioneered online car auctions!

THE FEATURE

From $75K Junkyard to $50B Auction Website

The story of Copart and its founder, Willis Johnson, is the stereotypical "rags-to-riches" tale or, more accurately, "Junk to Gold."

Johnson's $3.5B net worth comes from turning one California junkyard into Copart, the leading online car auction site with a $50B enterprise value!

The Founding Story

Johnson's introduction to the scrap industry came in the early 1960s. His father had purchased the assets of a bankrupt construction company and recruited his son and his young friends to dismantle its equipment and inventory to sell for scrap iron. 

After helping his father turn the acquired property into a full-fledged junkyard, Johnson joined the Army and earned a Purple Heart during the Vietnam War. Upon returning home, quarrels with his alcoholic father led Johnson to purchase his own junkyard for $75K.

However, this wouldn't be an ordinary scrap metal yard. Johnson had a mind for business and created a scrapping, reselling, and refurbishing machine: 

• Sell components: His competitors sold whole working parts from junk cars they got—e.g., $400 for an engine. Johnson would dismantle and refurbish entire engines, letting him sell distributors, alternators, and carburetors separately for a ~$700 total. 

• Percentage Fees: Salvagers used to charge sellers a fixed fee to resell their cars. Johnson instead took a 15% fee from the resale value, incentivizing him to repair the vehicles and get the best price for himself and his clients. 

• Specialization: Johnson specialized in car parts of unpopular brands and models at the time. This allowed him to get the parts for cheap and service a clientele that no one else had the inventory to serve, which also let him charge a higher margin. 

• Auction Makeovers: At the time, it cost $200 to pick up, store, and auction off a car. Willis incurred that cost and would clean up cars in exchange for a percentage of the proceeds sold (10-20%)

In 11 years, he expanded Copart across a dozen additional locations and saw 100% YoY growth in the early 1990s. 

Plus, that was all before the widespread adoption of the internet… which caused Copart's biggest growth spurt. 

The Business

Before the internet, buyers used to hire people to bid on their behalf at distant car auctions, paying out ~$150 every time they won a car. Johnson had started learning more about ".coms" and had an idea of how to revolutionize the process and cut out the paid paddle holders.

That idea would be to create the first online car auction.

When Copart launched its online auction site in 1998, it generated $1M in sales in its first quarter. That year, the company generated $114M in total revenue. By 2001, that figure more than doubled to $254M!

Copart has become an international beast, operating in The US, Canada, South America, the Middle East, and much of Europe and generating $4B a year!

Despite the transformation, Copart's core business model has stayed the same since its junkyard auction days— selling parts and refurbished cars for a sales percentage. 

The Key Observation

In the early 1980s, Johnson purchased a state-of-the-art IBM computer for $110K, the price of more than two homes at the time.

The computer allowed him to track inventory efficiently and make price adjustments on the fly as his competitors struggled with mountains of physical files. More importantly, the computer symbolizes Johnson's tendency to invest early in the latest technology, which is the primary reason for his company's success.

By creating a car auction site shortly after the launch of eBay, Copart secured the majority of the market and is still the industry leader today. 

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