How to Start a Gravel Pit Business

Start a Gravel Pit Business by following these 10 steps:

1. Plan your Gravel Pit Business
2. Form your Gravel Pit Business into a Legal Entity
3. Register your Gravel Pit Business for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Gravel Pit Business
6. Get the Necessary Permits & Licenses for your Gravel Pit Business
7. Get Gravel Pit Business Insurance
8. Define your Gravel Pit Business Brand
9. Create your Gravel Pit Business Website
10. Set up your Business Phone System

We have put together this simple guide to starting your Gravel Pit Business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

What are the costs involved in opening a Gravel Pit Business?

You'll need to buy land that contains suitable stones in large numbers. Before you can start producing gravel, you must acquire multiple permits. You will also have to remove trees and soil. A tall fence with a gate provides vital security.

These facilities use a variety of heavy-duty equipment. A used crusher typically costs over $20,000. While you might spend $65,000 on a new backhoe loader, pre-owned machines start at around $15,000. Water pumps and pipes often prove necessary as well. You can serve more customers when you own a dump truck and offer delivery. The price of a high-capacity truck ranges from about $25,000 for a 30-year-old vehicle to $120,000 for a new model. To minimize initial costs, pay a contractor to perform crushing tasks. They will bring their own equipment. The same goes for blasting.

If you don't want to prepare a new site or buy individual pieces of machinery, you could purchase a fully functional business instead. These companies frequently cost over $1 million. You might pay $800,000 for a small facility or $4 million for a much larger operation.

What are the ongoing expenses for a Gravel Pit Business?

You'll need to budget funds for utilities, property taxes, loan interest, advertising, wages, equipment upkeep, and fuel. Most dump trucks only travel four to seven miles per gallon. A replacement tire will cost at least $400. In addition to buying workers' compensation coverage, you should insure expensive equipment. Liability insurance premiums add around $1,000 to your annual expenses.

Who is the target market?

Gravel businesses have a tremendous variety of potential customers. Residential buyers include landlords and homeowners who maintain driveways, gardens, or private roads. Local and county governments may have their own gravel pits, but some of them buy this commodity from businesses. Contractors such as landscapers and construction companies often purchase gravel. The same goes for concrete manufacturers. You could also supply it to establishments that resell this product, such as garden centers or hardware stores.

People tend to buy more gravel in rural areas. However, this material isn't desirable for anyone who uses a snow blower. Individual homeowners might pay higher prices because they order smaller quantities, but large businesses and municipalities will spend more consistently.

How does a Gravel Pit Business make money?

Customers usually pay for gravel by the ton. Separate delivery charges may apply as well. Your company might sell other raw materials harvested from the same land, such as sand or lumber. Sales fluctuate depending on the weather and local construction activity. In many regions, spring and summer represent the best times of year to lay fresh gravel.

How much can you charge customers?

Prices often range from $12 to $45 for each ton. They vary depending on the level of demand and number of competitors in the vicinity. The smallest stones cost significantly more than larger rock fragments. Delivery adds around $5 per ton.

How much profit can a Gravel Pit Business make?

Profits vary considerably; net margins range from about 10 to 35%. You might earn $25,000 to $100,000 after expenses. Relatively large facilities have the potential to produce over $1 million in revenue.

How can you make your business more profitable?

Use a fleet fuel card or other discount program that reduces gasoline and diesel prices for business owners. Make sure it lets you fill up at conveniently located stations. Don't overlook fuel efficiency ratings when buying trucks. The difference between four and five mpg may seem trivial at first, but it represents a 25% increase.

Try to employ people who can maintain and fix equipment. Choose models that are comparatively easy to repair. Consider diversifying your business by using some of the same machines and materials to provide other services, such as excavation, equipment rentals, or drainage improvements.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your Gravel Pit Business is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

If you enjoy creating something from scratch and using powerful machines, you might succeed at running a gravel pit. You must have a willingness to perform noisy, messy tasks. Entrepreneurs also need enough patience to handle the complexities of government regulations and sophisticated equipment maintenance.

What happens during a typical day at a Gravel Pit Business?

You'll use heavy equipment like bulldozers and backhoes to extract stones. Next, you have to screen, crush, and sort them. Customers might travel to your pit and ask you to load their vehicles with gravel. Others may request deliveries. If you provide this service, you'll need to load a truck and travel to the buyer's home, facility, or work site.

What are some skills and experiences that will help you build a successful Gravel Pit Business?

You can benefit from knowing how to operate heavy equipment and repair machinery. A commercial driver's license is helpful. To learn how to run a gravel business, check out Pit & Quarry University. It provides 14 free online lessons consisting of detailed information, photos, and quizzes.

What is the growth potential for a Gravel Pit Business?

Around two-thirds of producers experienced sales growth of at least 5% in 2019, according to Pit & Quarry. Experts predict further increases in the industry. Successful businesses can create additional pits on the same property or establish separate locations, allowing them to serve larger geographic areas. For example, Thelen Sand and Gravel opened its first facility over 70 years ago. It eventually added two more locations in Wisconsin and Illinois. Keep in mind that extraction gradually depletes a pit. It may continue to produce gravel for decades or run empty in as few as five years.