Start a Gravel Pit Business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. 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.
Check out our How to Start a Business page.
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 are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
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.
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.
STEP 2: Form a legal entity
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.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
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!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
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.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment 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.
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.
Learn more about General Liability Insurance.
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.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a Gravel Pit Business
Most pits have websites that offer details on their products and pricing. You can also place classified ads or directly contact potential buyers. If you use postal mail, you won't have to worry about spam or "Do Not Call" complaints.
Make an effort to research nearby rivals. Aim to offer a stone type, service, or payment option they don't provide. You could also emphasize a related advantage. Some customers would probably appreciate rapid deliveries, a senior discount, or the option to buy small amounts.
Strive to maintain positive public relations. For instance, you could publicize donations to respected local charities or highlight the steps you take to minimize negative impacts on the community and environment. This may help reduce complaints and other opposition.
How to keep customers coming back
Sell an assortment of stone sizes as well as sand. You can also supply washed gravel if you have the right equipment. Washing makes it suitable for landscaping, gardening, and other purposes that call for attractive surfaces. Maximize convenience by offering to perform related tasks, such as spreading gravel on driveways. Take the time to have conversations and learn about customers' specific needs. Consider using a bulk or first-time discount to lure in commercial and industrial buyers.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Gravel Pit Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
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.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
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.
TRUiC's YouTube Channel
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a Gravel Pit Business?
Don't put off the acquisition of high-quality safety gear. Masks shield workers from particles that may cause cancer, heart disease, and other serious conditions. It's crucial to protect your eyes and ears as well. To prevent accidents and health problems, strive to limit the road dust around your facility. You can accomplish this by applying water or magnesium chloride to dry surfaces.
The weight of gravel makes it costly to transport. Try to choose a pit location near potential commercial, municipal, and industrial clients. Avoid sites close to homes because locals may complain about the noise and pollution. Too much water can force these businesses to stop serving customers. Pits at higher elevations don't flood as easily. A tall levee also reduces the risk. Income may rise significantly if your pit remains open while others flood.
Equipment failure could disrupt production or sales even as you continue paying wages and overhead expenses. It's important to purchase reliable machinery, maintain it well, and train operators thoroughly. Keep maintenance logs and routinely inspect the equipment.
How and when to build a team
You'll probably need employees to run an efficient gravel pit. Look for responsible individuals with equipment operation skills. Keep in mind that state law may require them to undergo safety training for a certain number of hours. Workers at gravel pits and other quarries get paid about $46,400 per year on average, according to ZipRecruiter.