Start a metal recycling company by following these 9 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 step guide to starting your metal recycling company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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 long it will take you to break even?
- 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 metal recycling company?
For an individual looking to do some scrapping on the weekend, you can go into business on a fairly low budget. You'll need a truck or van, a collection of basic tools including a cutting torch, safety gear, and any licenses required by your local government. This can be accomplished for around $40,000. If you are looking at opening a scrap yard or full-scale recycling center, the investment rapidly climbs to a minimum of $250,000 and up for the land, scales, heavy trucks, heavy sorting equipment, staff, and office buildings.
What are the ongoing expenses for a metal recycling company?
You will need to maintain your vehicle for your small business. Insurance, machinery maintenance, payroll, taxes, and accounting will be added to your larger concern.
Who is the target market?
Construction and demolition contractors consistently produce quantities of scrap metal. They are willing to pay you to remove it from their site. Used car dealers, automotive shops, and junk yards consistently offer up old cars for recycling.
How does a metal recycling company make money?
Scrap yards pay for sorted recyclable scrap metal by the pound and issue new prices on a daily basis. A metal recycler earns an income by bringing sorted metals to the yard for sale. A large recycler sells their processed, chipped, and shredded metals by the truck load to industrial manufacturers for use in new products.
How much can you charge customers?
Rates for metals run from a low of around $150 per ton up to $2.00 per pound and will change weekly. Pickup fee schedules can be as low as $50 and run up to $150, depending on your market and size of vehicle needed to move the scrap.
How much profit can a metal recycling company make?
With increased competition in the recycling market, profit margins for scrap recyclers has been narrowing over the past decade. However, when you work the market to find your scrap for as little as possible and sell it when there is a spike in the demand you can see significant profits. A small one-man side business can net a few thousand a year, while a large processing center is able to generate hundreds of thousands of dollars.
How can you make your business more profitable?
Know your metals and current pricing. For example, if the price of aluminum has been down for a long time, avoid picking it up and focus on finding more of the metals that are in higher demand to reap the most profit for your time and energy.
What will you name your business?
Choosing the right name is very important. 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.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your metal recycling company is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, and it's easy enough to form by yourself, or check out the top business formation services.
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?.
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
- 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.
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.
State & Local Business Licensing Requirements
In most states, it is necessary to obtain a metal recycling license. Certain state permits and licenses may be needed to operate a metal recycling business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
- List of individual state license requirements
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Certificate of Occupancy
A metal recycling business is generally run out of a physical location. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a metal recycling business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your metal recycling business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
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.
How to promote & market a metal recycling company
Your best customers are based in the commercial and construction world. Attend construction industry conventions to get your name and number known. Take advantage of websites that promote contractors and list your services with them. Ask at your city hall about how they dispose of recyclable materials and when bids might open for a new contract.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
While many large construction companies are willing to pay for you to remove their recyclables from their site, dependability is required. Offer the first two collections for free before charging for the service. They will continue to call you for pick up when you prove that you're eager to keep their sites clean and clear of scrap metals. Don't be afraid to drive up to a demolition site and ask if their recycling needs are being met.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Metal Recycling Company 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?
On a small scale, metal recycling is perfect for the individual who loves to collect cast off materials, enjoys getting their hands dirty, and loves to negotiate with scrap yards for the best price. On a large scale, a person with a passion for making use of every piece of material along with keen business acumen will be able to create a large business with a network of contacts looking to buy and sell quantities of valuable scrap.
What happens during a typical day at a metal recycling company?
No matter if you're operating on a small or large scale, your metal recycling business will need to:
- Identify the types of metal scrap
- Collect metal scrap from homes, businesses, municipal recycling centers, demolition and construction sites
- Use protective equipment and safe sorting practices to protect your health
- Cut scrap metal out of structures marked for demolition
- Separate out valuable metals from household appliances
- Transport sorted materials to scrap yard
- Locate best price for different types of metals to generate the best profit
- Focus on collecting enough high value metals to increase profit/cover operational expenses
- Expand your scrapping network and add new stops to your regular routes
What are some skills and experiences that will help you build a successful metal recycling company?
Before you start collecting old metals for your first trip to the scrap yard, you will need to:
- Know how to identify different types of metals such as copper, aluminum, iron, steel, stainless steel, brass, gold, and silver.
- Learn the going rates and market trends for each type of metal
- Know how to separate metals from buildings, structures, cars, and machinery
- Know how to safely use an oxy-acetylene torch
- Have a driver's license, possibly a commercial license for a large truck and trailer
- Have basic accounting knowledge
- Have good people skills to establish relationships with buyers and sellers of metals
- Know how to operate heavy-machinery if you own a large recycling yard
- Possess basic inventory abilities to maximize your profits
What is the growth potential for a metal recycling company?
When positioned in an area that is generating a large amount of metals ready to be recycled, a metal recycling business can expand into a huge processing facility able to rip cars apart and separate all the different materials. The electronics industry also can supply an endless mass of monitors, computer boards, and keyboards that contain precious metals that only need to be removed from the plastics for lucrative income opportunity. Expanding into a business that recycles plastics as well can take advantage of the full value of cast off electronics.
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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.
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 metal recycling company?
Learn the real value behind the different metals. Everything is sold by weight. However, iron is a heavy dense metal, but it doesn't earn a very high price. Copper is more valuable, but not as readily available. You will need to know what metals are obtainable for recycling in your area and be able to project the profitability of the business before starting. Contact large general contractors to generate a regular collection route.
How and when to build a team
If you are opening a large yard, you will need to be building your team right off the bat including a business manager, yard foreman, and a couple key workers so you can have them trained when the first big loads arrive for processing. When starting small, you'll want to hire a second scrapper when your weekly route becomes too much for you to complete on time.