Start a metal recycling company 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 metal recycling company. 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 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 important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Metal Recycling Company Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
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 metal recycling company 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.
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.
For 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.
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
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 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.
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.
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 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.
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 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.
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 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.