Are you interested in starting a scrap metal recycling business? Do you want to know what it takes to setup a scrap metal recycling plant? Do you need a scrap metal business plan or feasibility study? Then read on.
One of the most difficult (and dirtiest) businesses to establish is scrap metal recycling. However, it is a very profitable business. Just recently, we published an in-depth feasibility study report on how to start a recycling business from scratch. So in this article, we will be focusing on one aspect of recycling and that is “Scrap Metal Recycling.”
Scrap metal recycling is a very lucrative business, though it is quite capital intensive and requires a lot of technical know-how. When people hear the word scrap metal, what comes to their mind is aluminum or iron waste. What most people don’t know is that Gold, Silver, Copper, Lead, Tin, Nickel, etc are all metals; and they can be recycled.
So you shouldn’t limit your mind to only aluminum cans, as there are other money making avenues aside aluminum cans. Now for those who are yet to understand what scrap metal recycling is, here is a brief definition.
What is Scrap Metal Recycling?
In the simplest of terms, scrap metal recycling is the process of re-manufacturing or reproducing old metal products like old cars, steel, aluminum, etc into new products. Rather than use extraction from minerals and raw materials, these presumed junks are recycled and resold to the consumers. Now what are the profit potentials of running a recycling business?
5 Benefits of scrap metal recycling and why you should start this business
1. Scrap metal recycling is a very lucrative business and there is a huge market for its end products.
2. Running a scrap metal recycling plant is cheaper and uses less energy; especially when compared to the manufacturing or extraction of metals from their ore or raw state.
3. The scrap metal recycling business is a trending business with more potential in the future, because as people become more eco-conscious and the government implement policies targeted at environmental protection; your business will simply grow spontaneously.
4. As a metal recycling entrepreneur, you are contributing your quota in the campaign for natural resources conservation. You will also reduce environmental degradation, pollution and greenhouse gas emissions as the production of metal from virgin ore releases far greater amount of greenhouse gas emissions when compared with recycled metal.
5. When your recycling company is up and running, it will contribute to the economy with respect to the Gross Domestic Product; and also create job opportunities for many, both directly and indirectly.
How to Start a Scrap Metal Recycling Business – Sample Business Plan Template
1. Make the decision
You have to decide within yourself if you really want to enter the recycling industry, as this business is not child’s play. It takes effort, time and resources to setup and run a recycling plant. If you believe you are up for the challenges involved, you then need to decide whether to open a general metal recycling facility or a recycling center that focuses on just one or a few targeted metals.
If you are going to focus on a single metal, which would it be? Gold, aluminum, copper, etc? Of course, opening a metal recycling center requires significant investment in land and equipment, so you must be up for it.
After deciding to start this business, you will need to conduct a preliminary feasibility study to determine if a scrap metal recycling business will be viable in your geographical location. This is important to avoid expending money on conducting a full scale research, only to find out that the business is not worth the stress. During your research, you need to find out:
- The top three metals recycled in your market based on the prices per pound for reclaimed scrap
- The best place to site your recycling plant
- The number of competition in the local market and the estimated volume of scrap available in your market
- The current prices for recycled metals in the finance or business section of your local newspaper, in scrap metal pricing journals and online
- How many of these recyclers are in your market (competitors) also find out an estimated volume of the metal they recycle each month.
After determining that a market exists locally for your yet-to-be established services, you then need to prepare an in-depth business plan. Planning and organization is essential in every business. You need to have a guide to run your scrap metal business smoothly towards success.
A sample scrap metal business plan is what you need, to give you a head start in running your business. You can use it as a framework to write down your personalized business plan. It is also a document you can consult to measure and asses your business performance. This plan will cover the ups and downs of the metal recycling business. Below are some key points your business plan should contain.
A Sample Scrap Metal Recycling Business Plan Template
- Table of Contents
Sometimes, you forget that the simplest details you neglect can actually help you a lot. Looking for important information quickly can be a problem if it does not have a table of contents. So therefore, a table of content must be included in your scrap metal business plan to allow you to quickly see the information you or your investors are looking for.
- Executive summary
In this section, you need to write down the overview of your plan. Talk about your business and the services you offer. Discuss how can you make profits and how do you plan to achieve your goals. If you have any experience regarding the scrap metal business, talk about it as well. A good scrap metal business plan must contain a well written and catchy executive summary, so that the investors will take interest in your plan.
- Company background
In your scrap metal business plan, it is important to describe the team behind your proposed company including the owners. Do not forget to write the business name, address and contact numbers. You will also need to state how you came up with your idea and how the idea has evolved over time.
- Products and services description and purpose
In this section, you must be specific and detailed in writing your products and services description. Discuss how your business will differ from what your competitors are offering. Place the right price tag on your product or service. Describe your business purpose and how will it help consumers.
- Legal status
The legal status is an important part of your scrap metal business plan. Hence, you should indicate in your plan if your business is the product of a partnership, a sole proprietorship or a limited corporation and your reason for your choice of legal entity. Investors need to know this for future liability purposes. You must also indicate the steps you are going to undertake in applying for appropriate business licenses.
- Marketing strategy
An essential part of a metal recycling business plan is the marketing plan; which spells out in detail how you intend to sell your product. Write down the studies you undertook in choosing your type of target market and its size. Discuss what specific group of individuals you will focus on and the deals you are going to offer them. Include the methods you will use for advertisement and sales. Project the estimated costs and time period for your advertising campaigns. Discuss your sales targets, projected goals and how to reach them.
- Management strategy
Finally, you should include the process of how you intend managing your business. This will also cover how you will monitor your business, how you will go about with the financing, recruitment and hiring, product development, etc. It is also important you include a risk sensitivity analysis, and your financial projections.
4. Obtain the necessary business license and permits
Before setting a recycling plant, it is very important you consult with an attorney. Consult the necessary websites to ensure you understand and comply with all state and local restrictions and to obtain the necessary permissions and the licenses required to operate this type of business.
5. Purchase the necessary equipment
To start this business, you will need a vehicle like a recycling management software, business cards, an SUV, truck or van to transport both your junk goods and recycled products. In addition, you must procure some containers to make the sorting and transporting task cleaner, and easier. To complete your scrap metal business, you will need some heavy gloves, and a jumpsuit to protect you from dirt, and sharp scraps of metal.
And when it comes to the heavy machinery, you need to find out the equipment and facilities you will require to start your metal recycling business. For instance, tin recyclers might have their own smelting operation or may simply receive the scrap tin and then pay the customers based on the current pricing minus the profit margin. Then the next step is to send the scrap tin to a third-party smelter that will pay the market price for the metal.
6. Look for suppliers and customers
To get your business rolling, you need to determine where your best opportunities are for sourcing scrap metals, and develop a collection routes. Your scrap metal source may include small businesses, auto repair shops, demolition sites, plumbing businesses, mechanics, electricians, land scrapers, and plumbers. On the other hand, you can start with neighbors living within your place of residence. They will definitely love you for taking away their useless junks for them.
Since you are already interacting with your customers, it will be efficient if you advertise at the same time. And to make it more effective, you must satisfy your customers. You can satisfy them by making sure that your collection process is fast and clean; and most importantly, you must encourage them to talk about your business.
8. Expand Your Reach
Residential customers will definitely run out of metal scraps after you provide your service to them. Because of that, you will need to add some regular customers from business establishments. And to save you from frequently checking on them for scraps, provide them with a business card bearing your contact details on it. That will allow them to summon you whenever they will need your service.
You can also establish a collection checkpoint within their neighbor or better still, put your business on the web and encourage your customers to reach you via social media if there is to be a collection. You can also make use of software to schedule and keep in touch with your customers and suppliers.
9. Subscribe to Newsletters
To get more information about the trends of the industry you entered, it is a great idea to subscribe to metal scrap related online newsletters. Some of the websites you can get newsletters from are Fiber Market News, Construction and Demolition Recycling, and Metal World. On the other hand, once you visit those sites, you will be able to learn more about running a scrap metal recycling business.
5 Challenges of a scrap metal recycling business
Though scrap metal recycling is a very lucrative business, there are still some challenges accompanied with it. Below are some challenges you will encounter in the scrap metal recycling business.
1. You will be dealing with harmful objects
These scrap metals are sharp and very dangerous. When handling them, if you are not careful, you are likely to sustain injuries. Therefore, extreme care is required when handling them.
2. You will be dealing with bulky wares
Some of these scrap metals are too bulky, thus making it difficult collection. Examples of the bulky scrap metals are scrap motor parts, zinc etc. To overcome this challenge, you will need cranes and pulleys.
3. It takes time to separate or sort
When recycling scrap metals, some wastes are produced and it takes time to separate these wastes. Even before recycling it, it takes time to separate the recyclable materials from the non-recyclable materials.
4. You are prone to poisoning
Running a metal recycling plant exposes you to toxins. Some of the recyclable metal scraps are very poisonous and are harmful to man. An example of a poisonous content in a recyclable metal scrap is lead. An exposure to lead dust or fume will put you at a risk for lead poisoning.
5. It is capital intensive, labor intensive and time consuming
Scrap metal recycling is a bit time consuming. This is because it takes time to gather the scrap metals, transport it to the recycling plant and finally have it recycled. It is also a capital intensive business as you will need to purchase some heavy duty machinery. It is also not a business you can run alone, so you will need to employ helping hands.