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Starting a Scrap Metal Recycling Business – A Complete Guide

Do you want to start a scrap metal recycling company? If YES, here is a complete guide to starting a scrap metal recycling business with NO money and no experience.

Okay, so we have provided you an in-depth sample scrap metal recycling business plan template. We also took it further by analyzing and drafting a sample scrap metal recycling marketing plan backed up by actionable guerrilla marketing ideas for scrap metal recycling businesses. In this article, we will be considering all the requirements for starting a scrap metal recycling business. So put on your entrepreneurial hat and let’s proceed.

Why Start a Scrap Metal Recycling Business?

It has been proven over and over again that if there is any industry or line of business that is gaining support from key stakeholders in our world today, it has to be the recycling industry. This is simply because the recycling business is an eco-friendly business that can earn you a living, make you a business owner and an employer of labor.

There are diverse areas of specialization in the recycling industry and one of them that you can specialize in if you are interested in starting a business in this industry is the metal scrap recycling business. It is a business that is highly profitable because there is hardly any country or city that you won’t find used and abandoned metal scraps.

Essentially what you would need to put in place in other to successfully launch a metal scrap recycling business is the machines and equipment needed and how to operate them, a good knowledge of where to collect used and condemned metal and where to sell the raw materials generated from the recycling process, the legislations guiding the industry as well as strong entrepreneurial skills and determination.

So, if you have decided to start a scrap metal recycling company, then you should be ready to conduct thorough feasibility studies and market survey before committing your money and other resources to it. If you are interested in starting a scrap metal recycling business, then you should ensure you read through this article.

Starting a Scrap Metal Recycling Business – A Complete Guide

  • Industry Overview

The scrap metal recycling line of business is one of the largest lines of business in the recycling industry. Establishments in the scrap metal recycling industry are primarily involved in the collection, processing and recycling of condemned ferrous metals, such as iron and steel, and nonferrous metals, such as aluminum, copper and nickel. Basically, the scrap metal recycling process involves sorting, shearing, shredding, torching and baling scrap metal to be sold to downstream metal smelters for further processing.

Reports published by IBISWORLD shows that the Scrap Metal Recycling industry has been exposed to the full force of the global economy over the past five years. While the industry quickly rebounded in 2010 and continued to improve through 2011 and 2012, domestic and international demand conditions have softened but the industry is yet to reach its pre-recession high. However, the industry is expected to experience a less volatile period over the five years to 2020 as metal price fluctuations settle down.

The Scrap Metal Recycling industry is indeed a very thriving industry in most countries of the world. It is a major sector of the economy of the United States and it generates a whooping sum of $38 billion annually from about 611 registered and licensed scrap metal recycling companies scattered all around the United States of America. The industry is responsible for the employment of well over 35,987 people.

Experts project that the scrap metal recycling industry would grow at a 1.9 percent annual rate. Sims Metal Management is obviously the market leader in the scrap metal recycling industry; they have the lion market share in the United States of America.

If you are a keen follower of the trends in the scrap metal industry and of course any other recycling business, you will realize that players in this industry ensure that they position their recycling plant close to clients to reduce transportation costs and turnover time.

This is one of the major reasons why you can easily find scrap metal recycling plants located in manufacturing cum industrial estates, as well as highly populated urban areas to collect obsolete metal scrap. Good enough, manufacturing facilities do not only supply industry operators with scrap metal for their operation processes but they also demand recycled ferrous and nonferrous metals from industry operators hence a win – win operation.

No doubt, the Scrap Metal Recycling industry has come to stay and the good part of it is that it enjoys the support of environmentalists and the government of various nations since it is a means to preserve the earth from degradation, greenhouse gas emissions and environmental pollution.

Despite the fact that establishing a Scrap Metal Recycling Company requires huge startup capital and rigorous processes to build a standard recycling plant, but it is also a fact that it is indeed a profitable venture. The market for recycled scrap metal is large and can accommodate loads of investors.

Some of the factors that encourage entrepreneurs to start their own scrap metal recycling business is that the business is profitable and they can easily get support from the government.

Just like any other business, if you are able to conduct your cost analysis, market research and feasibility studies before launching your scrap metal recycling company, you are more likely not going to struggle to grow the business because there are loads of manufacturing companies out there who get supply of raw materials from the scrap metal recycling industry.

Over and above, starting and operating a scrap metal recycling company can be challenging, but the truth is that it can be rewarding at the same time. One good thing about the industry is that it is open for both big time investors who have the capacity to start the business on a large scale with world class recycling plant and aspiring entrepreneurs who may want to start on a small scale.

Starting a Scrap Metal Recycling Business – Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographics composition of those who need raw materials from scrap metal recycling companies can be restricted to manufacturing companies who manufacture products with metal components and metal products.

So, if you are looking towards defining the demographics for your scrap metal recycling business, then you should target manufacturing companies such as metal (ferrous and non – ferrous metal) production industries, manufacturing companies, automobile manufacturing companies, roofing and construction companies, ship manufacturing companies, manufacturers and distributors, entrepreneurs and start – ups who would need recycled raw materials.

List of Niche ideas Within the Scrap Metal Recycling Business That You Can Specialize in

Basically, there is no clear – cut niche area in the scrap metal recycling industry, although a scrap metal recycling company can decide to specialize in either recycling steel and iron scrap or recycling nonferrous scrap metal. But on the average, almost all scrap metal recycling companies engage in recycling all forms of metal.

So, if you are looking towards starting your own scrap metal recycling company, then you should clearly define your market so that you will be able to know how to supply recycled scrap metal to them. These are some of the niche ideas of specialization a start – up scrap metal recycling company can specialize in within the industry;

  • Recycling steel and iron scrap
  • Recycling copper scrap
  • Recycling aluminum scrap
  • Recycling lead scrap
  • Recycling other nonferrous scrap metals

The Level of Competition in the Scrap Metal Recycling Industry

No matter the line of business you decide to pitch your tent, you are still going to compete with others and even the government who are into same area of business and scrap metal recycling business is not an exemption.

The recycling industry is an emerging market that is yet to be fully embraced globally, therefore there is little or no competition in the industry at the moment. Although, there is a relationship between the emerging players as they cannot do without the other. Since the industry is a multi-stage one, there is need for collaboration among the players in order to have a win-win situation for all the players.

Without a shadow of doubt, there are loads of big time investors that have stakes in the scrap metal recycling industry; but one thing is certain, there is room big enough to accommodate all players. So, if you enter the industry today, you should brace up yourself for collaboration and prepare for serious competition in the nearest future as soon as the recycling industry enters it boom period, this period will definitely arrive especially in the developing world in little time when recycled product is seen in the same light as the new and “virgin” material.

List of Well Known Brands in the Scrap Metal Recycling Industry

These are some of the leading scrap metal recycling companies in the United States of America;

  • OmniSource – Steel Dynamics Inc.
  • Sims Metal Management
  • Commercial Metals Co. (CMC)
  • Schnitzer Steel Products Co.
  • Ferrous Processing & Trading Co. (FTP).
  • David J. Joseph Co. (DJJ),
  • PSC Metals
  • AMG Resources Corp.
  • Miller Compressing Co., Milwaukee
  • Cohen Brothers Inc., Middletown, Ohio
  • Alter Scrap Processing
  • Camden Iron & Metal Inc., Camden, N.J
  • Joseph Behr & Sons Inc
  • Mervis Industries
  • The Galamba Metals Group LLC, Kansas City, Mo
  • Gershow Recycling of Medford, N.Y.
  • Newell of Atlanta
  • General Iron Industries, Chicago
  • American Compressed Steel, Kansas City, Mo.
  • Morris Recycling Inc., Albany, Miss.
  • Atlantic Scrap and Processing LLC, Kernersville, N.C.

Economic Analysis

When starting a scrap metal recycling business, you just have to get your costing cum economic analysis right if your intention of building the business is to generate profit, grow the business and perhaps expand the business and start competing at national level.

When conducting costing and economic analysis for your scrap metal recycling business, you just have to critically examine these key factors; place, pricing and promotion. As a matter of fact, you would have to continue to review these key factors at regular interval while running your scrap metal recycling business. As a scrap metal recycling business owner, you just have to have a proper grasp of your competitive landscape if indeed you want to maximize profits and be in the frontline of the industry.

It is important to note that truck fueling and servicing, and maintenance cost for the recycling plant and is one of the most important factors contributing to the overall cost of operating a scrap metal recycling business and should be considered as a major factor when carrying out your costing and economic analysis.

This is why standard scrap metal recycling companies would prefer assembling in – house maintenance and servicing team as against contracting the maintenance of their haulage trucks and recycling plant to an automobile maintenance and servicing company.

Starting Your Scrap Metal Recycling Company from the Scratch versus Buying a Franchise

When it comes to starting a business of this nature, it will pay you to start from the scratch as against buying a franchise.

Besides, it is easier to start and run a scrap metal recycling company from scratch to profitability without leveraging on a known brand name. People will patronize your products based on accessibility and pricing as against relying on a brand name.

Please note that most of the big and successful scrap metal recycling companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success and of course you can build your own scrap metal recycling company to become a successful scrap metal recycling company in your area of specialization and even go ahead to start competing at national level.

Possible Threats and Challenges You Will Face When Starting a Scrap Metal Recycling Business

If you decide to start your own scrap metal recycling business today, one of the major challenges you are likely going to face is the presence of well – established scrap metal recycling companies in your target market location. The only way to avoid this challenge is to create your own market; concentrate on start-up production companies who need raw materials from a scrap metal recycling company.

Some other threats and challenges that you are likely going to face when you start your scrap metal recycling company are mature markets, bad economy (economy downturn), stiff competition, volatile costs, and rising fuel prices.

So also, unfavorable government policies, seasonal fluctuations, demographic / social factors, downturn in the economy which is likely going to affect consumers spending and of course emergence of new competitors within the same location where yours is located. There is hardly anything you can do as regards this threats and challenges other than to be optimistic that things will continue to work for your good.

Starting a Scrap Metal Recycling Business – Legal Matters

  • Best legal entity to use for a Scrap Metal Recycling Business

Starting a scrap metal recycling business is indeed a serious business so the legal entity you choose will go a long way to determine how big you want the business to grow. No doubt choosing a legal entity for a business can be a bit challenging.

When it comes to choosing a legal entity for your scrap metal recycling company you have the option of choosing from general partnership, a limited partnership, an LLC, a “C” corporation, or an “S” corporation. It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice.

These are some of the factors you should consider before choosing a legal entity for your scrap metal recycling business; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.

If you take your time to critically study the various legal entity to use for your waste collection and management business, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public and international.

Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your scrap metal recycling business so as to compete with major players in the industry not just within the United States of America, but also on the global stage; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.

Catchy Business Name Ideas Suitable for a Scrap Metal Recycling Company

Customarily, when it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Typically, it is the norm for people to follow the trend in the industry they intend operating from when naming their business.

If you are considering starting your own scrap metal recycling business, here are some catchy names that you can choose from;

  • Life Gate Metal Recycling®, LLC
  • Cone Shape Scrap Metal Recycling, Inc.
  • Andrew Anderson & Sons Scrap Metal Recycling Company
  • Mexico Heritage Scrap Metal Recycling Ltd.
  • Mike Pally Metal Company
  • Hardline Scrap Metal Recycling Company
  • Silver Lining Scrap Metal Recycling Company
  • Save the Environment Recycling Company
  • The Metal People Company
  • Santiago Matt Group, Inc.

Insurance Policies

In the United States and of course in most countries of the world, you can’t be allowed to operate a business without having some of the basic insurance covers that are required by the industry you want to operate from. Hence, it is imperative to create a budget for insurance policy cover and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your scrap metal recycling business.

Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own scrap metal recycling business in the United States of America

  • General insurance
  • Health insurance
  • Liability insurance
  • Equipment and Auto Insurance
  • Risk Insurance
  • Hazard insurance
  • Workers compensation
  • Overhead expense disability insurance
  • Business owner’s policy group insurance
  • Payment protection insurance

Intellectual Property Protection/Trademark

If you are considering starting your own scrap metal recycling business, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.

On the other hand, if you just want to protect your company’s logo and other documents or software that are unique to you or even operation concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.

Is Professional Certification Needed to Run a Scrap Metal Recycling Business?

If you intend starting a scrap metal recycling company in the United States of America, you are strongly encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business. These are some of the certifications you can work towards achieving if you want to run your own scrap metal recycling business;

  • ISO Certified Scrap Metal and Electronics Recycler
  • Recycling Industry Operation Standard (RIOS) Certification

Please note that all scrap metal recycling companies, are required by law to obtain the appropriate business license, permits and certification.

List of Legal Documents You Need to Run a Scrap Metal Recycling Company

The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, the long hand of the law will catch up with you faster than you expect.

These are some of the basic legal documents that you are expected to have in place if you want to legally run your own scrap metal recycling business in the United States of America;

  • Scrap Metal Dealers License
  • Business Incorporation Certificate
  • Commercial Vehicle Operator’s Registration for haulage trucks
  • Appropriate driver’s licenses for drivers
  • Assistant’s licenses for assistants
  • Health inspection Certificate
  • Proof of ownership, proper identification and vehicle license
  • Copy of license for the service support facility (recycling plant) and/or a recent inspection report
  • Tax Payer’s ID
  • Fire certificate
  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Non – disclosure Agreement
  • Employment Agreement (offer letters)
  • Employee’s Handbook
  • Operating Agreement for LLCs
  • Operating Agreement for LLCs
  • Insurance Policy
  • Apostille (for those who intend operating beyond the United States of America)

Financing Your Scrap Metal Recycling Business

Starting a standard and well–equipped scrap metal recycling business with the capacity to supply recycled metals to large production companies can be capital intensive especially if you choose to launch a large scrap metal recycling company with the capacity to supply recycled metals to production factories not just in your immediate community but also across your state and country.

Securing a land facility, fleet of haulage trucks and building a metal recycling plant and purchase of equipment are part of what will consume a large chunk of your start–up capital, but if you choose to start the business on a small scale with just one haulage truck, you may not have the need to go source for fund to finance the business.

No doubt when it comes to financing a business, one of the first things and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.

Here are some of the options you can explore when sourcing for start–up capital for your scrap metal recycling business;

  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell shares to interested investors
  • Applying for loan from your bank/banks
  • Pitching your business idea and applying for business grants and seed funding from government, donor organizations and angel investors
  • Source for soft loans from your family members and your friends

Choosing a Suitable Location for your Scrap Metal Recycling Business

Starting a business such as scrap metal recycling company comes with its own challenges; it is a business that cannot be started in any location of your choice. As a matter of fact, you will not be allowed to start a scrap metal recycling company in a residential estate in the United States of America. The only location you can be allowed to start a scrap metal recycling company is a land designated for such business and it is usually in the outskirts of town.

It cannot be overemphasized that the location you chose to start your scrap metal recycling company is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of businesses with the required purchasing power, and a location that has minimal hurdles to cross especially as it relates to construction of a scrap metal recycling plant.

If you make the mistake of renting or leasing a facility for your scrap metal recycling business in a location that is difficult to access; a location with difficult terrain, then you must be prepared to spend more on fueling and maintenance of your haulage trucks.

It is important to note that a business facility in a good location does not come cheap hence you should be able to allocate enough fund for leasing/renting in your budget. If you are new to the dynamics of choosing a location for a business such as scrap metal recycling business, then you should feel free to talk to a business consultant or a realtor who has a full grasp of the city and perhaps country you intend starting your scrap metal recycling business.

Starting a Scrap Metal Recycling Business – Technical & Manpower Details

After the construction of your scrap metal recycling plant, the next thing to do is to install all the necessary equipment and machinery required to run your company.

Here are some of the equipment and machinery needed in your scrap metal recycling plant; Scrap Metal Baling and Sorting machines, Scrap Metal and Steel material processing machine, Shredders, Cable Granulators, Catalytic Converter Recycling Machine, scrap metal melting furnace, Processing Wire Looms and Harnesses, Alligator Shears, Scrap Metal ingot Casting machine, Conveyor Belt System, and Power Plant amongst others. It is important to state that this equipment can be purchased as fairly used if you are operating on a low budget.

When it comes to choosing between renting and leasing a facility for your scrap metal recycling company, the size of the scrap metal recycling company you want to own, and your entire budget for the business should influence your choice.

If you have enough capital to run a pretty large and well – equipped scrap metal recycling company with a standard scrap metal recycling plant, then you should consider the option of long lease or out rightly purchasing a land; when you lease, or purchase a land, you will be able to work with long–term planning, structuring and expansion.

As regards the numbers of employees that you are expected employ to kick start the business with, you would need to consider your finances before making the decision. Averagely, when it comes to starting a standard scrap metal recycling business on a large scale, you would need the services of the following professionals; Chief Operating Officer (you can occupy this position), Head, Technical Services, Admin and HR Manager, Transport and Logistics Manager, Marketing and Sales Executive (Business Developer), Accountant, Recycle Plant Engineers/Technicians, and Operators, Scrap Metal Collection Truck Drivers and Customer Services Executive/Front Desk Officer.

Over and above, you would need a minimum of 10 to 15 key staff members to effectively run a medium scale but standard scrap metal recycling plant. Please note that there will be times when you are expected to go out of your way to hire experts to help you handle some job functions.

If you are just starting out you may not have the financial capacity or required business structure to retain all the professionals that are expected to work with you which is why you should make plans to partner with specialists in the industry.

The Production Process Involved in a Scrap Metal Recycling Company

Basically, the business operation process as it involves scrap metal recycling companies involves scrap metal collection/haulage trucks driving through designated locations to collect scrap metals that are well packed in a waste drum/waste bin and then transported to the scrap metal recycling plant.

Once the scrap metals are offloaded from the truck, sorting of the scrap metal is the next activity that will follow. After sorting of the scrap metal, they are then placed inside the scrap metal recycling plant; it usually goes through different processes such as melting, molding and packaging. At every process, the use of conveyor belt is needed to transport the materials from one location to another within the recycling plant.

Lastly, after the recycling process is complete, the recycled scrap metal are packaged and then shipped or transported to manufacturing companies that make use of recycled scrap metal as raw materials for producing products and this is done based on demand.

Starting a Scrap Metal Recycling Business – The Marketing Plan

  • Marketing ideas and strategies

The fact that the entry barrier for starting a small – scale scrap metal recycling business is not on the high side means that there is bound to be more players in the industry no matter the location you choose to start yours. In essence, you must come up with creativity and innovations if you must carve out a market for yourself within the available market in your community, city, state or country.

So, when you are drafting your marketing plans and strategies for your scrap metal recycling company, make sure that you create a compelling personal and company’s profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to scrap metal recycling. This will help boost your chances in the market place when marketing your services.

Here are some of the platforms you can utilize to market your scrap metal recycling company and the products;

  • Introduce your business by sending introductory letters alongside your brochure to manufacturing companies such as metal (ferrous and non – ferrous metal) production industries, manufacturing companies, automobile manufacturing companies, roofing and construction companies, ship manufacturing companies, manufacturers and distributors and entrepreneurs and start–ups who would need recycled raw materials.
  • Open your scrap metal recycling company with a party so as to capture the attention of residence who are your first targets.
  • Advertise your business in community based newspapers, local TV and radio stations.
  • List your business and products on yellow pages ads (local directories).
  • Engage in roadshow from time to time in targeted neighborhoods (as it applies to getting scrap metals from residence).
  • Leverage on the internet to promote your scrap metal recycling company.
  • Engage in direct marketing and sales.
  • Encourage the use of Word of mouth marketing (referrals).
  • Leverage on the internet to promote your business (when you blog regularly on key issues as it relates to your business, people who consider you an expert in the field).
  • Join local chambers of commerce around you with the main aim of networking and marketing your product; you are likely going to get referrals from such networks.
  • Engage the services of marketing executives and business developers to carry out direct marketing for you.

Strategies to Boost Your Scrap Metal Recycling Brand Awareness and Create Your Corporate Identity

No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Your corporate identity as a lot to do when it comes to building a business that is profitable and lasts long.

Here are the platforms you can leverage on to boost your brand awareness and create corporate identity for your scrap metal recycling company;

  • Place adverts on both print (newspapers and magazines) and electronic media platforms
  • Sponsor relevant community based events/programs
  • Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, YouTube, Google + et al to promote your business
  • Install your Bill Boards on strategic locations all around your city or state
  • Engage in roadshow from time to time in targeted neighborhoods (as it applies to getting scrap metals from residence)
  • Distribute your fliers and handbills in target areas
  • Contact manufacturing companies who leverage on recycled scrap metals as raw materials in their production process and residence (for collection of scrap metals) in your target areas by calling them up and informing them of your scrap metal recycling company and the products you offer
  • List your scrap metal recycling company in local directories/yellow pages
  • Advertise your scrap metal recycling company in your official website and employ strategies that will help you pull traffic to the site.
  • Ensure that all your staff members wear your branded shirts and all your vehicles and scrap metal collection trucks are well branded with your company logo et al.
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