How to Start a Junk Removal Business
If you enjoy staying physically active and like the variety of doing something a little different every day, the junk removal industry might be right for you. Starting a junk removal business of your own means you’ll be your own boss and no two work days will ever be quite the same. You’ll enjoy the satisfaction of providing a service that people need, while also being able to bring in some nice profits for your work. But starting this type of business isn’t as simple as just heading out in your truck. Read on to find out what’s involved and whether this business opportunity might be right for you.
Junk removal businesses provide an important service to homeowners and renters, home buyers, construction workers, and more. These businesses come into a site and clean out junk, which can consist of everything from scrap metal and old appliances to brush and trees to bags of garbage. These cleanup jobs are often large and physically demanding, and they’re usually jobs that the property owner doesn’t have the time, strength, or resources to do on their own.
Most junk removal businesses consist of teams of employees working out of a pickup truck or dump truck. Once they’ve removed the materials, these businesses typically bring them to landfills or recycle appropriate materials. Because clients rarely have ongoing needs for junk cleanup, a junk removal business usually works with a variety of different customers at many different sites in a single week.
According to IBIS World, the waste collection services industry has undergone steady growth from 2015 to 2020. The experience grew by 1.2% during that time, reaching $51.7 billion in 2020. That growth is driven by an increase in the industrial, construction, and commercial business industries, which results in increased demand for waste collection services. As of 2020, 12,158 businesses employed 219,049 staff.
This industry is expected to continue to grow from 2020 to 2025. This growth will be driven by an increase in waste production that correlates with population growth.
Understanding current junk and waste trends can help a business owner determine the services that will be most in demand. According to Junk Happens, each person in the United States generates an average of five pounds of waste per day, and the amount of waste that the United States generates in a year could double by 2050.
Electronic waste is a particularly big problem, and it results in approximately 70% of the toxic waste in the country. Less than 13% of electronic waste gets recycled, and electronic waste made up of mobile phones, computers, and TVs accounts for about 10 million metric tons of waste.
A junk removal business’ target market will depend on the business’ specialty. Some businesses market to homeowners and renters who need junk removed. Other junk removers specialize in working with commercial businesses, construction companies, or other large-volume markets. Some businesses may specialize in a certain type of junk removal, like recyclable metal, brush, or old appliances. These specialties will determine the appropriate target market.
Checklist for Starting a Junk Removal Business
If you’re thinking about starting your own junk removal business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a junk removal business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 3: Choose a Business Name
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select your Location
It’s possible to start a junk removal business from home, especially if it’s just a single-vehicle business. As that business grows and expands into a multi-vehicle fleet, it may be time to rent a commercial property or garage. Rental costs will depend on the type and size of the property, as well as its location.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
A junk removal business owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.
When starting a junk removal business, do some research into the disposal regulations in your area. Disposing of certain materials, like hazardous waste, may require additional permits and fees. The same is true of disposing of large items, like appliances. Familiarize yourself with the different facilities that you will need to travel to, and get an updated list of disposal prices. Having this information can help you to appropriately price jobs so you don’t lose out on profits because of these fees.
According to Haul Away Cash, a junk removal business will need to obtain additional licensing if it transports hazardous materials like paint, chemicals, and oil. This can be dangerous, so plan to budget not only for licensing but also for training. Many junk removal businesses avoid this challenge by working only with non-hazardous materials.
Some other common local, state and, federal registrations a junk removal business may need include, a business license, Employer Identification Number, and Occupancy Permit among others.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a junk removal company is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
Because there are low barriers to entry in this industry, your business will be up against plenty of competition. This means it’s even more important for you to create a recognizable brand and offer services that are better than what competitors provide. This doesn’t mean that you have to charge less than competitors, but rather that you have to provide a quality service and experience that customers won’t find elsewhere. Consider what you can do to make your business stand out, whether that’s offering last-minute bookings, complimentary cleanup services, or above-and-beyond customer service.
A junk removal business can market in many different ways, but some of the most common include social media marketing, online advertising, print advertising, and even direct mail advertising. Some businesses may explore radio and TV advertising, too.
Don’t forget the importance of networking and developing relationships with other professionals in the area. Realtors, construction contractors, property managers, and real estate flippers are all likely to frequently encounter situations needing junk removal. Building these relationships can lead to repeat business and referrals.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a junk removal business. A few of these include:
– General liability insurance helps to protect the business against expenses that could result if a customer or their property are hurt or damaged as a result of the business’ work.
– Commercial auto insurance helps to protect the business from expenses like medical bills and legal fees that it might face if one of its vehicles were in an accident.
– Workmans’ comp insurance helps to cover expenses like medical bills and legal fees that might occur if an employee were hurt on the job.
The cost to insure a junk hauling business can be affected by factors like the business’ location, the number of employees on staff, and the value of its vehicle. To get the most accurate idea of insurance costs, request quotes from multiple companies. When comparing the quotes, evaluate not only how the premiums, but also the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hiring Employees
A junk removal business will need at least one employee from the start for practical reasons since many junk removal jobs will require multiple people to lift and remove at least some of the items. ZipRecruiter reports that junk removal salaries average $30,641 per year, though salaries can range from $21,500 to $38,000 per year.
In addition to budgeting for salary costs, a budget also needs to include other related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are all common expenses that come with hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your junk hauling business is critical to your long-term success.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a junk removal business?
Depending on the vehicle that you already have access to, starting a junk removal business can be rather affordable or quite expensive. Accessing an appropriate vehicle, like a pickup truck, will be the largest expense, but can be done affordably by looking for a lower-cost used vehicle. Plan to spend $15,000 or more on the vehicle and common startup costs.
Some common startup costs for a junk removal business include:
– Tools and equipment
– Safety equipment like gloves
– Vehicle signage
What skills are needed to run a junk removal business?
It doesn’t take a business degree to start a junk removal business, but certain skills and experiences can increase the chances of that business becoming a success.
Knowledge of local disposal regulations. A junk removal business owner will need to be familiar with local disposal regulations and facilities so that they can choose appropriate disposal locations and methods.
Physical strength and endurance. Junk removal is a physically demanding career, so strength and endurance are important to productivity and to the business owner’s wellbeing.
Attention to detail and an eye for safety. Junk removal, especially when it involves larger, heavier items, can be dangerous. A business owner will benefit from an eye for detail and situational awareness to keep themselves and their employees safe.
Knowledge of proper lifting techniques. Knowledge of proper lifting techniques is important and can help to prevent injuries to the owner and staff.
Customer service skills. Strong customer service skills can help a business owner to develop good relationships with customers to get referrals, positive reviews, and even repeat business.
Management experience. A business owner who has experience in hiring, training, and managing staff will be well-prepared to hire the right employees for their business.
How much can a junk removal business owner make?
Business profits will vary depending on factors like the business’ location, profit margin, and number of years in business. According to Junk Removal Authority, a well-managed business with appropriate pricing will have expenses totaling approximately 41% of its income. If that business charges $350 for an average job, then the job’s expenses will be $143.50, leaving the business with an average gross profit of $206.50. Building that business so that it has a full schedule, then expanding to encompass multiple teams of staff with multiple trucks can increase those profits.
Are there grants to start a junk removal business?
It’s extremely rare to find a grant to start a junk removal business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a junk removal business?
The NAICS code for a junk removal business is 562119, which is categorized under Other Waste Collection.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
National Waste & Recycling Association