How to Start a Recycling Business
Recycling is a practice that has taken on various shapes over the years. One of the earliest recycling practices in the U.S. dates back to the 1600’s, when a Philadelphia paper mill used old rags and linens to make paper. However, it wasn’t until the late 20th century that curbside recycling pick-ups became standard in the U.S.
Nowadays, recycling has a huge place in American culture, and recycling businesses have an important role in reducing waste and repurposing materials for a second (or third) use. For instance, new inventions are created using recycled materials, such as paved roads and clothing from recycled plastics.
So, how do you start a recycling business? This guide provides an in-depth look into the recycling industry and how you can make money starting a recycling business.
Recycling facilities sort, clean, and package purchased or donated recyclable materials to resell as raw material to manufacturers. Small recycling facilities may handle the sorting of local community waste by hand. In contrast, large recycling facilities may take recycled products from several cities and use conveyor belts and machines such as balers and glass crushers. The sorted, cleaned, and repackaged materials are sold to manufacturers by the pound or ton, and the manufacturers then use the material to create new products.
Recycling centers typically run in two ways: single-stream sorting and double-stream. A single-stream system allows all recyclable materials to be deposited into one bin and then sorted on one conveyor belt. Conversely, a double-stream method has one conveyor belt for paper and cardboard and another for all other recyclable materials.
The benefit of a single-stream method is that consumers use one bin for all recyclables. In comparison, double-stream systems require consumers to separate recyclables into separate bins, one for paper and cardboard and another for everything else. However, the downfall of a single-stream system is that many recycled materials end up in the waste because they are more likely to be contaminated by a non-recyclable element (such as dirty takeout boxes).
Recycling is a growing industry and is closely linked to consumer spending. Over the last five years, recycling centers have grown on average by 3.6% per year. When spending is up, recycling revenue is up. Although consumer spending decreased during the height of the pandemic, recycling and spending have come back. In fact, recycling centers have generated $7.6 billion in revenue in 2022 and are expected to see an increase of 0.6% in revenue in 2022.
Recycling and consumer spending habits are closely linked because many recycling centers generate income from packaging materials like paper, cardboard, and plastic packaging from retail stores and shipping. Therefore, monitoring consumer spending can help determine the growth and outlook for recycling centers.
Growth is also linked to the number of products that can be recycled into raw materials. With the rise of companies and industries focusing on sustainability and reducing waste, there is a greater opportunity for additional materials to be recycled and resold. Further, an increased interest in recycled materials means the demand for recycled products will increase, and the raw material sale price will increase.
Recycling centers often need grants or funding to run effectively as many recycling services are offered for free or at a decreased cost. However, recycling centers often get minimal grants or lose funding to other government-funded amenities. At the same time, recycling is increasing, putting an additional strain on a recycling center’s costs. A lack of funding could threaten a recycling center’s growth and ability to handle the number of recycled materials processed through the facility.
Focusing marketing efforts on the correct market can help a recycling business succeed and grow steadily. For example, one of the main markets for recycling centers are manufacturers who purchase raw materials in large quantities.
Another key market includes the sources for incoming recyclables. The recycling center’s market for acquiring recycled materials are:
- Individuals who drop off materials.
- City contracts to collect curbside recyclables.
- Businesses and industries that produce a lot of recyclable waste.
Some examples of industries that produce recyclable waste include restaurants, retail stores, event centers, medical offices, and construction businesses.
Checklist for Starting a Recycling Business
A recycling business is an excellent idea. Not only is recycling good for the planet, but there’s a growing market for recycled products. But before you start, there are some things you need to do to make sure your business is successful. Here’s a checklist to help you get started.
Step 1: Figure Out Your Niche
There are many different types of recycling businesses, from plastic and paper recycling to scrap metal and e-waste like electronics and appliances. Figure out which type of recycling you’re interested in and what type of materials you want to recycle.
Step 2: Write a Business Plan
A recycling business plan is a document that sets out the business case for why a recycling company should be set up and funded. It should describe the market opportunity, the service or product offering, the target customers, the competition, the team and management, the business model and how it will make money, and the financial forecasts.
The business model section will also look at the potential profitability of the business. The financial forecasts section should include sales projections, costs, margins, and profits.
Related: How to write a business plan
Step 3: Name the Business
When it comes to coming up with a business name, there are a few things to consider.
First and foremost, the name should be reflective of the company’s mission and values. Look at choosing a name that conveys a commitment to environmental responsibility and sustainability.
Additionally, the name should be easy to remember and pronounce. After all, you want potential customers to be able to find your business when they’re looking to recycle their materials.
With these factors in mind, choose a name for your recycling business that will make a positive impression and help you to stand out from the competition.
Related: Tips on naming a business
Step 4: Form a Business Structure
A business structure (also referred to as a legal entity) 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 recycling 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.
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Step 5: Choose a good location for your business.
Finding a location is an important decision when starting a recycling business. Two of the most important include the market and cost of operation.
The first consideration is locating close to the materials you want to recycle. Be sure to be thorough in your market research and make sure your local market can provide a sufficient supply of materials.
Secondly, you need to consider the cost of operating in a particular location. If the costs are too high, such as the cost of transportation or the facility cost, it may not be feasible to open a recycling business in that area.
Some municipalities will provide assistance in starting a recycling program. Resources can be financial, but also evaluating a location and data on the needs of the community, so be sure to see what is available in your area.
Step 6: Apply for Business Licenses and Permits
Before you can start a recycling business, there are a few things you need to take care of first. First and foremost, you will need to obtain the proper licensing from the Environmental Protection Agency (EPA), state, city, and/or county to set up a facility. In most locations, a waste hauling license will also be needed to transport waste materials.
In addition, you will likely need to get a permit from your local landfill or transfer station in order to recycle materials. Once you have taken care of the paperwork, you will be ready to start collecting and recycling materials.
Then, there are general business licensing requirements that could include a Federal Employer Identification Number (FEIN), local business license, and more.
Related: Common business licenses, permits, and registrations by state
Step 7: Find Financing
Starting a recycling business can be a lucrative way to help the environment while also turning a profit. However, raising the necessary financing can be a challenge.
One option is to seek out investors who are interested in supporting green businesses. Another option is to apply for grants from organizations that promote sustainable practices. Note that these are usually for existing businesses, but they do occasionally exist for new businesses. The downside is they typically take a long time to get. Finally, many banks offer loans specifically for businesses that are looking to start up or expand their recycling efforts. By doing your research and exploring all of your options, you should be able to find the financing you need to get your business off the ground.
Step 8: 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 9: Get your Marketing Plan in Place
Marketing a recycling business can be twice as difficult as many businesses because, depending on your niche, you may have to market to the people who will bring you items for recycling and also market to the buyers of the recycled items.
But, there are a few avenues you can take.
Community events are a great way to get the word out and meet potential customers. You can also distribute flyers and door hangers in high-traffic areas. If you have the budget, billboards and ad space in local publications can be effective.
Recycling businesses can also partner with other local businesses. For example, you can team up with a grocery store or office building to provide recycling bins or pick-up services. This not only helps to increase your customer base but also helps to promote recycling in the community.
Finally, social media is a low-cost way to reach a wide audience. Create social media accounts for your business and post regular updates about your services. You can also use social media to run marketing campaigns and offer discounts or giveaways.
Related: Low-cost ideas to market a new business
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Step 10: Get Business Insurance
Recycling businesses need insurance for the same reasons that any other business does: to protect their property, vehicles, and employees.
A recycling business may need several different types of insurance, including property insurance to protect its buildings and equipment; vehicle insurance to cover its trucks and other vehicles; workers’ compensation insurance to provide benefits for injured employees; and general liability insurance to cover claims for bodily injury or property damage. In addition, a recycling business may need product liability insurance if it sells recycled products and pollution liability insurance if it handles hazardous materials. By carefully assessing its risks and choosing the right policies, a recycling business can obtain the protection it needs at a reasonable cost.
Step 11: Hire Employees
When it comes to running a recycling business, hiring the right employees is essential. Not only do they need to have experience in the recycling industry, but they also need to be hard working and motivated. Here are some tips on how to find the right employees for your recycling business:
Look for experienced employees. Ideally, you want to find employees who have several years of experience in the recycling industry. They should know the ins and outs of recycling, and they should be able to hit the ground running.
Look for hard workers. This is a demanding industry, so you want to make sure that your employees are up for the task. Look for employees who have a strong work ethic and who are willing to put in the extra hours when needed.
Look for motivated employees. In addition to being hard workers, you also want your employees to be motivated. They should be passionate about recycling, and they should be excited about working for your company.
Use an employment agency. If you’re having trouble finding the right employees on your own, consider using an employment agency that specializes in recruiting for the recycling industry. They will likely have a database of qualified candidates that you can choose from.
Related: Hiring your first employee
Step 12: Set up an Accounting System
Every business needs an accounting system to track income and expenses, and recycling businesses are no different. In order to set up an accounting system for a recycling business, there are a few steps that need to be followed.
First, you will need to decide what type of accounting system you would like to use. There are many software programs available that can be adapted to fit the needs of any business. Once you have chosen your accounting software, you will need to set up accounts for income and expenses. You will also need to track inventory levels and budget for future purchases. Finally, you will need to reconcile your accounts on a regular basis to ensure accuracy.
Related: Setting up the accounting for your business
How much does it cost to start a recycling business?
Starting a recycling business has several layers of costs. For one, the business needs a location to sort and package the materials for resale. Also, the equipment can help regulate and expedite the recycling process, but equipment usually has a high sticker price. Let’s look at a few costs required to start a recycling business.
Business formation costs – First, you must acquire a business license and applicable permits for the state (and sometimes the city) to start a business. The cost of business licenses, filing fees, and permits vary by state. So, check out your local government website to determine these costs. Also, you will need to purchase business insurance to protect you from losses and accidents. Business insurance also varies depending on the risk level and coverage amount. You may need to call a few insurance companies to get estimates.
Purchases – Purchasing materials is a major cost for a recycling business. Although drop-offs likely don’t cost the business money, many recycled materials coming into the business will be purchased (i.e., plastics, aluminum, glass). The cost of recycled materials fluctuates depending on the market.
Location costs – A recycling center needs a location to sort materials, set up machinery, and package raw materials for resale. You may choose to either rent space or purchase a commercial building. Rental costs fluctuate depending on location and size; however, Statista reports the average cost to rent an industrial warehouse is about $6 – $7 per square foot.
Supplies – You can purchase heavy-duty equipment to help process recycled materials instead of working by hand. However, equipment, such as balers and glass crushers, comes at a cost. For example, cardboard balers start at $5,000 and quickly increase to $20,000. To save money, you can purchase used balers or lease them. Glass crushers come in various sizes and cost between $10,000 – $35,000.
Employee wages – You may need numerous employees to help the business run efficiently. The average hourly wage for a recycling center employee in the U.S. is approximately $16. Other positions, such as HR personnel or accountants, may charge a higher hourly rate.
Marketing – Advertising is a great way to market the recycling center’s services. Costs vary per industry; however, the average cost-per-click Google ad is approximately $1 – $2. Generally, a small business marketing to other businesses should invest about 2 – 5% of revenue in advertising.
How much money can you make with a recycling business?
Recycling businesses can earn a profitable income by turning recycled materials into raw, sellable materials. However, a recycling business’s profit largely depends on materials’ cost and sale price.
For example, cardboard is a common material that is recycled and resold. The average going rate for a ton of cardboard is $75, and it can sell for as high as $100 per ton. Many recycling centers take cardboard drop-offs without charging customers or paying for the cardboard, which means that a ton of donated cardboard turns into $75 – $100 for the business.
In 2018, the EPA reported that 45.9 million tons of cardboard and paper products were recycled, meaning there was a lot of money on the table for recycling centers to process and resell paper materials.
Other materials, such as plastics, aluminum, glass, and mixed paper, sell either by the pound or ton, and prices inflate and depress depending on the supply and demand. Typically, recycling businesses buy the recycled material for a fraction of the cost that it is sold at once it has been sorted, cleaned, and packaged.
Therefore, researching materials that continually sell well and hold value can help determine which materials to focus on for your recycling center to improve profits.
Are there grants to start a recycling business?
While it’s extremely rare to find a grant to start a recycling business, it is perhaps the most likely industry to have startup business grants. 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 or environmental office to see if they have any grants available.
What skills are needed to run a recycling business?
Nearly every business venture takes a commitment of time and money to get started. Certainly, recycling centers are no exception. So, to start a recycling business, you will need a few handy skills to help reduce waste (in terms of your time and money).
Understanding waste laws and regulations. Working with recycling means following local and federal waste laws and regulations. Failing to do so could result in crippling fines, injuries, and setbacks. In addition, regulations ensure that employees and the environment are protected from hazardous waste. So, a well-rounded understanding of waste laws and compliance helps protect your employees and environment while also preventing unnecessary setbacks.
Understanding of the equipment. Many recycling centers utilize equipment to sort and process the materials. A recycling business that starts small may sort and package by hand to save on equipment costs. However, as the business grows and capital increases, the business may have the opportunity to purchase equipment that can expedite the sorting and packaging process.
Therefore, having mechanical knowledge or hiring an employee with mechanical knowledge can help keep the recycling business running smoothly.
Networking. Building a recycling business means you need recycled materials coming into the center and buyers available to purchase the raw material. These connections come through networking.
Two key aspects of building a solid network include:
Marketing – You will need to market to buyers who purchase your raw materials, generating income. Additionally, you may need to use marketing skills to form contracts with businesses and waste management businesses to buy recycled items.
Sales – Sales skills come in handy when it’s time to sell materials. Selling and representing your product for the best price possible is a skill that develops over time but will greatly assist the business’s growth.
People management skills. You may need multiple employees for sorting, machine maintenance, and processing raw materials for resale. This will require an ability to manage people, schedules, payroll, and disputes. Fortunately, you can delegate many of these tasks to hired positions such as HR and accounting personnel.
What is the NAICS code for a recycling business?
The NAICS code for a recycling business is 423930, which is classified as Recyclable Material Merchant Wholesalers.
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?
Recycling businesses play a vital role in manufacturing because they provide essential raw materials used to produce new products. Additionally, recycling helps communities be sustainable and reduce waste sitting in landfills.
Starting a recycling business is a complex project with many costs and moving parts. However, given the revenue that recycling centers bring in and the expected growth, a new recycling business should expect to be profitable. With a bit of work researching high-demand materials and acquiring and marketing those materials, you can significantly improve your chances of turning a satisfying profit.