How to Start a Tire Shredding Business

Last Updated on

Quick Reference

Are you looking for a niche business opportunity and care about the environment?  A tire shredding business may not be something that you’ve thought about, but it could be a great way for you to make a living while doing something eco-friendly.

Business Overview

A tire shredding business takes old tires that would normally go to landfills and shreds them to be used to make other recycled rubber products.  Uses include landscaping rubber mulch for athletic fields and playgrounds, rubberized asphalt, rubber mats, replacing sand or clay for road and landfill construction, tire-derived fuel (TDF) as a cleaner alternative to coal for cement kilns, paper mills, and utility boilers, and more.  The tire recycling companies get their tires from a variety of sources, including tire retailers, car rental services, and trucking companies.

Industry Summary

According to BCC Research, the global market for scrap tires management and rubber remediation was $7.6 billion in 2017 and is expected to grow to $9.5 billion by 2022. The growth has largely been driven by government regulations regarding scrap tire disposal.

 

Industry Trends

The industry is expected to grow due to the increasing need for eco-friendly solutions and recycling, as well as the many potential uses for shredded rubber.  The tire industry is committed to recycling options for used tires, which should help tremendously in propelling the tire shredding sector.

Target Market

Your target market will be manufacturers who use rubber in products, as well as those involved in certain civil engineering projects such as road construction. Tire based fuel users include paper mills and electric utilities.

Skills, Experience, and Education Useful in Running a Tire Shredding Business

There are several specific skills that you will need to open a tire shredding business.

  • Experience.  Some knowledge of the uses of shredded rubber will be valuable so that you know who to target to sell your shredded tires.
  • Education.  You will need to become educated about how to shred tires and the recycling regulations in your area.
  • Business knowledge and experience.  You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.

Costs to Start a Tire Shredding Business

Here are the typical costs you will face when you open a tire shredding business.

  • Setting up a business name and entity formation costs: $200 – $1,000
  • Business cards, brochures, postcards for marketing $200 – $300
  • Equipment such as tire shredders, forklift, etc.: $100,000+
  • Location for your shredding equipment and tire processing $1,500 – $5,000+ per month
  • Insurance $200 – $600

Steps to Starting a Tire Shredding Business

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your tire shredding business should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.

Related:
How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect tire shredding business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a 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.

RelatedComparison of Business Entities

Step 4: Select your Location

Your location needs to provide adequate space for the loading and unloading of trucks as well as storage for tires and to house your equipment. Optimally, your location should be close to places where you will get your raw materials in order to minimize transportation costs. Before committing to a location, be sure to check zoning, permits, and environmental regulations.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

A tire shredding will need to be aware of zoning and any environmental licensing, in addition to general local, state, and federal business registrations such as a sales tax permit and an Employer Identification Number.  

Related: Common business licenses, permits, and registrations by state

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 tire shredding business 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.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 8: Get your Marketing Plan in Place

A tire shredding business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a tire shredding business include social media marketing and online advertising, as well as postcards and flyers.  Developing a website can be a significant expense, but it can also give your tire shredding business greater visibility online.  Your sales, however, will mainly come from calling on companies that have a use for your product directly.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

A tire shredding business needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You will need employees to help you run your tire shredding business.  Make sure that you select people with appropriate experience.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your tire shredding business is critical to the long-term success of your business.

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.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning a Tire shredding Business?

Revenue for a tire shredding business is hard to predict.   Customers who want to dispose of their old tires will pay a tire disposal fee, and you will receive revenue from selling the shredded rubber.  Call potential customers to get an idea of what they currently pay for the rubber they use in manufacturing.

Things to Consider Before Starting a Tire Shredding Business

Running a tire shredding business or any business will have its challenges.  You need to be prepared and make sure that you know what you’re getting into.

Marketing and acquiring customers will be your biggest challenge and an ongoing expense.  You will need to make a lot of direct sales calls to get customers, and you will need to retain those customers so that you have a steady stream of business.

Keep in mind that you need to be aware of recycling regulations in your area.

You will be risking a significant amount of money opening a tire shredding business. It will take time and hard work to see a profit.

Talk to other business owners for tips on starting a business and do your homework to determine costs.  Research other tire shredding businesses to see what they offer and what prices they charge.

Subscribe Now to the 60-day Startup Challenge!

Subscribe Now to the 60-day Startup Challenge!