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How to Start a Tire Shredding Business

How to Start a Tire Shredding Business

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 into a rubber powder and tire chips to be used to make other recycled rubber products.  Uses for waste tires 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 oil (TDF) as a cleaner alternative to coal for cement kilns, paper mills, and utility boilers, and more.  The tire recycling companies get their waste 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 of waste tires, 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 recycling 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.

Checklist for Starting a Tire Shredding Business

If you’re thinking about starting a tire shredding business, it’s important to do your research first. Here is a checklist to help you get started.

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

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 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 tire 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 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 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: 3 steps 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 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 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

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

Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.

Step 9: Get Business Insurance

A tire recycling business should consider several types of insurance to fully protect the business. A few of these include:
– 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.

The cost of insurance will vary based on a number of factors. 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: Hire 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 the accounting for your business

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 tire shredding business?

Here are the typical costs you will face when you open a tire shredding business.
– Tire shredder – $125,000 – $200,000
– Equipment such as forklift, bins, etc.: $30,000+
– Location for your tire recycling plant $1,500 – $5,000+ per month
– Insurance $200 – $600

How profitable is 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.

Are there grants to start a tire shredding business?

It’s extremely rare to find a grant to start a tire shredding business, though since it falls into a recycling business there is some potential at the state level. 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.

Are there grants to start a tire shredding business?

The NAICS code for a tire shredding business is 423930, which is classified under 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 and how to find yours

Resources:

US Tire Manufacturer’s Association (previously called the Rubber Manufacturer’s Association)