Scrap Metal business plan for starting your own business
It’s usually said that one man’s trash is another man’s treasure – and that is totally true. Ever since humans have realized that metals are in a limited supply on the planet, the first thing that came to their mind was how to start scrap business so that they can turn the trash into treasure and be useful for the planet.
This business plan for scrap metal company will not only make you rich but will also conserve precious nonrenewable mineral and energy resources of the planet. You don’t need a business consultants service as long as you have this scrap metal business plan to guide you.
Executive Summary
2.1 The Business
Itay Scrap Yard will be a registered and insured metal scrap business in the heart of Tuscon. It will be focused on collecting, sorting, and selling scrap metals from the area. This business model is closely related to a green building business plan and will give us a good way to make a lot of money.
2.2 Management of Scrap Metal Business
The most important part of any metal scrap business plan is its management structure. For the business to be successful, you need it to have a well-formed management that can handle all the aspects of the business.
The management structure we are following for this scrap metal business plan pdf will be headed by the owner of the business. The owner will hire three managers who will run the different aspects of the business on a daily basis. All important matters will be brought to the notice of the owner on regular basis. The owner will exercise absolute control and authority over the business.
2.3 Customers of Scrap Metal Business
Before we move ahead with this business plan for scrap metal company, it is necessary to look into the customers that we will be dealing with from the platform of this business. The main customers of the business will be:
- Foundries and steel mills that need scrap iron to make new steel.
- Precious metal companies that extract and recycle precious metals from scrap.
- Private customers who need scrap metal for their use.
- Companies who want to sell scrap metal.
2.4 Business Target
Having a clear and attainable business target is also an important part of any scrap metal business plan template. Itay Scrap Yard will have the following business targets:
- To become the largest scrap metal dealer in the state of Arizona.
- To open three more locations by the end of year two.
Company Summary
3.1 Company Owner
Itay Pitt will be the owner of the business. Itay has worked as the manager of a garbage recycling business plan and knows how the scrap metal industry works and how to operate different aspects of such a business. He is the perfect owner for this scrap metal recycling business plan pdf.
3.2 Why the Scrap Metal Business is being started?
This scrap metal dealer business plan is being realized by Itay because he always wanted two things. He wanted an independent business of his own and he wanted to do something big. Now that he has the money to start the business, all he needs is to know how to write a scrap metal business plan and he can start the business.
3.3 How the Scrap Metal Business will be started?
Before we can make this scrap metal export business plan a reality, we need to know how to start such a business.
Step1: Detailed Planning
The first step, like any other business will be to plan the various aspects of the business. We will look into the supply and demand of scrap metals in the area and find out whether or not the business is feasible. Our research shows that there are no proper scrap metal businesses in Tucson, Arizona and that’s where we plan to start ours.
Step2: Making the Scrap Yard
The next step would be making a scrap yard where all the scrap metal will be sorted and packed into bales for delivery. We will need a large plot of land for this and that’s why we will make the yard out of the city in the suburbs where land is cheaper.
Step3: Establishing Connections
Next, what we need to do is to establish connections with people who want to buy and sell scrap metal in the area. This will include everyone from local solid waste management companies to small scrap dealers.
Step4: Online Presence
As many of the customers look up scrap metal dealers and businesses online on Google and other search engines, we will make a proper website and advertise our services online to make sure we can reach maximum customers.
| Start-up Expenses | |
| Legal | $251,000 |
| Consultants | $0 |
| Insurance | $31,000 |
| Rent | $32,000 |
| Research and Development | $26,000 |
| Expensed Equipment | $56,000 |
| Signs | $4,300 |
| TOTAL START-UP EXPENSES | $400,300 |
| Start-up Assets | $349,000 |
| Cash Required | $362,000 |
| Start-up Inventory | $42,000 |
| Other Current Assets | $228,000 |
| Long-term Assets | $270,000 |
| TOTAL ASSETS | $1,251,000 |
| Total Requirements | $1,651,300 |
| START-UP FUNDING | |
| Start-up Expenses to Fund | $400,300 |
| Start-up Assets to Fund | $1,251,000 |
| TOTAL FUNDING REQUIRED | $1,651,300 |
| Assets | |
| Non-cash Assets from Start-up | $1,642,000 |
| Cash Requirements from Start-up | $377,000 |
| Additional Cash Raised | $50,000 |
| Cash Balance on Starting Date | $36,000 |
| TOTAL ASSETS | $2,105,000 |
| Liabilities and Capital | |
| Liabilities | $29,000 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $45,000 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $74,000 |
| Capital | |
| Planned Investment | $1,651,300 |
| Investor 1 | $0 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $1,651,300 |
| Loss at Start-up (Start-up Expenses) | $379,700 |
| TOTAL CAPITAL | $2,031,000 |
| TOTAL CAPITAL AND LIABILITIES | $2,105,000 |
| Total Funding | $1,651,300 |
Services
Before we can move forward with this business plan template for scrap metal company, we need to decide what services we will be providing from the platform of Itay Scrap Yard. Deciding this now will make the operations and management of the business easier for us.
Note
If you want a business plan for your scrap metal business, it must have a dedicated services portion in it.
Here are the services that will be provided by this business plan scrap metal company:
Scrap Metal Retrieval
This will be the main service offered by us. We will retrieve scrap metal from solid waste and process it for recycling or reuse.
Scrap Metal Purchase
We will not only retrieve scrap metal from waste but will also buy it from anyone who has it and wants to sell it. We will offer the best rates in the market to get customers.
Scrap Metal Sale
The metal we purchase, and retrieve will be sold to local buyers and the ones from other states. We will try to make permanent scrap metal buyers to make a steady stream of income for the business.
Precious Metal Extraction
As a part of meal scrap business, we will also extract precious metals from computer components and batteries etc.
Marketing Analysis of Scrap Metal Business
Just like a jewelry business plan, it is a must to conduct proper marketing analysis before we start scrap metal business plan. This is where the analysis is run to know whether or not the business will be a successful one for us. Here, we will analyze various aspects of the free scrap metal business plan to find out whether or not we can make profit from it.
5.1 Market Trends
Another important thing to take into account in this scrap metal business plan free is the analysis of the market trends of this line of business. It is important to see how the market has changed over the past years and predict how it might change in the years to come.
This scrap metal business plan sample takes a close look at the trends of the scrap metal industry and has found out that this field has a lot of money making potential once we know how to set up a scrap metal business.
5.2 Marketing Segmentation
Now, we need to look into the marketing segmentation of scrap metal yard business plan. We will be serving the following businesses from our platform:
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5.2.1 Private Customers
People who want to sell scrap metal from their home or office will be entertained at Itay Scrap Yard.
5.2.2 Local Waste Management
Unlike a production and supply chain business plan, we will buy scrap metal from local solid waste management companies and that will be a major marketing segment for us.
5.2.3 Steel Foundries
The scrap will be sold to local and foreign steel foundries, and they will be the main market segment for our sales.
5.2.4 Scrap Importers
We will also buy scrap metal from the local scrap merchants that import it from neighboring states or abroad.
| Market Analysis | |||||||
| Potential Customers | Growth | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
| Private Customers | 35% | 39,000 | 42,000 | 44,000 | 46,000 | 49,000 | 10.00% |
| Local Waste Management | 27% | 30,000 | 32,000 | 33,000 | 35,000 | 36,000 | 10.00% |
| Steel Foundries | 24% | 24,000 | 25,000 | 27,000 | 29,000 | 31,000 | 10.00% |
| Scrap Importers | 14% | 15,000 | 16,000 | 17,000 | 18,000 | 19,000 | 11.00% |
| Total | 100% | 108,000 | 115,000 | 121,000 | 128,000 | 135,000 | 10% |
5.3 Business Target
- To establish a credible name in the scrap metal industry.
- To expand the business to as many cities as possible.
- To become the biggest scrap metal dealer in the USA.
5.4 Product Pricing
We will offer the best buying and selling prices to the people who do business with us. This will increase the flow of money and we will make profit by selling and buying more with lesser profit margin.
Marketing Strategy
Marketing strategy is also an integral part of any sample business plan for scrap metal company. We need to come up with a marketing strategy that can help us attain the business targets that we have set for our scrap metal business plan template. It is important to note that the business plan your scrap metal business needs a lot of scrap metal business ideas to be profitable for us.
6.1 Competitive Analysis
- There is no reputable scrap metal dealer in the area.
- The scrap metal dealers in the adjacent cities do not offer good rates for the buyers or sellers at all.
- The local steel foundries need a lot of scrap steel, but it is not available in the area.
6.2 Sales Strategy
- We will market and promote Itay Scrap Yard using all available marketing channels.
- Better rates, discounts and attractive deals will be offered to the buyers and sellers to make sure that we get business.
- Contracts will be made with bulk sellers and buyers to make sure that we can get a steady stream of income for the business.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Scrap Metal Retrieval | 50,000 | 53,000 | 56,180 |
| Scrap Metal Purchase | 47,000 | 49,820 | 52,809 |
| Scrap Metal Sale | 55,000 | 58,300 | 61,798 |
| Precious Metal Extraction | 40,000 | 42,400 | 44,944 |
| TOTAL UNIT SALES | 192,000 | 203,520 | 215,731 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Scrap Metal Retrieval | $60.00 | $69.60 | $80.74 |
| Scrap Metal Purchase | $56.00 | $64.96 | $75.35 |
| Scrap Metal Sale | $55.00 | $63.80 | $74.01 |
| Precious Metal Extraction | $70.00 | $81.20 | $94.19 |
| Sales | |||
| Scrap Metal Retrieval | $3,000,000.00 | $3,688,800.00 | $4,535,748.48 |
| Scrap Metal Purchase | $2,632,000.00 | $3,236,307.20 | $3,979,363.33 |
| Scrap Metal Sale | $3,025,000.00 | $3,719,540.00 | $4,573,546.38 |
| Precious Metal Extraction | $2,800,000.00 | $3,442,880.00 | $4,233,365.25 |
| TOTAL SALES | $11,457,000.00 | $14,087,527.20 | $17,322,023.45 |
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Scrap Metal Retrieval | $58.00 | $66.00 | $76.00 |
| Scrap Metal Purchase | $54.00 | $61.00 | $71.00 |
| Scrap Metal Sale | $53.00 | $60.00 | $70.00 |
| Precious Metal Extraction | $68.00 | $78.00 | $90.00 |
| Direct Cost of Sales | |||
| Scrap Metal Retrieval | $2,900,000.00 | $3,498,000.00 | $4,269,680.00 |
| Scrap Metal Purchase | $2,538,000.00 | $3,039,020.00 | $3,749,453.20 |
| Scrap Metal Sale | $2,915,000.00 | $3,498,000.00 | $4,325,860.00 |
| Precious Metal Extraction | $2,720,000.00 | $3,307,200.00 | $4,044,960.00 |
| Subtotal Direct Cost of Sales | $11,073,000.00 | $13,342,220.00 | $16,389,953.20 |
Personnel plan
Unlike a soap factory business plan, a scrap yad needs a lot of able hand to run and operate the right way. After we have finalized our scrap metal company names and the metal recycling business plan is ready, the next important thing to do is to find out the number of people that will be needed to operate the business.
A lot of the things and the success of the business greatly depend on this as the workers are the ones who make a business and it cannot be run without them. So, if you want to know how to start a scrap metal recycling business, here are the people that you’ll need for it:
7.1 Company Staff
Itay Pitt will be the owner and CEO of the business. He will be hiring the following people for running the scrap yard.
- 2 Managers for sales, and operations.
- 4 Scrap yard workers.
- 2 Welders.
- 2 Crane operators.
- 2 Hydraulic press operators.
- 2 Office workers.
- 2 Guards.
- 1 Reception clerk.
- 1 Accountant.
7.2 Average Salary of Employees
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Operations Manager | $13,000 | $14,300 | $15,730 |
| Sales Manager | $12,000 | $13,200 | $14,520 |
| Scrap Yard Workers | $40,000 | $44,000 | $48,400 |
| Welders | $19,000 | $20,900 | $22,990 |
| Crane Operators | $18,000 | $19,800 | $21,780 |
| Hydraulic Press Operators | $21,000 | $23,100 | $25,410 |
| Office Workers | $17,000 | $18,700 | $20,570 |
| Guards | $17,000 | $18,700 | $20,570 |
| Reception Clerk | $6,000 | $6,600 | $7,260 |
| Accountant | $7,000 | $7,700 | $8,470 |
| Total Salaries | $170,000 | $187,000 | $205,700 |
Conventional lenders, venture capitalists, equity partners and angel investors business plan are all possible business funders if the business plan is thorough and includes an in-depth Operating and Financial Plan.
Financial Plan
If you ask, is scrap metal business profitable? The answer is in the amount of money you spend while starting a scrap metal business. The money needed to start this business will vary based on what scale the business is going to be started at and where it will be located. Many of the business’s monetary requirements are same as those of a business plan microbrewery.
You will need money for the following:
- Money needed to buy land to make the scrap yard.
- The cost of civil works for the scrap yard.
- The cost of cranes and hydraulic press.
- The salary of employees.
- The cost of buying the scrap to start with.
- Bonds, securities, insurance, and registration costs.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.16% | 8.17% | 8.21% |
| Long-term Interest Rate | 8.39% | 8.42% | 8.45% |
| Tax Rate | 24.01% | 24.11% | 24.19% |
| Other | 0 | 0 | 0 |
8.2 Break-even Analysis
| Break-Even Analysis | |
| Monthly Units Break-even | 5330 |
| Monthly Revenue Break-even | $131,450 |
| Assumptions: | |
| Average Per-Unit Revenue | $236.00 |
| Average Per-Unit Variable Cost | $0.68 |
| Estimated Monthly Fixed Cost | $163,900 |
8.3 Projected Profit and Loss
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $11,457,000 | $14,087,527 | $17,322,023 |
| Direct Cost of Sales | $11,073,000 | $13,342,220 | $16,389,953 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $11,073,000 | $13,342,220 | $16,389,953 |
| Gross Margin | $384,000 | $745,307 | $932,070 |
| Gross Margin % | 3.35% | 5.29% | 5.38% |
| Expenses | |||
| Payroll | $170,000 | $187,000 | $205,700 |
| Sales and Marketing and Other Expenses | $138,700 | $142,000 | $148,000 |
| Depreciation | $2,100 | $2,341 | $2,400 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $2,900 | $3,000 | $3,100 |
| Insurance | $2,100 | $2,100 | $2,100 |
| Rent | $3,400 | $3,500 | $3,600 |
| Payroll Taxes | $29,000 | $32,000 | $34,000 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $348,200 | $371,941 | $398,900 |
| Profit Before Interest and Taxes | $35,800 | $373,366 | $533,170 |
| EBITDA | $35,800 | $373,366 | $533,170 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $7,160 | $74,673 | $106,634 |
| Net Profit | $28,640 | $298,693 | $426,536 |
| Net Profit/Sales | 0.25% | 2.12% | 2.46% |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $52,000 | $56,160 | $60,653 |
| Cash from Receivables | $18,000 | $19,440 | $20,995 |
| SUBTOTAL CASH FROM OPERATIONS | $70,000 | $76,300 | $82,404 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $71,000 | $77,000 | $83,000 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $40,000 | $41,000 | $43,000 |
| Bill Payments | $26,000 | $28,000 | $30,000 |
| SUBTOTAL SPENT ON OPERATIONS | $66,000 | $69,000 | $73,000 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $66,000 | $71,280 | $76,982 |
| Net Cash Flow | $19,000 | $20,000 | $21,000 |
| Cash Balance | $29,000 | $31,000 | $33,000 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $274,500 | $307,440 | $338,184 |
| Accounts Receivable | $24,000 | $26,880 | $30,213 |
| Inventory | $4,100 | $4,592 | $4,900 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $287,000 | $321,440 | $361,299 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $19,500 | $21,840 | $24,570 |
| TOTAL LONG-TERM ASSETS | $23,900 | $26,768 | $30,114 |
| TOTAL ASSETS | $293,000 | $328,160 | $369,180 |
| Liabilities and Capital | Year 4 | Year 5 | Year 6 |
| Current Liabilities | |||
| Accounts Payable | $19,100 | $21,392 | $24,045 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $17,700 | $19,824 | $22,282 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $15,600 | $17,472 | $19,639 |
| Paid-in Capital | $30,000 | $30,000 | $31,000 |
| Retained Earnings | $53,500 | $58,315 | $64,147 |
| Earnings | $191,200 | $208,408 | $229,249 |
| TOTAL CAPITAL | $285,000 | $310,650 | $341,715 |
| TOTAL LIABILITIES AND CAPITAL | $300,600 | $328,160 | $369,180 |
| Net Worth | $298,000 | $324,820 | $357,302 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | INDUSTRY PROFILE | |
| Sales Growth | 7.22% | 8.00% | 8.86% | 3.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 9.18% | 10.17% | 11.27% | 9.80% |
| Inventory | 5.39% | 5.97% | 6.62% | 9.90% |
| Other Current Assets | 2.18% | 2.42% | 2.68% | 2.40% |
| Total Current Assets | 150.30% | 152.00% | 152.00% | 158.00% |
| Long-term Assets | 11.34% | 11.60% | 11.64% | 12.00% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.89% | 4.93% | 4.97% | 4.34% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 0.00% |
| Total Liabilities | 7.60% | 7.66% | 7.73% | 7.38% |
| NET WORTH | 100.56% | 101.36% | 102.30% | 110.00% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.56% | 97.11% | 99.83% | 99.00% |
| Selling, General & Administrative Expenses | 94.78% | 97.34% | 100.06% | 97.80% |
| Advertising Expenses | 1.52% | 1.56% | 1.60% | 1.40% |
| Profit Before Interest and Taxes | 41.50% | 42.62% | 43.81% | 33.90% |
| Main Ratios | ||||
| Current | 34 | 35 | 36 | 32 |
| Quick | 33 | 33.4 | 34.235 | 33 |
| Total Debt to Total Assets | 0.18% | 0.18% | 0.17% | 0.40% |
| Pre-tax Return on Net Worth | 73.50% | 74.70% | 75.00% | 75.00% |
| Pre-tax Return on Assets | 95.10% | 99.86% | 104.85% | 111.30% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 33.02% | 34.04% | 35.10% | N.A. |
| Return on Equity | 55.77% | 57.50% | 59.28% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 7.7 | 7.8 | 7.8 | N.A. |
| Collection Days | 100 | 100 | 100 | N.A. |
| Inventory Turnover | 32.2 | 33.81 | 35 | N.A. |
| Accounts Payable Turnover | 15 | 16 | 16.3 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 2.5 | 2.5 | 2.6 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | -0.04 | -0.03 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $244,500 | $258,192 | $272,651 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.86 | 0.87 | 0.87 | N.A. |
| Current Debt/Total Assets | 1% | 0% | 0% | N.A. |
| Acid Test | 29.1 | 29.12 | 29.16 | N.A. |
| Sales/Net Worth | 2.1 | 2.2 | 2.3 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
FAQ
- How do I start a metal scrap business?
All you need to do is to get the relevant license and get the business registered. Then you have to buy a plot of land to establish the scrap yard and you can start your scrap business. That’s how to start a scrap metal business. - Is metal scrapping profitable?
Yes, scrapping metal is not only profitable but also good for the environment and the planet. You can buy scrap metal at very low rates and then sell it at quite good rates after sorting and separating them. - How much money can you make selling scrap metal?
That depends on the scale at which you are starting the steel scrap busines. If you start on a large scale with huge investment, you can make a lot of money from the scrap business. If, however, you start with a small budget the profit will be lesser. - What is the most profitable scrap metal?
The most profitable scrap metals are Copper, Brass, Silver, Aluminum, Stainless Steel, Gold, and Lead. If you’re thinking how to recycle metal for money or about starting a metal recycling business, here’s your answer!