The scrap metal business is very lucrative, but it is not easy to start because of the high capital requirements. However, investors are very interested in this type of business because it is a “green” enterprise since it recycles metals like iron, aluminum, copper, gold, lead, silver and tin. The wide range of metals that can be recycled makes it easier to obtain inventory, but there is a need for plan to develop regular routes to ensure a steady supply of metals. The scrap metal business plan will discuss the benefits of this type of business, and one of the important benefits is its contribution to natural resource conservation.
The scrap metal business has high startup costs because of the need for trucks and vans, and equipment capable of loading and transporting heavy metal items. If the scrap metal business will also recycle the metal at its own recycling center, the capital needs are even higher because a recycling plant has to be built or leased. Some scrap metal business plans will describe an operation that collects the metal and delivers it to a recycling plant owned by another business. In either case, the business needs property for sorting, storing and processing collected metals.
Investors considering funding the scrap metal business will look for:
- Feasibility studies that evaluate the regional metals market and the price per pound for reclaimed scrap metal
- Number of competitors and their success to date
- The level of services offered, such as load weight limits and final disposition of metal collected
- How the business will differentiate itself in comparison to competitors, whether through types of services, prices or customers served
- Primary revenue sources, i.e. pay customers for scrap and sell scrap to third-party recycler or process metal in own plant and then resell
- Product pricing scheme
- Identification of scrap metal sources
- Marketing plan that outlines how the business will ensure steady supply of scrap metal
- Management experience in the scrap metal business
It is important to detail the necessary equipment, like transport vehicles and containers, and pulleys and cranes. Since this is a business that would be very difficult to operate alone, the scrap metal business plan will also need to describe the staffing requirements. 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.
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