Table of Content

    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.

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    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.

    Scrap Metal Bussines Plan - 3 Years Profit Forecast

    Franchise Business Plan
    Helps the franchisee get business case approval from the franchisor

    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.

    Scrap Metal Bussines Plan - Startup Cost

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    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:

    Scrap Metal Bussines Plan - Marketing Segmentation

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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.
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    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

    Scrap Metal Bussines Plan - Sales Monthly

    6.4 Sales Yearly

    Scrap Metal Bussines Plan - Sales Yearly

    6.5 Sales Forecast

    Scrap Metal Bussines Plan - Unit Sales

    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:

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    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

    Scrap Metal Bussines Plan - 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

    Scrap Metal Bussines Plan - Profit Monthly

    8.3.2 Profit Yearly

    Scrap Metal Bussines Plan - Profit Yearly

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    8.3.3 Gross Margin Monthly

    Scrap Metal Bussines Plan - Gross Margin Monthly

    8.3.4 Gross Margin Yearly

    Scrap Metal Bussines Plan - Gross Margin Yearly

    8.4 Projected Cash Flow

    Scrap Metal Bussines Plan - 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

    1. 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.
    2. 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.
    3. 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.
    4. 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!

    Download Scrap Metal Business Plan Sample in pdf