Do and Don't: How to Start an "E-waste" Recycling Business

I'm working on another post, not ready for publication yet, How to Become an "e-waste" or e-Scrap Recycler Vendor, (and paper recycler, transfer station operator).  In those posts you may get to read good advice about the particulars of entering those businesses.   But before you even start, below are some common “Dos and Don´ts” which are common to all recycling businesses, and to other wholesale businesses as well.

Don’t overcapitalize.   You can "flip" material (resale in consolidated batches) to an existing large business out of your territory or niche once you reach a scalable monthly volume, and sort material into more grades than they can afford to sit on between shippable quantity sales.  I’ve seen many eager beavers hire staff and rent space based on what volume they plan to have.  Surrounding yourself with junk and training new staff may just be distracting you from getting clients, and if you create a ‘tire pile’ in the interim, your very reputation is in jeopardy.  Until you get 80,000 lbs per month on a regular basis, you are probably better off with a trailer than a warehouse. 

Don´t downcycle.   Downcycling is taking something that already has added value, and processing it unnecessarily to lesser raw material value.  Used car parts are in high demand, and do a lot to explain the yards of the competitors which look like junk yards.  Another way to downcycle is to take a very high grade of material, like copper wire, and mix it with lower grades, like copper pipe.  The value of the higher grades is because of the enormous processing it took the mills to get copper to the electrical purity not demanded of piping, and it´s a shame if you don´t recycle it separately.

Do check employee references.   There are a lot of applicants to scrap metal recycling businesses who seem to know a whole lot more than they put on their resume.  If someone can get you to pay them by the hour, and then take home your gold and copper to sell to a competitor, they have an advantage you don´t have.

Do keep your books.   Some buyers, particularly overseas buyers, are willing to put tens of thousands of dollars into advance purchase orders to lock up your material.  But until you have the material and have closed out the purchase order, you might mistake ‘cash flow’ for profit.  Miscalculations can also force you to ´downcycle´material for faster sale in order to meet cash flow demands.

Do study the markets.  If you don´t understand the difference between Hong Kong scrap metal buyers and American smelters, you could wind up without a diversified market for the materials you are collecting, and when the market swings, you may not be able to swing away from it.  Do your homework, and study the history of shortages and glutted markets. Join Institute of Scrap Recycling Industries (ISRI) and learn the various grades of metals and their individual histories.

Understand the customers.  Have you noticed we haven´t talked about saving the planet or preserving landfills?  Some of your recycling clients care a lot about sustainability and alternatives to mining.  But some of the biggest recycling suppliers don´t have a green hair on their heads.

Don´t underestimate your competitors.   The survivors are smarter than you think.  If they can or can´t do something you intend to skip or do, check your math.   And don´t assume negative gossip you hear about them is the full story.  

In future posts, we'll describe some of the important different market niches and the basics of sorting categories and task functions, and the differences between e-waste recycling for commercial businesses, municipalities, legislated programs, hard drive recycling, fair trade exporting, and other niches.

If the economy is about to rebound, you have a new niche, or an old player is leaving the field, you can look forward to a great career, and the dream of “doing well by doing good”.  But if you think of recycling as a field that doesn´t require a lot of research and homework, look out behind you.  The biggest problem for scrap recycling has been the low threshold to entry into this business.  And the idiots who start recycling businesses without doing their homework take away clients, employees, and affect your rates, before they go under.  And the supply of wannabes seems endless.

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