Costs to Start a Junk Removal Business
Depending on the vehicle that you already have access to, starting a junk removal business can be rather affordable or quite expensive. Accessing an appropriate vehicle, like a pickup truck, will be the largest expense, but can be done affordably by looking for a lower-cost used vehicle. Plan to spend $15,000 or more on the vehicle and common startup costs.
Common startup costs for a junk removal business include:
- Vehicle
- Tools and equipment
- Uniforms
- Safety equipment like gloves
- Vehicle signage
Steps to Starting a Junk Removal business
Step 1. Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
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Step 2. 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 LLC. Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements.
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Step 3. Select your Location
It’s possible to start a junk removal business from home, especially if it’s just a single-vehicle business. As that business grows and expands into a multi-vehicle fleet, it may be time to rent a commercial property or garage. Rental costs will depend on the type and size of the property, as well as its location.
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Step 4. Apply for Business Licenses and Permits
A junk removal business owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.
According to Haul Away Cash, a junk removal business will need to obtain additional licensing if it transports hazardous materials like paint, chemicals, and oil. This can be dangerous, so plan to budget not only for licensing, but also for training. Many junk removal businesses avoid this challenge by working only with non-hazardous materials.
Some other common local, state and, federal registrations a junk removal business may need include, an , and Occupancy Permit among others.
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Step 5. 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 junk removal 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.
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Step 6. Get your Marketing Plan in Place
Marketing is an ongoing expense that a business’ budget will need to include. Junk removal businesses can market in many different ways, but some of the most common include social media marketing, online advertising, print advertising, and even direct mail advertising. Some businesses may explore radio and TV advertising, too. The cost of marketing will vary depending on the activity and volume. If a business owner can manage some or all of their marketing on their own, they can save money over the costs of hiring a professional to help.
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Step 7. Get Insurance
A junk removal business needs several types of insurance for full coverage:
- General liability insurance helps to protect the business against expenses that could result if a customer or their property are hurt or damaged as a result of the business’ work.
- Commercial property insurance can help to cover expenses and losses that the business might face if its equipment is ever damaged or destroyed by a fire or other type of event.
- Commercial auto insurance helps to protect the business from expenses like medical bills and legal fees that it might face if one of its vehicles were in an accident.
- Workmans comp insurance helps to cover expenses like medical bills and legal fees that might occur if an employee were hurt on the job.
Insurance policy cost can be affected by factors like the business’ location, the number of employees on staff, and the value of its vehicle. To get the most accurate idea of insurance costs, request quotes from multiple companies. When comparing the quotes, evaluate not only how the premiums, but also the plan exclusions, coverage limitations, and deductibles compare.
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Step 8. Hiring Employees
A junk removal business will need at least one employee from the start for practical reasons, since many junk removal jobs will require multiple people to lift and remove at least some of the items. ZipRecruiter reports that junk removal salaries average $30,641 per year, though salaries can range from $21,500 to $38,000 per year.
In addition to budgeting for salary costs, a budget also needs to include other related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are all common expenses that come with hiring staff.
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How much can you potentially make owning a junk removal business?
Business profits will vary depending on factors like the business’ location, profit margin, and number of years in business. According to Junk Removal Authority, a well-managed business with appropriate pricing will have expenses totaling approximately 41% of its income. If that business charges $350 for an average job, then the job’s expenses will be $143.50, leaving the business with an average gross profit of $206.50. Building that business so that it has a full schedule, then expanding to encompass multiple teams of staff with multiple trucks can increase those profits.
Things to consider before starting a junk removal business
When starting a junk removal business, do some research into the disposal regulations in your area. Disposing of certain materials, like hazardous waste, may require additional permits and fees. The same is true of disposing of large items, like appliances. Familiarize yourself with the different facilities that you will need to travel to, and get an updated list of disposal prices. Having this information can help you to appropriately price jobs so you don’t lose out on profits because of these fees.
Don’t forget the importance of networking and developing relationships with other professionals in the area. Realtors, construction contractors, and real estate flippers are all likely to frequently encounter situations needing junk removal. Building these relationships can lead to repeat business and referrals.
Because there are low barriers to entry in this industry, your business will be up against plenty of competition. This means it’s even more important for you to create a recognizable brand and offer services that are better than what competitors provide. This doesn’t mean that you have to charge less than competitors, but rather that you have to provide a quality service and experience that customers won’t find elsewhere. Consider what you can do to make your business stand out, whether that’s offering last-minute bookings, complimentary cleanup services, or above-and-beyond customer service.
Resources:
National Waste & Recycling Association
