How to Start a Junk Shop, Scrap, and Recycling Business

Junk shop is considered by many as a dirty business, I mean it literally, but this is a lucrative business that generates a lot of money both for garbage collectors and junk shop owners.

The junk shop business is most relevant today considering that the government has promoted environmental awareness among its citizens, expressing the need for proper waste disposal and recycling of materials as a major factor in protecting the environment.

As such, business of this nature has developed into a small scale industry. At a glance, one can not immediately see the profitability of this business but in fact that junk shops continue to exist is proof enough. The proliferation of junk shops in many localities attests to the stability of this small scale industry.

The introduction of new materials such as plastic and aluminum containers replacing the old kind have expanded the items now considered in the business unlike before wherein old newspapers, glass bottles and metals are the main concern. From the simple and ordinary galvanized iron and brass steel products, copper, aluminum and plastic use more as an alternative, has taken the limelight.

And so we can say that this enterprise which is actually a simple buy and sell business is here to stay.

Registration and Permits

In whatever type of business one intends to venture into, legally is a must. The licenses coming from the concerned government agencies should be acquired prior to operation. Below is a list of the said agencies.

  • Department of Trade and Industry (DTI) – Business Name Registration
  • Bureau of Internal Revenue – Taxation Purposes
  • Barangay Certification
  • Local Government Unit (City/Municipality) – License to Operate

Capitalization

Since the project is a trading/buy and sell business, the initial capital investment required is not that much compared to other similar trading businesses. Suggested minimum initial capital investment should be at least P1500,000.  It is highly advised that the entrepreneur make a detailed checklist of the following:

Capital Investment

A. Fixed

  • Business Licenses & Registration
  • Security (refundable) and Advance Rental Deposits equivalent to 4 months (2 months security deposit and 2 months advance rent)
  • Equipments
  • Vehicle (Optional-Pick-up truck)
  • Renovation (In case of land lease)
  • Miscellaneous

B. Operating Expenses

  • Monthly Rent
  • Utilities (Electricity, Water, Telephone, Gas)
  • Manpower (Wages)

C. Revolving Fund

  • Purchasing Cash

D. Contingency Fund (Optional)

The entrepreneur must open and maintain a separate bank account solely for the Junk Shop’s financial transactions.

Location/Site of the Business

The project’s location should be within a commercial district and proximate to residential developments. It should be highly accessible to private and public utility vehicles, trucks included. Prior to signing of the lease contract, the entrepreneur must check with the local barangay with regards to any restrictions concerning the junk shop operation.

There are two options that can be considered with regards to how big an area one should lease.

1. Buying Station

  • Should one find it hard to acquire a space for both purchasing and warehouse purposes due to inavailability or high rent, one can operate a buying station with an area of at least 30 sq. ms. However, a storage area proximate to the buying station is required. The storage area must be at least 100 sq. ms. portion of which is covered, the ratio to be determined based on the market assumptions. In this case, It is necessary to have at least a small pick-up vehicle for transporting the purchased goods from the buying station to the storage area.

2. Warehouse Operation

  • A warehouse set-up with ample open area is advisable. The gross floor area should be at least 100 sq. ms., portion of which is covered, the ratio between the open and covered area to be determined based on the demand in relation to the volume of recyclable items/materials. In this case, the acquisition of a delivery vehicle is optional.

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