How to Start a Paper Recycling Business

Starting a paper recycling business can be an exciting and rewarding business venture for entrepreneurs who are passionate about sustainability and want to make a positive environmental impact while generating income.

Having said that, you should keep in mind that launching a successful paper recycling business will require careful planning and a strong understanding of both waste management processes and local recycling regulations.

In this comprehensive guide, we’ll walk you through all the essential steps you’ll need to take to start your own paper recycling business, from creating a business plan and securing funding to setting up a collection system and ensuring your business is properly licensed.

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Industry Overview

In line with the increased adoption of sustainable practices globally, the paper recycling industry has experienced significant growth in recent years, with its overall market value reaching approximately USD $7.1 billion in 2023.

Building on this momentum, this industry’s upward trajectory is forecast to continue well into the future, with projections indicating a compound annual growth rate (CAGR) of 5.70% from 2024 until it reaches a market value of around USD $13.1 billion by the end of 2034.

A number of factors are thought to be contributing to this robust expansion — the primary one being the increasing use of recycled paper as the preferred packaging material across various industries, including food and beverage and pharmaceuticals.

This has been further bolstered by environmental concerns surrounding non-biodegradable plastics, as well as government initiatives — such as Extended Producer Responsibility (EPR) laws — promoting the use of recycled materials and implementing stringent regulations against unsustainable options.

The main challenge faced by this industry at the moment is its volatility — which complicates long-term planning and investment for businesses as a result of constant shifts in the demand for paper products, the fluctuating costs of virgin paper, and evolving regulatory landscapes.

A key barrier to entry for new entrants worth mentioning is the challenge of collecting recyclable paper, particularly due to infrastructure-related constraints in many rural areas. While many businesses are turning to solutions like automated collection systems and electric vehicles, these technologies obviously involve a substantial upfront cost that many smaller businesses are, as of yet, unable to bear.

Startup Costs

If you’re considering whether a paper recycling business is right for you, the first thing you’ll need to know is whether it’s a) affordable, and b) worth the investment. I mean, how much can you actually make running your own paper recycling business?

Well, it depends, and the initial investment for a paper recycling business varies widely based on factors such as its scale, operating locations, and available resources. With that being said, most paper recycling businesses will typically face the same upfront expenses when starting out, including:

• Vehicle Costs: One of the biggest costs to prepare for when setting up your paper recycling business is that of obtaining a reliable vehicle capable of transporting collected paper. While entrepreneurs with limited capital might first start off with their personal vehicle, it’s worth noting that this is only practical for moving small loads of paper. For larger operations, investing in a trailer or truck will be essential, with used trailers typically starting at $3,000 and commercial-grade trucks beginning at around $20,000.
• Storage Space: In order to maintain the value of the paper that you’ve collected, you’ll need to store it in a dry, covered area to prevent damage. As such, many business owners will start out using an existing garage or shed, which effectively eliminates this cost. However, if you decide to rent a space to store your collected paper, costs will typically range between $50 and $250 per month depending on the size and location of the rented space.
• Essential Tools and Supplies: To ensure the smooth operation of your paper recycling business there are certain key tools you’ll need, including a reliable scale to be able to accurately price and manage your paper inventory and utility knives for opening boxes. These should generally cost you between $100 and $400, though you’ll also need to factor in the cost of essential basic supplies like bins, gloves, and tarps for safely collecting and sorting paper — which will add an extra $50 to $300 to this total.
• Business Licensing and Permits: For your paper recycling business to be able to operate legally, there are various different licenses and permits that it will need to obtain before it can begin its operations (see Step 5). Depending on the specific ones you need — which could include waste handling permits, zoning permits, and any local business operating licenses — you can expect to spend anywhere from $100 to $1,000 on this expense.

As such, with as little as $5,000 to $25,000 in total startup capital you could get an entry-level paper recycling business off the ground — which is what makes it such an appealing venture for many entrepreneurs.

When it comes to the primary ongoing costs faced by a paper recycling business, they’re also relatively low; the most significant ones to be aware of include fuel and vehicle maintenance (so that you can continue to collect and transport materials), as well as rent (if you decide to rent a storage space).

Earning Potential

Instead of charging the people or businesses they typically collect this paper waste from, the primary way in which paper recycling businesses make money is by collecting it from producers with lots of paper waste and delivering it to nearby recycling facilities, which pay based on the weight and type of paper.

For example, while mixed paper and Old Corrugated Containers (OCC) will earn you $45 and $77 per ton respectively, these recycling facilities often pay around $117 per ton for Sorted Office Paper (SOP).

While also charging for collection might make a little more money in the short run, this isn’t generally advisable because, in the long run, you’ll likely end up driving these people and organizations to either get rid of this waste themselves or swap to a competitor that won’t charge them for this service.

By not charging, you’re actually providing a mutually beneficial service, whereby you help them dispose of their waste at no cost while at the same time ensuring you have a steady supply of recyclable material for your business to sell.

Due to how cheap recycled paper is, volume is a key determinant of profitability. This is why big earners in this industry typically seek to secure contracts with large retailers and manufacturers that tend to produce large amounts of waste paper on a predictable schedule, such as Amazon or Walmart.

However, when you’re just starting out you’ll likely need to focus on residential sources and build your way up to these more lucrative deals. With that being said, there’s no need to worry about finding a steady supply, as paper is the most widely produced waste material in the US — comprising over 23% of all municipal solid waste (MSW).

If you’re looking to further boost your profitability, some recyclers expand their services to include document shredding, which not only generates additional income but also provides access to high-grade paper that commands premium rates.

7 Steps to Starting a Paper Recycling Business

In order to start a paper recycling business, you’ll need to complete the following steps:

1. Planning Your Paper Recycling Business
2. Registering Your Business
3. Opening a Business Bank Account and Credit Card
4. Securing Funding (If Applicable)
5. Set Up Business Accounting
6. Getting all Applicable Licenses and Permits
7. Obtaining Business Insurance

We’ve broken each one of these down in more detail below.

Still exploring your options? Check out other small business ideas.

Step 1: Plan Your Paper Recycling Business

Before diving into your paper recycling business, you’ll need to spend some time conducting thorough market research.

When thinking about setting up this type of business, the first thing to check is where the recyclers in your area are located and the rates they tend to pay per ton for each of the various different paper types — be sure to also check if there are any types of paper that you can’t take to them.

This will help you evaluate the financial viability of your project — including projected revenues and expenses — as well as identify the niches in which your company may have the best chance for success.

Finding a Suitable Name

Choosing the right business name is both important and challenging.

Your name will need to be eye-catching, memorable, and (at least somewhat) related to your industry.

If you don’t already have a name in mind and need help, you can visit our How to Name a Business guide or use our Paper Recycling Business Name Generator tool.

If you do have a name in mind, we recommend researching the following to confirm it’s available:

• Your state’s business records
• Federal and state trademark records
• Social media platforms

You will also need to make sure that your business’s name is available as a domain — this is your website’s URL address.

Note: If you’re planning to operate a sole proprietorship, you might want to operate under a business name other than your own name — known as a “Doing Business As” (DBA) name. Keep in mind that this is not recommended for a paper recycling business.

Building a Client Base

With this initial research out of the way, the next step is to secure clients who can supply you with a steady stream of paper waste to take to your local recycling plants.

While major corporate contracts will likely be off the table at this time, reaching out to places like offices, schools, and retail outlets in malls is a good place to start. In many cases, you’d be surprised how many of these establishments are actually paying waste management companies to haul away recyclable waste.

By offering to collect their paper waste at no charge, you can position yourself as a cost-effective and convenient alternative that’s hard to turn down. For clients who might still be on the fence, emphasizing the environmental benefits of partnering with your business — on top of the cost savings — can be an effective strategy.

Once you lock in agreements with these clients, focus on establishing a reliable and efficient pickup schedule tailored to their needs — whether paper waste is generated daily, weekly, or monthly, coordinating collection times will streamline your operations and help you to build trust with your clients.

Step 2: Register Your Business

One crucial aspect that cannot be overlooked when starting your paper recycling business is the importance of establishing a solid business foundation.

While sole proprietorships and partnerships are the most common entity types for small businesses, they’re a far less stable and advantageous option than LLCs — especially when it comes to paper recycling businesses (with potential liabilities and debt).

This is because unincorporated business structures (i.e., sole proprietorships and partnerships) expose you as an owner to personal liability for your business’s debts and legal actions, while LLCs protect you by keeping your personal assets separate from your business’s liabilities.

In practice, this means that if your paper recycling business were to face a lawsuit or incur any debts, your savings, home, and other personal assets could not be used to cover these costs. On top of this, forming your business as an LLC also helps it to appear more legitimate and trustworthy.

Note: If you’re interested in more information before getting started, we recommend having a look at our How to Start a Business guide (DIY) or our in-depth Best Business Formation Services review (for those opting for a professional service).

Step 3: Open a Business Bank Account and Credit Card

Using dedicated business banking and credit accounts is essential when operating as a business owner; this is because when your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) can be at risk in the event your business is sued.

In business law, this is referred to as piercing your corporate veil and is a result of the fact that not having a separate business bank account can be interpreted by some courts as evidence that you are not treating your business as a separate financial entity.

As a result, you could lose your limited liability protections even if you’ve registered a separate business such as an LLC or C Corp.

There are also a variety of practical and economic benefits to this step, such as a larger access to business loans and a more legitimate look.

Getting a business credit card can also be a great idea as it can help you build your company’s credit history from the start.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Step 4: Secure Funding (If Applicable)

Securing funding for your paper recycling business is a vital part of getting started, with typical financing options including bank loans, SBA financing, private investors, and crowdfunding.

Each of these financing routes has its own advantages and disadvantages you’ll need to weigh up, and the best option will largely depend on your financial needs and specific business strategy.

Due to the relatively modest capital requirements associated with starting up a paper recycling business, it’s often advisable to start small and use personal savings in order to cover any initial startup expenses.

This way you can test the market, establish a client base, and refine your operations without the added pressure of loan repayments. Then, once you’ve built a consistent stream of revenue and established reliable sources of paper waste, you can explore external funding if you want to scale your operations.

This could include purchasing larger vehicles, expanding your storage capacity, or investing in the infrastructure needed to offer additional services like document shredding.

By taking out loans in this way based on proven demand rather than speculative predictions, you can minimize financial risk and set your business up for long-term success.

Step 5: Set up Business Accounting

In order to gain a clear understanding of the financial performance of your paper recycling business, it will be essential for you to keep track of its key expenses and sources of revenue.

To maintain clarity in your financial records, we recommend organizing your income and expenses into distinct categories, such as:

• Equipment Costs (e.g., purchasing or maintaining scales, utility knives, bins, and other tools).
• Transportation Costs (e.g., fuel, maintenance, and insurance for company vehicles).
• Fixed Expenses (e.g., rent for a storage space, insurance premiums, and utility bills).
• Recycling Facility Revenue (e.g., from the sale of cardboard, mixed paper, or office paper).
• Marketing Expenses (e.g., flyers, business cards, a basic website, social media ads).
• Administrative Expenses (e.g., bookkeeping software and office supplies).

By doing so, you should be able to easily obtain a clear insight into your business’s financial performance, which is essential for you to be able to make informed decisions.

Step 6: Secure All Necessary Permits and Licenses

One of the final steps you’ll need to take before you can officially launch your paper recycling business is to obtain the various different licenses and permits that are commonly required by law.

Zoning Permit

A zoning permit confirms that your paper recycling business’s location complies with local zoning laws, which dictate the types of businesses allowed to operate in specific areas.

While local regulations may vary, paper recycling facilities are typically classified as industrial or commercial since the activities involved (e.g., processing, sorting, and transporting waste paper) typically require space and can generate noise or increased traffic.

However, for more specific information on how zoning permits may apply to you, you’ll need to confirm the relevant regulations with your local city and/or county zoning office or planning department.

Environmental Permits

Due to the potential environmental impact of collecting, storing, and processing paper waste, your paper recycling business will likely need to obtain several environmental permits, including a:

• Waste Management Permit
• Waste Hauler Permit

Both your state’s environmental protection agency and your local regulatory authorities will be able to provide more specific details on the permits your paper recycling business will need in order to be fully compliant.

Home Occupation Permit

If you plan to operate your paper recycling business from your home, you’ll likely be required to obtain a home occupation permit as it’s mandatory in most cities and counties.

This permit ensures that your business adheres to local regulations designed to preserve the residential nature of the neighborhood, which may include restrictions on signage or the volume of traffic generated by the business (e.g., by vehicles used for paper collection or deliveries).

Step 7: Get Business Insurance

In addition to securing the necessary permits and licenses, you will need to obtain the right business insurance.

Note

Even if you form an LLC, purchasing business insurance is still a good idea. This is because an LLC structure protects your personal assets, not your business’s.

While specific coverage needs may vary based on factors such as location, size, and unique risks, there are several key types of insurance that most paper recycling businesses should consider.

We’ve briefly outlined these below.

General Liability Insurance

General liability insurance is a foundational coverage that’s essential for paper recycling businesses because it protects against claims of bodily injury, property damage, and personal injury that may be linked to your business’s activities.

An example of this might be if a client’s property is damaged while your team is collecting paper waste from their office — in this case, general liability insurance would protect you against any potential legal fees or settlement costs if the client files a claim.

The average cost for general liability insurance according to recent data is between $50 and $200 per month, though costs can vary based on your business’s specific needs and risks.

Commercial Property Insurance

Commercial property insurance is essential for safeguarding your paper recycling business’s physical assets, such as its equipment, vehicles, and storage facilities.

The median cost for business property insurance is approximately between $100 and $300 per month.

Having said that, rates can vary significantly based on factors such as your business’s location, risk profile, and the value of the property in question.

Commercial Auto Insurance

Commercial auto insurance provides financial protection in the event of an accident involving one of your paper recycling business’s vehicles.

This is important due to how often you or your employees will be driving company vehicles to collect paper waste from clients and drop it off at recycling centers.

Typically, this policy costs between $125 and $300 per month, though the actual cost will depend on factors such as your business location, the type and number of vehicles insured, the level of risk, and your selected coverage limits.

Workers’ Compensation Insurance

If your paper recycling business will have employees, workers’ compensation insurance is likely going to be a legal requirement depending on your state.

This insurance policy provides coverage for medical expenses and lost wages to employees who are injured during work.

The average cost of workers’ compensation insurance ranges between $200 and $400 per month, but this can vary based on factors such as payroll, location, and (once again) your business’s specific risk profile.

Ready to Get Started?

How to Start a Paper Recycling Business FAQs

Who is the target market?

The target market for a paper recycling business includes businesses and organizations that generate substantial paper waste, such as schools, offices, retail stores, and manufacturers.

While these aren’t “customers” in the traditional sense, these entities provide the perfect source of paper for your business to collect, organize, and later sell to recycling centers.

How much can you charge customers?

Instead of charging the people and organizations they collect waste from, paper recycling businesses typically earn revenue by delivering the materials they’ve collected to recycling facilities — which, for the most part, pay between $50 and $200 per ton of paper.

How much profit can a paper recycling business make?

While new businesses in this industry will start out more slowly, there’s no reason why established paper recycling companies can’t earn upwards of $100,000 per year once they’ve secured steady contracts with large retailers to collect and process their waste on a regular basis.

How can you make your business more profitable?

To boost profitability, your long term focus should be on securing high-value contracts with large waste producers.

However, if you’re looking for a quicker revenue increase, consider offering document shredding services — this not only generates additional income, it also grants you access to high-grade paper that can be sold at premium rates.