Starting a Compost Business

Part 1 - How to start a Starting a Compost business - Background

A composting business helps keep the community clean by composting leaves and recyclable organic materials. From this raw material, compost is created, which can then be sold to consumers or used on farms or in residential areas. Composting businesses typically operate out of a large facility where the composting takes place. They may pick up other people’s compost for a fee, or accept drop-offs for a fee.

Our guide is in 3 parts:

• Part 1 - How to start a Compost business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a compost business?

This business is labor intensive and may cost a lot to get set up. Between land costs and maintenance, costs for hauling and distribution of compost, and collection (if your business offers collection services), startup costs may exceed $1 million.

The bulk of the costs go into the land required for composting, the tools required for maintenance, compliance with local and state regulations, and trucks to haul compost to and from the site.

What are the ongoing expenses for a compost business?

Ongoing expenses for this type of business include gasoline for trucks, marketing, office utilities, and labor costs to maintain the compost fields. These costs may be as little as $10,000 for a very small compost field up to hundreds of thousands of dollars for a large-scale operation.

Who is the target market?

Your target market includes local governments, HOA neighborhoods, and farms and commercial enterprises that need a high-volume of soil.

How does a compost business make money?

Compost companies make money by selling fully composted material, which is essentially high-quality dirt or “top soil” used as fertilizer or ground cover. It is usually nutrient-rich and ideal for use on farms, gardens, and in residential neighborhoods.

How much can you charge customers?

This depends on the local market. Selling in bulk helps increase your total revenues, but may lower your profit margins. Companies typically charge between $5 and $10 per cubic foot. However, discount prices may drive those prices down to $1 to $3 per cubic foot. Local governments may also demand a lower price as well as farmers buying compost in bulk. You should plan on minimum charges of $1 per cubic foot, with an average sale price of $3 per cubic foot.

How much profit can a compost business make?

Profit depends largely on the local demand for compost. Compost is in high demand in some areas, allowing businesses to earn net profit margins in excess of 10%, while other markets command razor-thin margins. Average revenue in this industry (which is still young) ranges from $500,000 to over $1 million for a small to medium-sized compost business.

How can you make your business more profitable?

Making the business more profitable is not a simple matter. Lowering costs is the primary way to increase profits. But, this requires you to find cheaper sources for compost raw materials and lowering your transportation costs. Buying land in low-cost and low-tax areas will also help the bottom line.

Day-to-Day and Growth

What happens during a typical day at a compost business?

A composting business collects recyclable garbage from the community. People either drop it off or the company goes and picks up garbage from local neighborhoods, similar to waste disposal services. The compost is then taken to the facility where it is dumped into various compost piles. These piles are managed and rotated to make sure that the composting process takes place and that there is an even distribution of compostable material.

What are some skills and experiences that will help you build a successful compost business?

Understanding the science and business of composting is a must. You must study composting cycles, what makes good compost, what to avoid and what to expect from your first few composting seasons. Not being afraid of dirt also helps. An ecological background isn’t required, but helps.

What is the growth potential for a compost business?

Growth potential for this business depends a lot on local laws and regulations. Since composting deals with garbage, local ordinances may prohibit or limit the use of composts in your area. Or, they may require special licensing or permitting. Many governments are, however, becoming very liberal in allowing composting businesses to set up a composting field and run their business like any other normal business operation.

A composting business is usually limited in size based on the amount of land you can afford to purchase and maintain.

What are some insider tips for jump starting a compost business?

This business is easy to get going, aside from the high initial cost. Most businesses are looking for a low-cost way to get rid of their garbage. Flower shops, bakeries, and any other business that produces significant organic waste is a potential source for your composted raw material. As for customers, you should focus on selling to HOA neighborhoods, business that need high-quality soil, and local governments.

How and when to build a team

Your business will need a lot of employees in the beginning. Plan on hiring at least 5 to 10 workers and adding to that as your composting business grows.

Part 2 - Is a Starting a Compost business the right fit for you?

Part 3 - Action plan to launch your Starting a Compost business in 90 days