Business Ideas | Small Business Ideas: How to Start a Sand & Gravel Company

Tuesday, January 6, 2015

How to Start a Sand & Gravel Company | Business Ideas

Gravel is an important commercial product, with a number of applications. Many roadways are surfaced with gravel, especially in rural areas where there is little traffic. Globally, far more roads are surfaced with gravel than with concrete or tarmac; Russia alone has over 400,000 km (250,000 mi) of gravel roads. Both sand and small gravel are also important for the manufacture of concrete. Sand and gravel enterprises operate in one of two main ways; they either limit the scope of their business to the storage and delivery of sand, rock and gravel, or they take part in the actual quarrying and manufacture of the raw material. The success of both types of sand and gravel companies depends on the local demand for sand and aggregate materials and the amount of competition in the area.

Launching a sand and gravel company is a rewarding experience but it's important to plan out the business in detail before you start. This article contains nuts-and-bolts information to develop the business successfully.

Wondering how to start a sand and gravel company? We take you step-by-step from start to success.

How to Create Effective Sand & Gravel Company Business Plans

A great business plan will lay a strong foundation for growth in your start-up sand and gravel company.

Business plans address a wide range of issues, including startup financials. The financial chapter of your business plan is one of the first places investors and lenders look, so it needs to contain forecasts and budgets that are rooted in business realities rather than your personal best case scenario.

Subsequently, a thorough understanding of business plan financial basics is a prerequisite to effective business plan writing for sand and gravel companies.

Don't Overlook Competitors

Well in advance of opening a sand and gravel company within your community, it's essential to determine how strong the competition is. We've provided the link below to help you find competitors in your city. After clicking on the link, type in your city, state and zip code to get a list of sand and gravel companies near you.

Gain a knowledge of how existing firms have positioned themselves in the marketplace, and then design your business in a way that sets you apart from the others.

Getting Advice from Experienced Entrepreneurs

As part of your due diligence on opening a sand and gravel company, it's a wise move to have a conversation with someone who is in the business. If you think your local competitors will give you advice, you're being overoptimistic. It'd be crazy for them to teach you the business.

Thankfully, an owner of a a sand and gravel company in a location that is not competitive to you may be more than happy to give you a few tips, after they realize you reside far away from them and won't be stealing their local customers. Indeed, many experienced entrepreneurs enjoy offering advice to startup entrepreneurs. Our estimate is that you may have to contact many business owners to find one who is willing to share his wisdom with you.

Where would you find an owner of a sand and gravel company on the other side of the country to talk to?

Easy. Find them using our link below and start calling until you are successful.

Financial Benefits of Buying a Sand & Gravel Company

Worried about the financial aspects of starting a sand and gravel company? Most start-up sand and gravel company owners are.

Financial risk management requires you to at least consider the possibility of setting your startup plans aside to explore acquisition opportunities. Many entrepreneurs buy an existing business for the sole purpose of tapping into the financial benefits of an established customer base.

But most importantly, existing sand and gravel companies have documented financial histories. Although you can create pro forma earnings and financial statements for a startup, a business-for-sale should have a well-documented, multi-year history of financial performance.

Is Franchising the Right Option?

If this is your first venture, your best bet may be exploring whether there are good franchise opportunities that would be right for you.

Before you consider starting a sand and gravel company, it's worthwhile to assess whether franchise opportunities in your space might simplify your entering the business.

The link below gives you access to our franchise directory so you can see if there's a franchise opportunity for you. You might even find something that points you in a completely different direction.

How to Start a Sand & Gravel Business

Market Need

The first step in starting any business should be a detailed analysis of the intended market. Sand and gravel businesses thrive in areas of rapid development and new housing starts, as long as aggregate companies don’t already saturate the market. The best way to determine the feasibility of starting a new company is to find out what local sand and gravel companies are charging per ton for their aggregate and then compare that to the prices charged in nearby communities. If the cost in your community is substantially higher, there might be room for some competition in your area.

Start-Up Costs

Starting a full-service sand and gravel operation that quarries and crushes aggregate requires a substantial initial investment that could easily run into the hundreds of thousands of dollars, or more. Land acquisition, excavation, extraction, crushing, screening and washing equipment are necessary in addition to trucks for hauling the material. A delivery-only sand and gravel business has a lower start-up cost, which includes dump trucks to haul the aggregate and loaders to load the trucks. Dump trucks can run anywhere from $25,000 for a pre-owned model, to $80,000 for a brand new truck. Front-end loaders are comparable in price. Delivery-only companies can haul directly from the quarry to the customer, or can purchase large amounts of aggregate and store it at a local distribution site.

Licensing and Permits

Obtaining a permit to quarry can be a complicated process since the operation is similar to strip mining, which forever alters the properties of the land. State environmental management authorities regulate quarrying activities and the requirements necessary for obtaining a license. These might include paying a land reclamation bond, undergoing an environmental study, publishing a notice of intent in a community newspaper, filing a map of the intended quarry site with state and county authorities, as well as filing a plan showing how you intend to discharge process water and contain pollutants. Your county extension agency can provide the contact numbers for the state agency that will oversee the permit process. Obtaining a permit for a delivery-only company is less involved but might still require holding a hearing for neighboring landowners before the county authority issues a permit.

The Business End of the Business

Local, state and federal taxing authorities are very interested in the profit you stand to make from your sand and gravel business. Even if you intend to handle all your own bookkeeping, it’s a good idea to consult an accountant for advice on taxes, payroll and how to structure your company to best protect your assets. You must comply with your state’s laws governing unemployment compensation, workers compensation, commercial liability insurance requirements.

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Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.

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