Before starting a composting business, do your homework

Before starting a composting business, do your homework

Composting beyond the backyard is no project for a novice.  But anyone can earn some basic composting business chops through research.  The goal is to answer the big questions before spending a dime on formal development activities.

Starting a composting business can be a challenge, and we’ve all seen what can happen when things go wrong.  A composting facility may shut down after only a handful of years.  Another still struggles with financial or regulatory issues a decade after start-up. 

These types of troubles can be signs of insufficient fact-finding in the early days of project development. In other words:

Someone didn’t do enough homework.

As a result, design or technology choices were not a good match for the feedstocks or location.  Or the volume of available organics was too small to support the operation. Perhaps the wrong people were hired.  Maybe the marketing program did not attract the right customers.  Etcetera, etcetera, etcetera.

The fun stuff comes last, not first

It’s all too common for new business owners to get caught up in the glitzy excitement of branding, brochures, and websites.  But these activities should come much later in the development process, especially when starting a composting business.

Those things are the equivalent of color choices for a new home’s exterior paint or the posies that line the sidewalk.  Such blandishments are designed to set the stage, appeal to a certain type of buyer, make a statement.

However, if the plumbing and electrical systems were not designed and installed correctly, if the wall studs are spaced too far apart, if the floor joists are too small to carry the load… Well, suffice it to say that building is in trouble, no matter how pretty it looks from the street.

Even then, all that loveliness could be totally wasted if your targeted buyer prefers a different architectural style, color palette, or lot size.

Research helps a business owner build an operation that will stand the test of time and attract the right customer.  And in this regard, starting a composting business is no different than any other.

At each step in the development process, research provides the stability and confidence a composting business needs to take it to the next level:

  • Volumes and types of wastes to be processed influence technology choice. 
  • Technology plus composting regulations plus projected processing volumes/types form the foundation for facility design. 
  • Facility design determines site requirements, as well as construction and operating costs.  
  • Site location shapes market boundaries for both intake and compost sales.  
  • Market boundaries delineate the customer base.  
  • The customer base dictates specifics of the marketing program.

Full facility development — from preliminary assessments to permitting to start-up — can take many months and cost hundreds of thousands of dollars.  Investing a few days in armchair research before the launch of formal development activities can prevent crippling missteps.

During this process you will want to look for or figure out things like:

(1) Your probable service area

It’s not unusual to find similar business or residential types clustered together throughout a metropolitan area. Identify those concentration zones that match your intended customer base.

Do this long before you go shopping for a site so you can see where major waste generators (and competitors) are located.  Transportation costs can greatly influence a prospective customer’s waste management decisions and/or your profit margins.

For example, if you hope to find a niche providing residential food waste collection services, you’ll be looking for households in higher-income ZIP Codes.  These addresses have the income to pay a premium for separate food waste recycling.   Neighborhoods with younger residents are more likely to support composting than those filled with retirees, too.

How do we know that?  Internet research.

Now, when the time comes to choose a site, you can narrow your search to locations that will give you a competitive advantage.

By targeting specific areas, you will also be able to extrapolate things like the actual number of households, grocery stores, restaurants, or other entities generating the wastes you hope to capture.  This count will serve as the foundation for –

(2) Waste volume guesstimates 

Continuing with the previous example, let’s assume half the households in those higher income ZIP Codes (as suggested by one study) want to compost food waste. Each household generates 8.7 pounds of food waste a week (suggested by another study).  Simple arithmetic will tell you if there are enough target households in your to defined service area to support your business:  # total high income households / 2 x 8.7 = estimated pounds per week x your proposed charge per pound = projected weekly gross revenue.

This calculation tells you two things: (1) The total volumes you can expect to process if all goes according to plan and (2) how much you will gross, whether charging by the household or by the pound.

Just know the statistics you find on the internet are ballpark figures.  They only provide a frame of reference for the purpose of assessing project viability.  These numbers are soft and pliable and need to be firmed up as the business gains actual operational insight.

Because, in truth, only one or two out of a hundred households are likely to subscribe to your service after your initial marketing effort.  That’s considered normal in the wider world of marketing.  It’s a reality that must be considered during all financial planning.

So don’t be surprised if the answer to all that viability arithmetic is no.  Sometimes, a business concept can be a good one.  But there just aren’t enough prospective customers in a specific locale to make the business profitable. 

Don’t assume too much or too often

Every new business has to make assumptions.  But without facts to back them up, assumptions are only wishful thoughts.

For example:  If the focus is supermarkets, and there are a dozen in the targeted service area, do not assume all 12 will jump at the opportunity to send their food waste to composting.

The separation of food waste could require changes to internal systems.  Maybe there’s no space out back for another dumpster.  Diversion might necessitate alterations to corporate policy.

Or, like one disappointed composting wannabe discovered, all of that food waste might be contracted to pig farmers.

Zoning laws, HOA rules, access issues, and many more hurdles can stand between a composter and a business opportunity.  A city might even have flow control laws/policies in place that prevent newcomers from competing against contract-protected waste haulers.

Dig deep.  Cover all bases.  Then decide if your project is a No or Go.

It’s better to be disappointed when an idea is only on paper than after investing in the development of a business concept with little chance for success.

Don’t give up

This is not to suggest that giving an “abandon ship” order is the right thing to do.  When the numbers aren’t adding up, carefully analyze your initial concept.  Starting a composting business sometimes requires creativity.

Could you shave some costs?  Delay a purchase?  Start smaller and grow into the Grand Plan?  Partner with civic clubs or homeowners associations?  Focus on commercial waste generators instead of residential?

When all roads lead to Rome, choosing a scenic route can be much more enjoyable and less stressful than taking the expressway.  When starting a composting business, you could find your business niche by choosing a less-traveled path.

But to avoid wandering aimlessly in the wilderness, map your path using good, solid research.