First steps towards launching a tire recycling or pyrolysis business
To build a successful tire recycling or pyrolysis business, one needs to first of all identify markets and products and properly build sales channels. This is a rather complex task, as it is composed of many difficult and field-specific details.
Nowadays one may think of the Internet as a pioneering marketing tool to help sell products. Partly this is true, as there are many platforms for retailing or wholesaling across the entire world. But despite the ease of launching online sales, feasibility needs to be carefully calculated before you start recycling tires.
Step 1: Identifying products and markets
To properly prepare launching a business in tire recycling or pyrolysis, one needs to conduct a market research in order to evaluate feasibility of the project. Here, it is necessary to address the local conditions with considerable impact on the project on one hand, while analyzing if the desired technological setup (if known) would allow the marketization of the output on the regional and international markets.
It must be based on research and preparatory work performed for the specific situation of the customer in the target area, which shall include:
- A thorough analysis of the production costs that may vary with each location chosen: this must include but not be limited to labor and energy costs, taxes, implementation expenses, etc.
- A complete understanding of the legislation relating to the creation of a firm in the selected areas, as well as the environmental regulations and HSE requirements in regards to pyrolysis operations.
- A full investigation of the European and international markets for tire recycling / pyrolysis production output (e.g. crumb rubber, rubber powder, rCB, oil, steel). Markets must be investigated and specific potential clients for end products of the plant must be found.
- An overview of the current quality standards and requirements of regional and international markets for tire recycling / pyrolysis products. This information would help to determine the chances of the project’s success by comparing it with the results of a due diligence.
Step 2: Due diligence
If you already possess information on markets, products, etc., it is highly desirable to find an independent consultant who helps make sure the estimations are correct and, indeed, feasible.
A proper due diligence could have the following structure:
General feedback on the technology
This part must focus on the technological details and different parts of the line considered for the project. This analysis should focus on criteria such as:
- Product type (considering the range of usual production outputs, such as crumb rubber, rubber powder, light fraction oil, heavy fraction oil, raw recovered Carbon Black, recovered Carbon Black, steel, etc.)
- Technology setup
- Output/Input, estimated hourly production rate
- Compliance with regulations in the targeted area
- Other relevant factors for the feasibility of the project.
- Environmental regulation risks
Detailed review on the equipment
This part encompasses a detailed review of the equipment and usually starts with preparing a professional "Request for Proposal" (RfP). This RfP will be sent to at least three reputable suppliers in the industry. This is a time consuming effort which often takes three months or more. It also includes checking successful references of plants running in a similar environment.
Detailed market study
Take sufficient time to collect as much information about your future market. Focus on how likely the products will compete with alternatives from the industry on local and international markets? Are the competitive advantages of the proposed technology big enough to ensure the success of the project also in a worst case scenario.
Revision of overall market profit margins
The goal here should be to cross-check production cost assumptions and profitability assumptions in your financial planning. Verification of current market prices and industry standards with local conditions must be carried out.
General industry risks
Some of those key risks include:
- Risk that the technology is not competitive.
- Risk of an organization and technology mismatch.
- Risk that the technology will not effectively scale or transfer.
- Risk that the technology is not adequately supported, recorded or understood.
- Risk that the resources required to develop and deploy a technology are insufficient.
- Market risks.
Step 3: Financial projections
Based on the early results of the previous steps, this part should focus on the economics of the enterprise (financial plan for over 10 years long, including profit and loss account, balance sheet projections, cash flow planning, etc.). It shall include a detailed financial modelling tool for the project, such as:
- Profitability analysis
- Payback period analysis
- Return on investment analysis
- Cash flow analysis
- In addition, this step could include a sensitivity analysis exercise, which allows for a better assessment of the project’s economic return under different macroeconomic scenarios.
Weibold’s bankable business plans
As an experienced consultant focused exclusively on tire recycling and pyrolysis, Weibold produces custom made bankable business plans to boost customers’ success. Weibold’s business plans not only serve as detailed blueprints for launching tire recycling / pyrolysis business, but also ensure to receive funding from investors, banks and authorities.
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