Do you want to start a wood pallet recycling? If YES, here is a complete guide to starting a wood pallet recycling business with NO money and no experience.
All over the world, countries are now becoming more conscious of their environment. A lot of industries are using wood pallet especially for shipping because of the health and safety regulations that they are adhering to when they use wood in place of plastic pallets.
As such, if you are going into the business to purely make profit for yourself, you can also be satisfied that you are doing your bit to make the environment better.
Wood pallet recycling business is not only regarded as a hobby but as a commercial venture as well. The fact that there are so many businesses using wood pallets for shipping, makes it a very lucrative business for any environmentally conscious entrepreneur to go into.
Even though pallets are not the finest of wood but they are regarded as very useful as it can even help build the necessary furniture needed in a house but in a way that is not as expensive as using other kinds of wood. Due to the fact that this is a recycling business, it is important that you conduct all the necessary research that will enable you find out all there is to know especially in regards to running the business and making a success of it.
Your market research should lead you to finding were you can get wood pallets cheaply or for free. Usually, sources for wood pallets can be distribution firms, magazine publishers, manufacturers, newspapers and shippers, where most of them either discard pallets and give it for free or sell at a very cheap rate.
Once you have a steady stream of suppliers, you will also need to find out who your core customers are and where to find them. In some states, you might be lucky to get a list of those that use wood pallets, thereby making it easier for you to know which set of customers to focus your attention on.
Ensure that you contact the purchasing or shipping departments of the companies you are looking to contact. However, before you start sending out quotes to your potential customers, you should have conducted a research as regards pricing in order to be able to compete fairly against your competitors.
This is a business that requires you to be environmentally compliant and so you must ensure that not only the safety and insurance of your business are strictly regulated but that they comply with the rules of the Environmental Protection Agency (EPA) as well as the Department of Labor.
It is only after this that you can get the business license and permit that will be needed to run your business in the state where you are looking to operate your business from.
Steps to Starting a Wood Pallet Recycling Business
1. Understand the Industry
Wood recycler businesses usually prefer the most common pallet sizes in the united states as well as other popular sizes of wood. Pallet recycling has not only become a significant part of the industry, it is also regarded as the segment that has been growing rapidly in the past decade.
Due to changed perceptions, users of pallets have become more used to pallets that have been reconditioned because the price is considered lower in comparison to new pallets that are of the same quality.
According to a report by Freedonia Group, it is expected that the sales of new as well as refurbished pallets will see an expansion rate of 3.5 percent between the periods of 2013 and 2017, which will cause the value to climb from $16.9 billion for v an estimated value of 1.3 billion units.
Block pallets have been dominating the market as more manufacturers have been replacing stringer pallets with new block pallets. Even though plastic pallets are seen as degrading the environment, it has still continued to record an above average growth. Metal pallets have however had the highest gain amongst the three pallet types – wood, metal and plastic.
Even though metal and plastic have an above average growth, they are still regarded as a smaller percentage when it comes to the market share that they represent and so the revenue they generate can be regarded as minimal. Wood pallets however have a dominant percent of the market especially as regards to unit; plastic pallets account for 4 percent of the market while metal pellets account for just 1 percent.
The reminder of the market is accounted for by molded wood pallets, corrugated wood pallets and pallets that have been constructed by other alternative materials.
According to the Freedonia Group report, 60 percent of the wood pallets that are being sold are those that have been used, while only about 40 percent are new. However, it is estimated that percentages could shift in favor of new wood pallets.
The reason for the shift to new pellets is due to the fact that there has been a shortage of quality used pallets in the market from 2012.
The trend towards plastic pallets is largely driven by companies that are looking to control the pool of their pallets, taking advantage of how long plastics can last while also taking into cognizance the environmental sanitation concerns regarding wood pallets.
There are no companies that have a dominant market share in the wood pallets industry even though revenue generated by this industry is $10 billion and the 6.4 percent growth rate has been steady since 2012 to 2017. There are more than 2,600 wood pallet businesses in the United States employing more than 54,800 people.
It is expected that rising industrial production as well as consumer spending will continue to push the growth of the industry allowing demand for pallets to grow over the next five years, even as it has seen an increase in the previous five years. Increased manufacturing activity will continue to ensure that the industry generates steady revenue.
The industry has however been facing increased competition from alternative materials such as metal, plastic and paper, and even though wood still dominates the market due to the fact that it has a lower cost, there has been greater competition from the substitutes especially as they proffer a better sanitation solution.
It is expected that from the period of 2017 to 2022, consumer spending as well as industrial production will continue to be on the increase thereby enabling the industry to generate revenue and grow. Even though it is expected that competition from external sources will continue to rise, there will be a focus on the recovery of pallet by the operators.
The pallet industry is one that has a low level of market share concentration especially as there is no pallet manufacturer that commands about 5 percent of the overall industry revenue. A large number of pallet companies operate either in a single state or in a region and this is due to the fact that interstate business for this kind of business is not profitable especially due to the high cost of transport and the low cost of the pallets.
Another reason why industry operators are also very reluctant to expand their businesses is the increased adoption of just-in-time manufacturing method where companies look to get products within a minimum turnaround period.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic compositions of those who buy wood pallets are local stores, manufacturing companies and industries in the downstream sector as well as households. Therefore, if you are looking to define the demographic of your wood pallet recycling business, you might do well to look at the popular market segment.
3. Decide Which Niche to Concentrate On
A wood pallet recycle business usually produces wood pallets as well as other wood parts for companies that manufacture wood products and these products are sold to industries that use the pallets to not only store but also transport consumer and industrial goods.
Many wood pallet companies just focus on their core functions but a large number of wood pallet companies are starting to look for a niche in which they can stand out in order to better compete against their competitors in the same industry. Some of the niche ideas that are in this particular business that one can specialize in include;
- Recycled wood pallets
- New wood pallets
- Plastic pallets
- Block pallets
- Metal pallets
The Level of Competition in the Industry
While some regions have a lot of wood pallet stores, there are some regions where there aren’t so much and so the level of competition will be dependent entirely on the concentration of the existing wood pallets recycling business in the area where you are looking to operate your business from.
Major clients for wood pallet businesses are manufacturing companies and local stores and any area that has a lot of these businesses will be very beneficial to your business. What most of these clients are after is that they get well cleaned wood pallets as at when needed and at a price that they feel is fair.
If you are going to locate your business in a region that already has a lot of pallet stores, then you should be prepared to have well laid plans as to how you intend to source for customers and where you also intend to source for your wood pallets in order to be able to have the required advantage over your competitors.
You should however be aware that large wood pallet stores will have an advantage over small wood pallet stores in terms of economies of scale.
4. Know Your Major Competitors in the Industry
Being a well-known brand in any industry depends fully on how well you market and promote your brand, your prices, your customer care relationship as well as many other factors. The goal of very entrepreneur for their brand is to achieve recognition either nationally or in the region where they are operating. Below are some of the well-known wood pallet recycling brands in the United States;
- Kamps’ Pallets
- PALNET USA
- Recover USA
- Pallet Management Group
- Smart Way Recycling
- Central Coast Pallet
Economic Analysis
Pallets usually have their peak periods and so in a normal pallet cycle, companies that usually acquire used pallets always boost their inventories especially during a high shipping season by purchasing new pallets. This influx of pallets during this period helps to replenish the pool that will give the recycling industry a boost in the coming year.
However, the economy is a major determinant of companies buying new pallets, as instead of splurging on new pallets, companies in an economic downturn will rather prefer to buy reconditioned pallets. Not buying new pallets will have an effect on the pallet pool that is already seen as depleted especially during the used pallet shortage period.
High demand and low supply in the industry can bring about disaster as manufacturers will be forced to keep used pallets much longer in the overall pool and continue to re-condition in order to compensate for shortages, which will cause the quality of the woods to reduce.
Pallet companies in certain cities are beginning to seek certification in order to prove that the wood they sell does not come from illegal sources especially as there is a growing awareness the wood that is being used to construct these pallets.
5. Decide Whether to Buy a Franchise or Start from Scratch
When looking to start a business, one of the influencing decisions that you will need to take is if to start your business from scratch or if you should buy a franchise. While either option might be fine depending on the industry, you should ensure that whatever decision you make is one that aligns with your core goals and objectives.
The wood pallet business is a business that is highly regionalized and to this extent, there hasn’t been a national brand neither has there been franchise opportunities as you can start this business from home as long as you have a steady stream of clients that are looking to buy your recycled wood pallets.
The only option available to you is to start the business totally from scratch or to partner with other wood pallets shop in your area. If starting from the scratch is overwhelming for you, then carefully study the wood pallets shops around you to determine which ones will be more inclined to a partnership that will be beneficial to your company in the long run.
6. Know the Possible Threats and Challenges You Will Face
Every business that is being started up, no matter how monopolistic the business might seem, will always have its share of threats and challenges. Therefore as an entrepreneur, you should be prepared for any threats and challenges that you are likely going to face within your industry and outside it by having strategies in place.
It is important to note that while some of these threats and challenges might be easy to tackle, not all will be and when they do occur, the best that you can do is remain optimistic and wait for the moment to pass.
Some of the threats and challenges that you are therefore likely to face when starting your business are; having to compete against other existing wood pallets recycling businesses, being an unknown brand, having a reliable source with which to get your pallets and finding clients for your business so that you can achieve your goals and objectives.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Every entrepreneur starting a business in the United States often has to grapple with what legal entity to use for the business as the wrong legal entity can limit how the business can grow and achieve its intended goals and objectives. This is why it is often best to seek expert advice when it comes to legal matters especially one that will have an effect on the business.
There are no dominant companies in this market and this to a large extent shows that the industry is one where businesses thrive more in the region they are located and this fact might also be brought to bear when choosing the legal entity to use for your business.
Another factor that you might need to take into consideration when choosing the legal entity for your business is what scale of business you are looking to run and if you intend to grow beyond that scale in the future.
It is important to note that while you can choose certain legal entities and then switch as the business grows, it might not be possible for you to change some kind of legal entities when you choose them which might cause you to lose a lot of money.
There are five legal entities available to entrepreneurs looking to start their business in the United States and they are; sole proprietorship, partnership, Limited Liability Company (LLC), S corporation and C corporation. choosing a legal entity can be determined via the attributes of the entity.
Therefore in using attributes, you should consider flexibility, ease of ownership, setup and control, taxation structure, liability issues as well as other such actors that will be used as determinants.
Each of these legal entities have been chosen by entrepreneurs due to the kind of businesses they run with sole proprietorship and LLC being amongst the most common legal entities chosen by entrepreneurs in the United States. Having a lawyer or talking to those in similar businesses as yours will help you determine which legal entity will likely work for you.
8. Choose a Catchy Business Name
Just like names are important for an individual, they are more so for a company as this is how you can easily be identified and in essence allow you to achieve your goals and objectives. A business name shouldn’t only be catchy, it should be memorable and identify what kind of business you are into. Some of the catchy business names that is most suitable for your wood pallet recycling business include;
- Fina Pallets Group
- Tampy Wood Pallets
- Eco Wood Pallets Group
- Vrood Woods Pallet
- WOPALETS, Inc
9. Discuss with an Agent to Know the Best Insurance Policies for You
There are several calamities – natural or manmade – that can make you close the door to your business especially if you hadn’t insured the business properly.
According to available statistics, when a disaster happens, more than a quarter of the businesses affected who don’t have insurance does not re-open because of how difficult it is to rebuild especially if you had initially emptied your life savings.
To therefore protect your investment and bottom line, having insurance is very important. The main challenge that you might however face will be determining what insurance policy will be best for your business and so you might need to seek the advice of an insurance agent or broker as to which insurance policies are best.
Some of the insurance policies that you will need to purchase for your wood pallets recycling business are;
- Casualty Insurance
- Workers’ Compensation Insurance
- General Liability Insurance
- Commercial Property Insurance
- Business Auto Insurance
- Umbrella Policies
- Mechanical Breakdown
- Burglary and Robbery
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
The wood pallets recycling business is one where you get wood pallets and then resell them after you have ensured that they are clean and free of pests. For this sort of business, which is physical in nature, applying for an intellectual property protection isn’t necessary.
Even though an intellectual property protection is not considered a priority, some entrepreneurs especially those who have become nationally known or have achieved a certain level of success however apply for intellectual property protection for their company name, logo or any other material deemed important.
11. Get the Necessary Professional Certification
There are certain businesses that require the entrepreneur to possess certain kinds of certifications before the business can be run; however, this is not so for the woods pallets recycling business.
While entrepreneurs in this business do not have to bother with getting any professional certification, this doesn’t mean that you can’t get any related certifications that will enable you to stand out especially if you are looking to supply to huge clients and intend to stand out from your competitors.
12. Get the Necessary Legal Documents You Need to Operate
Having legal documents with which to run your wood pallet recycling business without any hitches from regulated authorities is very important. You might need to approach others in the same wood pallets recycling business as you in order to know what important documents they have or visit your city council in order to determine what documents you would need.
No business can be run in the United States without legal documents and those that attempt it usually have to face the wrath of the law. Below are some of the legal documents that you will need to run your wood pallets recycling business;
- Doing Business As (DBA) Certificate
- Certificate of Incorporation
- Operating Agreements for LLCs
- Business Plan
- Business License
- Insurance Policy
- Seller’s Permit
- Contract Documents
- Employer Identification Number (EIN)
- Tax Identification Number (TIN)
13. Raise the Needed Startup Capital
While the wood pallets recycling business might look simple enough, like any other business it requires capital. You will need capital to buy or lease the tools that you are going to use, promote your business and take care of other overhead and running costs.
This is why a business plan is very helpful because not only do you get to research thoroughly about the business but you also get to know how much you will need to start the business and if you do not have enough capital, you can use this business plan to convince investors to lend you the money that you will require to start the business.
Some of the financing options available for your start-up wood pallets recycling business are;
- Generating part of the start-up capital from your own savings or sale of property
- Sourcing for soft loan from friends and family members
- Applying for equipment leasing
- Approaching an investor for loan in exchange for equity
14. Choose a Suitable Location for your Business
One of the main decisions that will have a great impact on your business is where you decide to locate your business. The wood pallet recycling business is one that thrives depending on the location of the business and so common sense requires that you make a thorough research as to where your business is likely to generate more revenue that will enable the business grow and sustain itself.
According to statistics, most wood pallets recycling companies that have hit it big are those that are located close to or within urban areas and this is because most of the major customers – such as manufacturing companies, companies in the downstream sector and local stores are usually located in urban areas.
If you are starting the business on a low scale, then it will not be a bad idea for you to first start the business at home especially if you live on your property and have enough space to set up your business. All that you will need to worry about are customers for your business as you will need to advertise more to ensure that customers are aware of your business.
However, before you make the decision of running your business from home, you should check to see how many competitors you have and if there are quite a number, it will be best to rent an official facility to ensure that your business can be seen by potential clients.
In sourcing for a location, engage a real estate agent especially one that has thorough knowledge of the area and will be able to work within your budget.
15. Hire Employees for your Technical and Manpower Needs
Even though the wood pallet business is a very lucrative one and looks simple enough, starting the business can however be very expensive especially if you do not have certain tools that you will need to make your task more efficient.
To keep your startup costs low, you might need to lease the equipment that you will need; however, you will also need to be qualified for an equipment lease.
Even though leasing might lower your startup costs, you will still need to take into consideration the cost of maintaining the equipment, which is why some wood pallets recycling businesses usually team up with each other so as to be able to combat costs and other factors.
It is often best to locate your wood pallet recycling business close to an urban area or where there is a high number of manufacturing plants or distribution centers. As one starting the business, you will need to buy the cores (empty pallets), and how the core is valued will depend on how much competition you are going to face and what the sales prospects are.
Once the pallets have been acquired, they are usually sorted into popular sizes and grades, repairable pallets, pallets that will need to be dismantled as well as unwanted pallets that will be ground into wood fiber.
The wood pallets recycling business is one that requires a lot of equipment in order to achieve efficiency and so if you do not already have the equipment, you will need to get a variety such as automated sorting lines, forklifts, unstacking and stacking equipment, pallet dismantling equipment, flippers, pneumatic nailing tools and wood grinding systems.
Large scale wood pallets recycling companies usually also acquire paint booths and also lift-assist equipment in order to achieve some level of efficiency.
If you are going to be running your wood pallet on a small scale, then you might not need to employ so many people to help out. However, if you are looking to run a medium to large scale business, you will need to employ others by building an excellent business structure that will allow you to achieve efficiency.
Some of those that you will need to employ to help run your wood pallet recycling business include; logistics manager, human resource and administrative manager, marketing and sales executives, receptionist, cleaner, driver and security guard.
Therefore from the above analysis, you will require at least 7 key individuals to help you achieve your goals and objectives.
The Service Delivery Process of the Business
Depending on the scale in which you are starting your business, the process involved in starting this business starts with first looking for wood pallets that are being recycled in the area you intend to operate or at any retail store, factories or mall.
You will need to come into an agreement with the manager of these outlets so that they allow you come every day to pick pallets that have been left over. Ensure that all the pallets that you have collected are clean and do not have pests in them, then sort them out by sizes.
Remove any nails that you might find and repair the ones that look old before contacting your intended customers. Once you have agreed on the amount of wood pallets that are to be delivered and have delivered them, you will get paid for your services.
16. Write a Marketing Plan Packed with ideas & Strategies
One sure way of getting your products and services out there is through marketing which is why this is one aspect of the business that is not taken lightly by any serious and passion driven entrepreneur.
Marketing involves anticipating what your target market needs and then putting plans in place to ensure that these needs are being met either to their satisfaction or above it. This then allows you to favorably compete against your competitors while seeking to carve out a market share for your business.
In order to accurately identify the needs of your target market, it is important that you at first conduct a market research as this will present a credible and clear report of what your business is about, who your target market is and what they expect from you and how you will be able to meet and even exceed their expectations.
The market research will also enable you determine who your existing competitors are and how you can best them. Location plays a major role in marketing because where you are located can allow you spend less in other marketing activities and campaigns; and so if you are located where the majority of your target market can visibly see you, this can also be regarded as marketing your business.
The more visible your business is, the less effort it will take for your customers to reach out especially as manufacturing companies need wood pallets delivered in a timely manner and so will likely reach out to a close wood pallets recycling business than one that is far off or not visible at all.
Below are some of the marketing ideas and strategies that are suitable for your wood pallets recycling business;
- Ensure that you send a formal letter with your contact information, services and rates to shipping companies and distribution departments informing them about your wood pallets recycling business
- Install flexi banners in various strategic locations within the hub of your target market
- Place adverts regarding your business in local newspapers and industry publications as well as on radio and television stations
- Get a professional web developer to create a website for you so that you could market your products and services
- Ensure that your wood pallets recycling business is in yellow pages as well as online directories
- Use your social media platforms such as Facebook, Twitter and Instagram to market your business
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Having strategies in place to promote your business is very important because boosting your brand awareness and creating a corporate identity not only helps your business achieve recognition, it also ensures that a percentage of this recognition gets converted to revenue for the business.
One thing with publicity is that not all promotional activities require huge sums of money as a simple act of wearing a customized tee shirt or branding your automobile can be a good way of publicizing the business.
However, like all important decisions that you will be making in your business, it is important that you have conducted a research by checking out what others are doing, knowing which strategies work and which will work when modified.
Below are some of the strategies that you can use to boost your brand awareness and create a corporate identity about your business;
- Ensure that you engage the services of a Search Engine Optimization (SEO) Consultant to help ensure that your website ranks tops on search engines
- Distribute handbills and paste fliers in various strategic locations in your target market area
- Join associations and attend seminars and events in order to network and increase awareness for your business
- Use your social media platforms such as Facebook and Twitter to push your brand
- Participate in environmental and local activities in order to increase awareness for your company
- Encourage your loyal customers to help spread the word about your company