Have you thought of starting a pallet business but don’t know how? Do you know what it takes to run a pallet business successfully? Pallets are cheap and environmentally friendly resources that can earn you lots of money if well utilized, so if you fall in any of the categories above, we have something for you. We will cover everything you need to start a successful pallet business in a few steps. Expect to learn about where to source pallets, how to finance your pallet business, and the resources you need, among many more, by the end of the article. Let’s get right into it!
1. Find Out All The Details About The Pallet Business
Before making a huge investment, you must figure out the good and bad sides of any business, including pallets. It’s, therefore, imperative to find out the pros and cons of the pallet business to figure out whether it suits you in the long run. Some advantages include a wide customer base since pallets are utilized in several industries, low setup costs given that pallets are locally available, and repeat business since pallets are resources that wear out and require replacement.
Some cons of starting and running a pallet business include high competition, given that there are several pallet manufacturers, and high liability, such as insurance premiums. Once you know everything about owning and running a pallet business, you will be in a better place to make the decision.
Also, please find out about the pallet business’ industry trends. Your research should additionally focus on its challenges, such as labor shortage issues, a drastic rise in wood prices, and labor shortages. Lastly, you should find out the setup cost and earning potential of the business before coming up with a plan or deciding to pursue it.
Some items to account for under setup cost include saws, heat treating equipment, pry bars, air compressor, pallet repair workstations, and nailing equipment. You will also have to spend on licenses, permits, business cards and brochures, insurance, website setup, rent, raw materials, initial operating costs, and the initial amount spent on employee wages.
Knowing everything about the pallet business will help you properly decide whether to proceed with the idea.
2. Develop Your Business Idea
Once you know every detail about the pallet business, it’s time to hone your business idea. This will help you compete fairly in the market and have an easier time coming up with your business plan. First, identify a market gap or niche your business will take advantage of and fulfill, i.e., review your competitor’s products, weaknesses, and price points to establish a market gap. You can also target a whole market by specializing in a given aspect of the pallet industry.
The next step while honing your business idea is to determine the types of products and services you will be selling, i.e., the sizes of the pallets you will be selling and their purposes. A great alternative would be customizing pallets to meet customers’ specifications. Developing your business idea also means identifying your target market. Who will you be selling to? This is where you identify the businesses using pallets that may be interested in your products if you choose to start your business.
Remember to figure out where you will run your business, i.e., a rented space to run your operations. You can choose to locate one or use platforms such as Craigslist. When choosing the right premises, some things to have in mind include accessibility, space, ventilation, lease flexibility, and whether the space is ready to use.
Next, ask yourself how much you will be charging for your pallets: a decision that requires you to factor in your possible expenses. Make sure you get a profit margin of at least 20% if you need your business to stay afloat.
3. Come Up With The Right Business Name
Your business needs a name that acts as its identity. Therefore, exercise extra caution when coming up with one. Make sure that you avoid offensive business names. Here are some tips to help you if you are struggling with figuring out the best name for your business:
- Ensure that your business name relates to your products or services
- Your business name should be simple and easy to spell
- Embrace creativity. If possible, obtain ideas from colleagues, family, and friends.
- Use a short, catchy, and unique name to make your business outstanding
- Include relevant keywords in your business name for search engine optimization
- Do not use location-based names, as they may inhibit your business’s future expansion
You can also use other resources, such as online business name generators and Shopify’s business name generator, to create the best name for your pallet business. Once you have something, confirm with the US Patent and Trademark Office whether your name is available for registration. Remember, this process needs to be done with the utmost care, given that your company’s branding will heavily depend on its name, which can be hard to change later.
4. Have A Plan
Before starting any business, one of the most important things to do is to put together a comprehensive plan, which should cover different business aspects and elements, i.e., organization and management, marketing strategy, initial funding, financial projections, etc. However, while putting together the plan, the business owner must stay as realistic as possible regarding overall goals and expectations.
The business plan helps the entity successfully move through the launch process while informing investors and potential partners about the company’s missions and visions. Here are some of the things to consider for better results:
- Overview- Your plan should offer an overview of the company’s mission, vision, corporate goals, and ownership
- Executive Summary- The executive summary offers a brief overview of the business plan. It can only be written once the plan is complete
- Products and Services– This is a detailed overview of your offerings.
- Sales and Marketing – Your plan should cover your company’s USPS (unique selling propositions) and include its marketing, sales, and promotional strategies
- Appendix- These are any additional business or financial-related documents
- Competitive Analysis– Your business plan should analyze main competitors by assessing both their strengths and weaknesses and highlighting your service advantages
- Market Analysis- This includes a SWOT analysis and market trends assessments such as growth prospects and demand variations.
Your business should also have an operations plan which includes key assets and equipment, procurement, office location, and additional logistical details. A financial plan with three years of financial planning to include profit and loss estimates, startup cost, and break-even analysis is also important. Hiring a specialist will be a good idea if you have a problem creating a business plan.
5. Register The Business
This is where you form and register the legal business entity. You can only operate a pallet business once it is officially registered with local and federal governments. However, you will first have to settle on the business structure of your choice, which should reflect your needs and preferences. Here are some of the common options:
- Sole Proprietorship- This is the most common and simplest business structure. It serves small businesses, given that it is easy to set up. However, it has zero personal liability protection meaning that the owner is liable for every debt, loss, and liability. Business taxes are normally paid on the owner’s tax return.
- Limited Liability Company- If you decide on a limited liability company, you enjoy personal liability protection, meaning that you won’t be liable for the business debts as an owner. Such business entities are also usually more flexible.
- General Partnership- A general partnership is the same as a sole proprietorship, just that more than one person owns it. Like sole proprietorships, owners are responsible for business liabilities and even pay their share of taxes on their personal tax returns.
- C Corp– In a C Corp model, the business is treated as a distinct legal entity, meaning that the owners are not liable for the company’s debts. Profits are obtained through shareholder dividends and not directly. The owners only have to pay taxes on their dividends and do not cover the corporation’s taxes.
Before deciding on the right entity for your pallet business, consider your business goals, the type of liability exposure you can shoulder, and overall business goals. For example, you don’t need a limited liability company if you intend to serve your friends, customers, and those around you since a sole proprietorship will come in handy. However, if you need a large company that will be serving many regions, an LLC or corporate organization will come in handy.
Registering your business entity with the relevant state authority through the secretary of state office will not only give you the legal protection you need for successful business operations but also your assets. Once the business has been registered, you have to get a business license from the local city or county by filling out an application and submitting it to the local licensing authority, which reviews it and decides whether you qualify. We will cover those as we proceed.
6. Financing Your Business
This is where you look for great financing options for your pallet business, given that you need both initial and working capital to run your operations. Luckily, there are several avenues you can use to obtain money to fund your business. Most pallet businesses get their capital through the following means depending on their scale of operations and long-term goals:
Friends and Family
This is a popular means of funding businesses. A good percentage of sole proprietorships get their initial and working capital by raising money from family and friends.
This is by far the most common method of funding a business. You can obtain a bank loan with a strong credit history and a well-drafted business plan.
Certain websites and platforms such as Indiegogo, act as low-risk options where donors can find different business owners’ visions. Other entrepreneurial crowdfunding sites that one can use include Fundable.
Governments offer grants through financial assistance programs designed for entrepreneurs. Try to find out how grants work before trying them.
Even though this means of funding a business means giving up a percentage of your control, it is still viable. A venture capitalist offers funds for an ownership stake. However, this method only works if the business has high growth potential.
This method of business financing works for entities that don’t require heavy investing. You can self-fund a business using savings or selling your property and assets.
However, before choosing any of the above methods, consider their long-term financial implications for your business and you. If you only need a few hundred or thousands to start your business, then personal funding can work. However, note that you may have to keep digging deeper into your pocket before your business picks up. If your business has high growth potential and therefore requires lots of money, venture capital is the right way. However, note that you have to give up a portion of the control. All in all, take time before settling on the best decision.
7. Open A Bank Account For Your Business
You don’t want to mix up your personal and business funds. Luckily, there are several accounts that you can open for your pallet business, depending on your preferences and the amount you want to deposit. Here are some that you should consider:
Opening a savings account is an excellent way to increase your business’s cash reserves, given that the principal amount earns interest over time. The only downside is that these accounts may have withdrawal limits. Some also have low-interest rates.
Checking accounts are some of the easiest types of accounts to open. Users get several features and pros that small businesses can benefit from. A pallet business with a checking account will easily deposit or withdraw money as needed. It’s also easy to write checks from the checking account, which the business may need to pay suppliers.
Business Credit Card
Like personal credit cards, business credit cards come in handy if an entity needs to build up its credit history or make large purchases. The only downside is that these cards have high-interest rates and gather annual fees, which may be costly.
Take some time to compare the features and fees of these three options before making a decision. You can also obtain the services of a professional accountant before choosing the right bank account.
8. Work On Your Accounting And Taxes
No business can operate and stay profitable without a proper accounting and tax system. A good accounting system will help you track your revenue, receipts, expenses, etc. You can settle for an online accounting software such as Xero or QuickBooks or hire an accountant to ensure everything is okay. The online software products we just mentioned will offer you all the tools required for business growth, i.e., tracking your contractors, income receipts, expenses, etc. All in all, ensure that you settle for a system that is easy to understand and use.
Once you have settled on a robust accounting system, focus on tracking your expenses and revenue to better understand your income and some of the expenses you need to slow down on. Expense and revenue tracking also come in handy during future budgeting. Every pallet business owner should also dedicate time to reconciling accounts and updating the records monthly. Regular account reconciliation and record updates keep everything in check, saving you from future auditing challenges.
To set up your tax system, you will need an Employer Identification Number, which you can file for online or through the mail. However, taxes are handled using the social security number for a sole proprietorship business model. It is worth noting that registering for taxes means choosing a fiscal year, which is a 12-month period from January- December in which your business will be operating. Remember, your business structure determines the type of taxes the business pays. For more information, check the IRS website.
9. Get All The Necessary Permits And Licenses
You still have to obtain several licenses and permits from the state, local, and federal governments before your business becomes operational. Remember, these will depend on the location and type of your pallet business. An easier way to find out what your business needs is to contact the local business licensing office to give you a detailed correspondence of all the permits and licenses you need in your locality.
Some permits and licenses needed for pallet businesses include doing business as (DBA) permits, health licenses, and permits from bodies such as Occupational Safety and Health Administration. Others can include trademarks, patents, copyrights, IP permits, and industry-specific licenses. Remember, you can only operate legally and expand your operations if you have these permits.
10. Get All The Equipment, Tools, And Software Needed
A pallet business can only operate with the right tools, equipment, software, and supplies. Consider the following tips if you need to do this right:
Determine the Exact Things You Need
Review your operations to discover the tools, supplies, and equipment required for a pallet business. Make a list of everything you need depending on the type of business you seek to operate and your product and service offerings. Remember to include both large and small items in your list.
Find the Best Suppliers
After determining what you need for your new pallet business, it is time to begin shopping. To reduce your business setup cost, weigh your options and pick the best deals. Also, remember to compare the quality of items before choosing the best supplier.
Purchasing, Renting, or Leasing?
You don’t have to purchase everything at once, especially if you don’t have enough capital for your business. Renting equipment generally comes in handy when operating on a tight budget. This option also works well if the business requires expensive items not regularly used.
Keep Purchase Receipts/ Contracts
It is important to get everything in writing once you have picked the best suppliers for your business. This means getting receipts on purchases to avoid future misunderstandings. Getting everything in writing also means easier follow-ups.
Keep Track of Everything
Every business owner understands the importance of staying organized and keeping track of equipment, supplies, and tools while conducting business. Inventory tracking means always knowing what the business has and things that need replenishment.
Only by correctly obtaining and tracking business inventory will the business run smoothly.
11. Insure Your Business
Even though most businesses don’t prioritize insuring their businesses, it is equally important. Your business should be protected from any unexpected event that may negatively harm it. Some types of insurance you can obtain include worker’s compensation, general liability, business property, equipment breakdown, commercial auto, property, business owner’s policy (BOP), and professional liability insurance.
12. Brand Your Company
You have to create a business identity for your pallet company by defining the company’s values and purposes, picking the right color scheme to reflect your company’s personality, picking a good logo to represent your brand, and creating consistent branding across different channels. Make sure the brand resonates with your target audience, and you will be good to go.
13. Create A Website, Email Address & Phone Number
Your pallet business should maintain an online presence, meaning you need a beautifully designed website. An excellent option would be hiring a professional website designer who will give your website the best structure and hierarchy and create excellent visuals and graphics. Your website should also have informative, persuasive, and well-written texts and be tested before it is launched to ensure everything is perfect.
A phone number and email address will give your business a professional look and help you communicate easily with your customers. Use a good telecom provider to purchase and register a business phone number and then set up a professional email, configuring it to forward messages to the phone number.
14. Launch Your Business
Once everything is in place, it’s time to launch your business. One last step is to use the marketing plan formulated during business planning to get your business out there and get your first few customers. You can reach out to local newspapers and social media influencers, organize a business launch event, organize a business launch sale, run several online ads, partner with local businesses and ask your friends and family to share your business.
With the right steps, getting your pallet business up and running shouldn’t be difficult. Ensure you first weigh the advantages and disadvantages of such a business and create a comprehensive plan before opening a shop. Feel free to use our article as a checklist in your quest.